Deal bulletins are within the very DNA of the annual biotech wind-blown occasion also referred to as the J.P. Morgan Healthcare Convention in San Francisco. And after a tough biotech 12 months in 2022 when solely 11 firms went public and scores of personal firms noticed their valuations fall, the way forward for biotech M&A is a subject of nice curiosity.
So not surprisingly, the difficulty of M&A and technique got here up at Sanofi’s media briefing Wednesday. CEO Paul Hudson and CFO Jean-Baptiste Chasseloup de Chatillon have been requested about whether or not regulatory scrutiny from the FTC, the macroeconomic setting and provisions within the Inflation Discount Act are hampering large-scale M&A within the biopharma world. They have been additionally requested about their technique particularly within the context of their unsolicited bid for Horizon Therapeutics, which Amgen in the end snagged for $27.8 billion in late December.
Hudson stated “all the above” in answering the M&A headwinds query however as an alternative of immediately answering what kind of goal or the dimensions of future offers, turned the query on its head seemingly suggesting that Sanofi’s Huge Pharma opponents are in additional dire want to have interaction in large-scale M&A as a result of they’ve a “leaky bathtub”. Right here’s what Hudson stated [edited for clarity]:
In the event you take a look at the highest 20 drug firms and also you take a look at their proportion of gross sales in danger to lack of mental property between now and the top of the last decade, we’re the bottom. We’re lower than 9% and lots of of our friends go as excessive as 75%, which implies they must utterly renew all of their income within the subsequent 5, six, seven years – all of it – and these are main firms. So whenever you ask us about M&A, you assume that in some unspecified time in the future these cliff edges of falling away of income imply that firms have to start out making extra acquisitions. A few of these medicines are massive medicines — a few of the prime two or three medicines on the planet — that can lose their patent – what which means for these firms to switch that [revenue]? What might they probably purchase to try this?
There are solely a small variety of firms [you can buy] and it’s not a straightforward route. So why are individuals hesitating other than Amgen Horizon? I believe individuals are ready to see… and they’re attempting to resolve what’s the greatest match for them in their very own journey and the place is the science most predictable and reliable over time to make these massive premiums — and they’re massive premiums — defendable. Our focus is to go and purchase 10,12, 15 small biotechs and spin the roulette wheel, which can also be credible work however it doesn’t essentially imply by 2027 you’ll be able to cowl the place the hole was.
If nothing occurs, a number of individuals listed below are speaking about whether or not that results in consolidation, as a result of individuals must discover a strategy to proceed to gasoline R&D and if there are usually not sufficient breakthrough science organizations that may assist replenish [the lost revenue], then it will get extra difficult for a few of these firms. Whether or not by some means, we’ve the bottom publicity…we don’t have a leaky bathtub and that’s the nicest strategy to describe it.
So whose bathtub has a leak?
A fast reality verify exhibits that in 2021, Humira was the world’s second-biggest drug by gross sales (after Pfizer/BioNTech’s mRNA Covid-19 vaccine) garnering $20.7 billion. Although Humira’s U.S. patent expired in 2016, Abbvie, Humira’s maker, was in a position to wrangle an extra 132 patents associated to different makes use of of the drug — together with manufacturing strategies and the precise administering of Humira. All of those pushed out the patent expiration date to 2034. However long-awaited Humira biosimilars are set to hit the market this 12 months. Humira treats rheumatoid and psoriatic arthritis, ankylosing spondylitis, Crohn’s illness and ulcerative colitis.
One other prime drug — 4th in drug gross sales after Moderna’s Covid-19 vaccine — is Merck’s oncology drug, Keytruda, that raked in $17.2 billion in 2021. However many imagine that competitors from biosimilars will eat into that income by the top of the last decade. Keytruda’s U.S. patent expires in 2028. [In the list of top-selling drugs, Sanofi’s Dupixient came in at no. 14 with 2021 sales of $6.2 billion. The drug treats atopic dermatitis, asthma and chronic rhinosinitus with nasal polyps]
Whereas Hudson didn’t present the supply of the info that led him to conclude that Sanofi’s general threat profile is fairly low when it comes to proportion of gross sales in danger to IP loss, the difficulty of patent cliff has lengthy been an existential menace that Huge Pharma has aggressively tried to handle.
Sanofi is within the midst of a change articulated in 2019 when it determined to desert its give attention to diabetes and cardiovascular merchandise and embark on a path to develop oncology, immunology and gene remedy merchandise. And that’s what drove its curiosity in Horizon Therapeutics, which is growing therapies to deal with uncommon and rheumatic illnesses.
“[Horizon was struggling a little bit if you remember at the beginning of the year with the launch of their new drug,” recalled Chasseloup de Chatillon, Sanofi’s chief financial officer. “Their share price was down, so it was an opportunity to help the deployment the drug for new patients and to create value for the shareholders of Sanofi, so we were interested but at the right price. The minute the price went off from what we thought was [the] worth creation level, we walked away. It’s quite simple.”
OK, so $27.8 billion was too steep a value for Paris-based drugmaker. So what sort of offers can we anticipate from Sanofi in 2023?
“We’ve been clear with our capital allocation from after we launched our technique in 2019 that we’re within the scientific bolt-on, the kind of $2-$5 billion acquisitions [space] – and all the things we’ve accomplished has been aligned with that,” Hudson stated.
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