RE:RE:RE:RE:RE:RE:RE:Big pharma is set to keep signing bigger deals in 2024In 2021 the US imposed changes to the way it allows companies to deduct R&D expenses such that now most companies must amortize those costs over 5 years. Starting in 2022, companies can no longer write off 100% of costs in the year they were incurred. Instead, to comply with these new rules, companies must amortize most of those costs over five years (15 years for R&D expenses attributed to foreign research)..
Furthermore the IRA, passed in the United States in January 2022, provides 13 years of FDA market exclusivity from the date of FDA approval for biologics, in contrast to 9 years for small molecule drugs.
This change in exclusivity favoring biologics, and changes in the way that R&D expenses can not be deducted, has caused Big Pharma to make changes to their in-house R&D models.
This is one of the reasons that Roche/Genentech has contributed to the company's decision to dramatically reduce its in-house R&D activites and like other Big Pharma companies, is looking to M&A to replenish its product portfolio with new drug candidates.
Consequently the positive impact form small biotech companies are larger deal values, particuarly for late-stage clinical development companies, like the biologics company ONCY, who are seeking near term Accelerated Approvals and near term market entry for their drug products.
And another benefit for ONCY is that it has approximately $500 million "on-the-books" in R&D expenses that can be transferred to any acquirer that can be written off against other of the acquirer's revenue, which benefits the Big Pharma acquirer who is operating in the United States, - with 100% of ONCY's R&D costs available to be written off from the date of acquisition.