Dealmaking Gives Biotechs Needed Financial Relief, But Deal Terms Are Under Pressure

Pharma Partners And Buyers Are In The Driver’s Seat

Biotechs are ready to partner or sell assets to raise cash while turmoil continues in the financial markets, but they are doing so at lower valuations, with IRA and FTC concerns putting further pressure on deal terms.

Two men negotiate deal terms
Dealmaking offers an attractive funding alternative in a tough financial market • Source: Shutterstock

Biotechnology firms that may have been reluctant to do a deal when venture capital and public market financing options were plentiful in 2020 and 2021 are now ready and willing to partner or find a buyer. But with companies facing the prospect of shutting down research and development programs or ceasing operations altogether without new funding, prospective partners and buyers are in the driver’s seat, and big pharma is further adjusting deal terms because of pressures they are facing.

KEY TAKEAWAYS
  • Dealmaking activity is robust as biotechs look to out-license or sell assets as a means of raising cash for in-house R&D while the financial markets remain difficult.

  • Big pharma is in the driver’s seat in deal negotiations, since they have the money small firms need. As company valuations have come down, deal terms have adjusted, for instance, with lower upfront payments.

  • Inflation Reduction Act requirements for Medicare drug price negotiations and Federal Trade Commission scrutiny of biopharma M&A have put new pressures on big pharma, which in turn add new considerations for dealmaking, which may impact transaction terms

The Inflation Reduction Act (IRA) signed into law in the US in 2022 requires the Centers for Medicare and Medicaid Services (CMS) to negotiate pricing for an escalating number of medicines covered by Medicare nine years after US Food and Drug Administration approval for small molecules and 13 years after approval for biologics, which has caused pharma companies to assign different valuations to small molecules than for biologics, according to executives Scrip spoke with at the recent BIO International Convention

Read the full article – start your free trial today!

Join thousands of industry professionals who rely on Scrip for daily insights

  • Start your 7-day free trial
  • Explore trusted news, analysis, and insights
  • Access comprehensive global coverage
  • Enjoy instant access – no credit card required

More from Deals

Biopharma Deals ROI Has Fallen And Market Instability Could Make It Worse

 

Rising biotech valuations mean return on investment on some deals is non-existent for big pharma, though certain strategies will improve chances of success, a new analysis has found.

Dr Reddy’s Gears For Tariffs Scenario, To Ensure No US Supply Disruption

 

Dr. Reddy's Laboratories preps for potential US tariffs, focusing on sustaining product supply and collaborating with customers on inventories. A recent US plant sale, the firm stressed, was unrelated to tariffs and underlines its openness to ‘make in the US’, where it launched 18 products in fiscal 2025.

Pharma Left Hanging After US/UK Trade Pact

 
• By 

An ‘historic economic prosperity deal’ does not include the sector.

Sanofi R&D Head’s Words Of Wisdom For Biotechs

 
• By 

Houman Ashrafian tells delegates at Swiss Biotech Day that ‘literally only two things matter in our industry – target credentialing and differentiated pharmacology. The rest is execution.’

More from Business

Quick Listen: Scrip’s Five Must-Know Things

 
• By 

In this week's episode: industry makes its case to Trump; Sarepta slammed by double blow; Chinese firms build obesity pipeline; Swiss biopharma staying strong; and Merck & Co looks to immunology and ophthalmology.

Takeda Plans US Investment But Sees Little Impact From Tariffs

 

The Japanese drug maker is on track for three pivotal Phase III readouts and two regulatory submissions in 2025.

Q1 S&E In Brief: Tracking New Launches And Catalysts In Biopharma

 

Neurocrine, Madrigal and Vanda updated investors on new drug launches, while Cytokinetics talked to investors about an FDA extension for aficamten.