Stock Watch: Why Have All The Buyouts Gone?

At the end of May 2024, the NASDAQ Biotech Index (NBI) fell into negative territory both in the year to date and compared with the previous 12 months. This was despite the imperative on big pharma companies to refresh their pipelines through the acquisition of smaller biotech companies. This imperative is driven by the pressure of Medicare price renegotiation, the biosimilar patent cliff and the failure of big pharma’s innovative products for rare and orphan patient populations to replace the sales of their older blockbusters for bigger indications. In the past, pipeline expansion would have been achieved by two means: mergers of big pharma and the acquisition of smaller biotechs. With the competition authorities breathing down necks to dissuade transactions that achieve the former, we should already be knee-deep in a golden age of biotech acquisitions. In the three hot areas of obesity, radiopharmaceuticals and antibody-drug conjugates, this remains true. However, a therapeutically wider renaissance of biotech acquisitions is probably being prevented by good holistic due diligence, and some valuation sensitivity.

In the years before Pfizer Inc.’s* 2016 acquisition of Medivation, Inc. for $14bn, largely for its androgen receptor...