The current M&A environment and its strategic implications for emerging biotherapeutics companies

Abstract

The age of the blockbuster drug may have come and gone. With dwindling pipelines and increasing generic competition, pharmaceutical companies continue to create efficiencies through mergers and acquisitions (M&A). Increasingly, the pharmaceutical industry is turning to biotechnology companies to drive new product innovations. As part of this evolving paradigm, biotechnology companies with deep therapeutic product pipelines – ‘biotherapeutics' companies – protected by sound intellectual property rights are becoming ever more attractive targets for M&A. This is likely due to the facts that biotherapies command high reimbursement rates due to high efficacy and reduced toxicity, and are less vulnerable to generic competition due to technical and regulatory barriers. As a result, M&A has offered high returns to investors in recent years at a time when public markets have declined. In order to attract a purchaser, small biotherapeutics companies must develop product pipelines in a strategic manner, defining the target markets accurately and patenting technologies needed to protect shares of those markets. This article discusses the strategic considerations a biotherapeutics company should make as part of its exit strategy, as well as examples of how those considerations are represented in the current pharmaceutical M&A landscape.