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
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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.
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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.
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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
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