M&A Is Gathering Steam For Venture-Backed Biotechs

"Mergers and acquisitions of venture-backed drug developers are starting to rebound following a relatively slow period in 2023, brightening the outlook for venture capitalists seeking to cash out of biotechnology investments.

On Monday, venture-backed biotech startup Cardior Pharmaceuticals agreed to be acquired by drugmaker Novo Nordisk in a deal worth more than 1.02 billion euros, or about $1.11 billion, in upfront and success-based payments. The companies expect the transaction to close in the second quarter.

AnHeart Therapeutics also disclosed merger plans Monday. The venture-backed biotech said it would merge with publicly traded drugmaker Nuvation Bio. The all-stock deal is expected to close next quarter.

From the start of the year through March 18, four private venture-backed biotech companies globally closed merger deals in which at least $75 million was paid up front, according to Silicon Valley Bank. That compares with two during the same period of 2023.

Dealmaking had been tepid the previous two years, with 12 biotech startups acquired in 2023 and nine in 2022, down from 15 in 2021 and 20 in 2020, according to SVB.

Acquisitions didn't surge the past two years even as valuations declined and financing options narrowed for startups. 

Large pharmaceutical companies are less concerned with bargain hunting than with finding drug programs advanced enough to warrant an acquisition, said Andrew Weisenfeld, a managing partner of investment bank MTS Health Partners.

"Buyers are very disciplined, they target assets when they want them and when they think they're sufficiently de-risked," Weisenfeld added.

Acquisitions aren't exploding for biotech startups yet. But startups with promising drug programs are drawing attention.

Cardior had advanced a heart failure drug into midstage, or Phase 2, clinical trials [1]. 

The company, whose venture backers included EQT Life Sciences, could have raised financing to fund the next stage of clinical studies but decided a merger with Novo Nordisk was its best option, said co-founder and Chief Executive Dr. Claudia Ulbrich.

Earlier this month drugmaker AstraZeneca agreed to buy venture-backed Amolyt Pharma, which moved a drug for a rare disease into Phase 3 clinical studies, for a total consideration of up to $1.05 billion.

Top drugmakers need new medicines to replace ones losing patent protections in coming years, and much of their innovation is coming from the biotech industry, said Sofia Ioannidou, a partner with Amolyt investor Andera Partners.

Large drugmakers aren't just acquiring biotechs with drugs in late-stage clinical trials, said Antoine Papiernik, chairman and managing partner of venture investor Sofinnova Partners, which also backed Amolyt.

Drugmaker Eli Lilly in October struck a deal to acquire Mablink Bioscience, a preclinical-stage biotech startup in Sofinnova's portfolio.

Pharmaceutical companies are buying at the bookends, acquiring later-stage products that could help them in the near term and earlier-stage drugs to build for the future, Papiernik said." [2]

1. "What are Phase 1 2 and 3 clinical trials?

Phase I trials test if a new treatment is safe and look for the best way to give the treatment. Doctors also look for signs that cancer responds to the new treatment. Phase II trials test if one type of cancer responds to the new treatment. Phase III trials test if a new treatment is better than a standard treatment. "
   
 

2. M&A Is Gathering Steam For Venture-Backed Biotechs. Gormley, Brian.  Wall Street Journal, Eastern edition; New York, N.Y.. 27 Mar 2024: B.12.