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Biopharma M&A ripens as JPM launches

Illustration of a hundred dollar bill with Benjamin Franklin dressed as a doctor and holding a prescription pill bottle.

Illustration: Victoria Ellis/Axios

The JPMorgan Health Care Conference — the definitive launchpad for industry dealmaking — kicked off Monday.

Why it matters: As interest rates stabilize and the funding market for biotech rebounds, there will be plenty of white space in pharma to consolidate, dealmakers say.

Driving the news: There were a trio of oncology deal announcements: Johnson & Johnson's $2 billion bid for Ambrx Biopharma, Merck's $680 million deal for Harpoon Therapeutics, and Novartis' proposed $250 million buyout of Calypso Biotech.

  • These follow Bristol Myers Squibb and AstraZeneca announcing separate billion-dollar deals in the last weeks of 2023.
  • The pending patent cliff and pricing pressures have dealmakers on alert after CVS-owned PBM Caremark announced plans to direct patients to biosimilars of AbbVie's blockbuster drug Humira.

State of play: Industry eyes are on Immunovant, an autoimmune drug developer whose early antibody treatment data beat expectations last fall.

  • "We think Immunovant might get acquired," Cowen analyst Yaron Werber says. "People are expecting an announcement at JPMorgan."
  • Werber also cited Celldex Therapeutics as a likely target. Its inflammatory skin disease drug that's been successful against at least one approved treatment is entering Phase 3 trials.
  • Other names on Werber's acquisition shortlist include oncology pharma Legend (a Johnson & Johnson partner) as well as metabolic pharma CymaBay Therapeutics and precision oncology company PMV Pharmaceuticals.

Zoom out: Alongside oncology and immunology, Arda Ural, EY Americas market leader of health sciences and wellness, says central nervous system therapeutics, metabolic diseases, endocrine and immunomodulators are increasingly attractive,

  • Muscle mass therapy biotechs are also of interest to Big Pharma, with Regeneron and Roche expressing interest, Jefferies analyst Michael Yee wrote in a recent note.
  • Yee adds that Eli Lilly's pending Phase 2b data for its muscle mass therapy could provide further fuel to the sector.

The intrigue: Although the FTC's challenge of Amgen's $28 billion proposed acquisition of Horizon Therapeutics was short-lived, regulators likely don't have much appetite for mega-mergers.

  • Analysts expect Big Pharma will likely focus on acquiring companies with late-stage, de-risked assets.

Yes, but: Late-stage clinical assets are far more expensive, meaning a bigger loss should the drug not succeed, Werber says.

  • "What large buyers should do is almost like a basketball analogy," Werber says. "When you shoot a free throw — to be good, you need to hit 85, 88%."
  • The same strategy applies to pharma, he argues. Strategics paying up for a late-stage, de-risked asset (a three-pointer, in this analogy) have more on the line should those drugs fail in final clinical trials.
  • "They need to go earlier stage, buy assets, and take more clinical risk," he says. "It's OK if only three out of 10 work out because if the assets are really good, the financial rewards way outweigh massively overpaying for a big company."

What we're watching: Focused on anti-competitive actions, the FTC has aimed at licensing deals alongside mergers.

  • In December, the regulator threatened to block Sanofi's licensing deal with biotech Maze Therapeutics, leading Sanofi to terminate the agreement.
  • "That's going to have an impact for sure," Werber says. "They're trying to flex their muscles."
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