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Bayer announced its deal to buy gene-therapy startup Asklepios BioPharmaceutical in October, one of 19 acquisitions of biotech startups by drug manufacturers last year, according to Silicon Valley Bank. (REUTERS)
Bayer announced its deal to buy gene-therapy startup Asklepios BioPharmaceutical in October, one of 19 acquisitions of biotech startups by drug manufacturers last year, according to Silicon Valley Bank. (REUTERS)
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Biotech startup acquisitions jumped in 2020, leaving VCs optimistic for New Year

Corporations seek to persuade startups to be acquired instead of going public

Acquisitions of biotechnology startups jumped in 2020, as buyers moved upstream to grab promising drugmakers while they were still private and relatively cheap.

Drug manufacturers bought 19 biotech startups last year, up from 15 in 2019, according to Silicon Valley Bank. Last year’s total was the highest since the 20 buyouts recorded in 2016. The median upfront sum paid in 2020 was $300 million, compared with $250 million the year before.

Buyers are competing with an exploding initial public offerings market. Eighty-four biotechs went public in 2020, topping the previous peak of 66 in 2014, according to SVB.

Median biotech IPO pre-money valuations, the value before a company goes public, reached a record, $500 million in 2020. Some acquirers aim to buy biotechs before they become more highly valued, publicly traded companies, SVB Managing Director Jonathan Norris said.

“We’re seeing unprecedented valuations of companies going public and great performance out there," Mr. Norris said.

Buyers closed 2020 with several sizable deals, including Bayer AG’s purchase of gene-therapy startup Asklepios BioPharmaceutical Inc. for $2 billion up front, plus up to $2 billion in success-based payments.

Startup acquisitions rose despite the pandemic, which forced buyers to negotiate deals virtually. David Lee, chief executive of Servier Pharmaceuticals, the U.S. subsidiary of French drugmaker Servier Laboratories, said the crisis slowed some deal making efforts, as the company confronted questions such as how to vet opportunities without face-to-face meetings.

Still, Servier last year acquired venture-backed Symphogen A/S, formed a collaboration with venture-funded Celsius Therapeutics Inc., and agreed to buy the oncology business of publicly held Agios Pharmaceuticals Inc.

“When you have strong motivation to get things done, you still do," Mr. Lee said.

Biotech acquisitions aren’t necessarily correlated with economic cycles because pharmaceutical companies have plenty of cash to make deals, said Christiana Bardon, a managing director with MPM Capital Oncology Impact Fund, a cancer-focused investment fund, and with life sciences investor Burrage Capital.

Corporate acquirers can strike when they see a biotech drug reach an important milestone, such as strong clinical trial data, she said. Because of the financing climate, biotechs now often have the option to pass on buyout offers and raise money to remain independent.

“If these companies don’t see a deal they like on the table they have plenty of resources and opportunities to take that asset forward themselves," Dr. Bardon said.

Pharmaceutical companies in particular are evaluating acquisitions of genetic-medicine companies that could shake up the drug industry, said Gbola Amusa, head of health-care research for investment banking firm Chardan Capital Markets LLC.

Potential targets include gene-therapy companies, which typically use adeno-associated virus, or AAV, to ferry genes into cells, where they make a specific disease-fighting protein.

Some gene-therapy companies are developing one-time treatments for conditions, such as the blinding disease age-related macular degeneration, that could displace top-selling drugs that are taken repeatedly, Dr. Amusa said.

“If AAV starts to be able to produce these proteins in the body, that will eliminate a big portion of what Big Pharma is doing," he said.

Because of drugmakers’ need for growth, and sizable financial resources, the year ahead looks promising for biotech acquisitions, said Otello Stampacchia, founder of health-care investor Omega Funds, adding, “We think there’s going to be a lot of activity."

This story has been published from a wire agency feed without modifications to the text.

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