An Ongoing Rush To Cancer Drug Development

BMI View: Due to the large unmet clinical need and relatively favourable regulatory regime for cancer care, coupled with improved scientific understanding, oncology drug development has generated great interest in the pharmaceutical industry. However, a disproportionate amount of R&D funding directed to this therapeutic area could ultimately reduce investment returns. We nevertheless expect multinationals, both traditional and biotech-orientated, to continue to purchase or partner with SMEs involved in cancer therapeutics.

Following the trend of reducing internal research & development (R&D) and increasing the in-licensing of early clinical stage drug candidates, mergers and acquisitions (M&A) numbers in the pharmaceutical industry have recovered from pre-financial crisis levels. According to report from HBM Partners, private transactions accounted for over 80% of the total deal numbers in 2012. However, in terms of shares of deal transaction volume, multinationals have always spent the most. Notably, large biotech companies such as Gilead and Amgen bought three companies in 2012, highlighting the anticipation of new blockbuster products in the biotech sector.

Although small and medium-sized enterprises (SMEs) in the industry have been very active in M&A, almost all of the SMEs have a strategic plan of collaborating with multinationals at various stages of drug development as multinational drugmakers have the expertise to take products from bench to market and are well equipped to conduct clinical trials and work with regulator authorities to obtain product approval. Therefore their preference matters to SMEs with an acquisition or licensing deals in mind, as multinationals could be a source of income through partnership deals or the exit that gives the initial investors a return.

Multinationals Spend The Most
Number of Biopharma M&A Deals (LHS) & Share of M&A Upfront Transaction Volume By Type Of Buyer (RHS)

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This article is tagged to:
Sector: Pharmaceuticals & Healthcare
Geography: Global

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