Thank you for Subscribing to Med Tech Business Review Weekly Brief
Medtech Business Review | Tuesday, February 28, 2023
The coming years will be a dynamic time to accelerate dealmaking with great promise for value creation in the biopharma industry. With Constant effort by C-suite and the strategy and business development team, companies will maximize value by making deals effectively.
FREMONT, CA: Dealmaking has long been a defining trademark of the biopharma sector and is a key component of most companies' growth strategies. The sector has historically experienced more and larger transactions than even the IT sector. Due to the slow pace of innovation in the biopharma industry, partnerships, mergers, and acquisitions have become essential for the survival of successful businesses.
To make deals companies in the biopharma sector have significant levels of available cash. Companies which have more than 200 billion USD in cash will use them to pay down debt or deliver dividends to shareholders.
Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.
Opportunities are growing in emerging markets
For the biopharma sector, the growth potential of emerging markets is increasingly attractive. Dealmaking in a variety of forms, such as developing regional innovation hubs, forming business and academic alliances, expanding joint ventures, and conventional M&A, is probably going to increase. Apart from commercial expansion, biopharma companies are exploring APAC countries and other emerging markets for acquisition and partnership targets to boost innovation.
Check Out This : Bioenergy Solutions Companies
A desire for data and analytics tools
Big data and sophisticated analytics have long had a significant impact on the healthcare sector, but as their demand has grown, more agreements are now concentrating on digital assets. The top ten biopharma businesses alone saw 28 deals in 2020 with a value of more than 2 billion USD, which is twice as much as deals from five years earlier. While the pandemic may have fueled some of this activity, it is likely to continue as the industry's need to manage decentralised clinical trials and implement new digital management tools grows. Biopharma companies will continue to invest in digital and artificial intelligence capabilities across the value chain to create differentiated solutions. Indeed, several large biopharma players have announced new partnership deals and achievements centred on data and analytics since the beginning of last year.
More conventional and more unconventional – partnerships are setting the stage for future deals
Biopharma companies have intensified their partnership activity over the past several years along with an increase in their M&A activity. COVID-19 resulted in an unprecedented rise in unconventional partnerships between players that had never previously collaborated and in therapeutic fields like infectious diseases that are not typically renowned for corporate cooperation. Partnerships are another strategy that businesses are utilising to derisk their investments and explore new markets using shared capabilities. One example of this is the use of deferred payments and options in licensing agreements. This dealmaking strategy should grow more prevalent as the market struggles with increasing discovery costs and as external innovation accounts for a larger share of revenues. It will grow in popularity and be a useful tool for biopharma dealmakers.
Buying Innovation
To enrich their pipelines, biopharma players are progressively looking for growth acquisitions. Biopharma companies can increase their chances of R&D success and also acquire partially derisked revenue by buying innovation. Over the next five to seven years, smaller biopharma companies are anticipated to provide more than two-thirds of the revenue growth, which will make collaborations and acquisitions more appealing to larger corporations.
Seeking Portfolio Transformation
Since it stimulates value creation and drives growth, active portfolio management is a major value driver for every business and is crucial for success in the biopharma sector. It enables businesses to concentrate on their strengths in the areas of science and operations, realign with those with the largest patient needs and growth potential, maximise the synergies between multiple assets, and update their portfolio as important pharmaceuticals lose exclusivity. Typically, companies that rotate their portfolios through programmatic M&A and partnerships outperform their peers and generate higher total shareholder returns than those that choose alternate growth strategies like selective dealmaking and organic growth.
Impact on Biopharma Companies
• Exploring Emerging Market deals for Innovative and Expansion
Opportunities that offer locally sourced innovation and a foundation for commercial expansion should be prioritised by companies. In addition to more conventional M&A and partnerships, they can look at riskier transaction types including joint ventures and spin-offs to increase their chances of success.
• Exploring Data and Analytics Deals to Boost Innovation
M&A and collaborations are advantageous for biopharma enterprises to get the cutting-edge data and analytics capabilities they require to promote innovation and bolster their pipelines. Companies should be clear about the goals they want to pursue—for example, service-offering expansion, the purchase of particular data, or the pursuit of digital therapeutics and match the digital play to those outcomes.
• Pursue partnerships as Aggressively as M&A
Targeting clinical and commercial collaborations at all stages of the product life cycle can boost deal flow and reduce the risk of pursuing external innovation. Various payment structures and other levers are available to boost near-term value while retaining the option for later acquisition.
• Make external innovation sourcing a core capability.
Biopharma companies must actively update their portfolio road maps in order to target high-growth external assets that can supplement the overall strategy. Companies should strengthen their M&A and integration capabilities to more quickly identify, execute, and integrate these deals and drive long-term value.
More in News