More, faster deals, but smaller deals — Lazard co-heads of biopharma on this year’s M&A

Michael Kingston and Dale Raine on the capital markets and global deal-making landscape

With most of the highly attractive late-stage assets already scooped up, pharmas are turning their sights to Phase II companies, and lining up their case to make an attractive offer and move fast. About 40% of the M&A deals in 2023-24 were completed in less than six weeks, from approach to announcement, according to Lazard’s data. 

Michael Kingston and Dale Raine, global co-heads of biopharma at Lazard, joined The BioCentury Show this week to discuss the M&A outlook amid the still-precarious biotech financing landscape.

“We think it still remains pretty tepid out there,” said Kingston, noting the XBI has oscillated between $90 and $100 since May, and though the IPO pace has picked up, September was a good month for follow-ons, and the Fed cut interest rates 50 basis points, there’s still a lot of uncertainty in the capital markets.

The result has been more companies staying private for longer, and therefore more private companies with assets further into clinical development. And that’s reflected in the contours of the M&A deals over the past two years, with many more companies in Phase II rather than Phase III or later, and private and public companies evenly split, unlike last year when only 15% of the acquired companies were private.

“In terms of Phase II, you have some level of comfort in terms of the profile of the product and the ability to go big, go broad, which frankly you need to do today, given the IRA and the clock that ticks once you get approved,” said Kingston.

“One of the things we’ve observed, particularly in the last 12 to 18 months, is the rapid speed of execution,” added Raine. About 40% of M&A were completed in under six weeks, he said, due to the scarcity of assets that are truly strategic to each pharma. “We see pharma companies spend a lot of time ahead of major catalysts, developing a differentiated thesis,” so that they are in a position to move quickly, put a compelling offer on the table, and push timelines so that it’s difficult for competitors to catch up. 

Raine and Kingston also talked about how deals have become more competitive, and how the buyer universe is expanding, with more mid-caps such as Genmab A/S (CSE:GMAB; NASDAQ:GMAB), Incyte Corp. (NASDAQ:INCY), and European players such as Servier, Recordati S.p.A. (MTAA:REC), Chiesi Farmaceutici S.p.A. and Alfasigma S.p.A. now becoming active acquirers.