Licensing deals and ADCs drive biopharma deal flow in 2023
The biopharma industry experienced a tapering off in deal flow in 2023, but according to a new report from J.P. Morgan, the big companies in the industry still knew what they wanted. The report reveals that antibody-drug conjugates (ADCs) were the hot commodity driving the fourth-quarter spike in licensing deal proceeds, offering a glimmer of hope to an industry that had been battered by outside forces and grim financing prospects.
During the fourth quarter, biopharma licensing partnerships accounted for a total value of $63 billion from 108 deals. One standout deal was Merck’s ADC partnership with Daiichi Sankyo, which accounted for $22 billion of that total. Another significant deal involved Bristol Myers Squibb working with SystImmune, amounting to a total value of $8.4 billion. Even when excluding the Merck deal, the total value of these partnerships still exceeded the previous quarter, which ended with $32.1 billion. Although the total number of licensing deals decreased compared to the previous year, deal values remained relatively high.
Venture investments reach $17 billion as biotech closes out the year
2023 saw a total of $17 billion in venture investments across 250 rounds in the biotech industry. In the last quarter alone, $3.5 billion was secured through 79 rounds. Aiolos Bio claimed the title of the largest venture round of the quarter, raising $245 million, which also happened to be the largest series A funding as well. Despite a decline in IPO activity, the venture investment sector remained strong, indicating ongoing interest and support for biotech innovation.
IPOs and M&A activity show mixed results in biopharma industry
The biopharma industry saw limited IPO activity in 2023, with only one IPO taking place in the fourth quarter. Cargo Therapeutics took the plunge and raised $300 million, contributing to a total of 13 IPOs for the year. This figure is significantly lower than the previous year, raising questions about what lies ahead for the industry in 2024. While IPOs were down, M&A activity saw a surge in December, with several Big Pharma companies acquiring smaller firms. The total M&A value for the fourth quarter was $37.6 billion, resulting in a total of $128.8 billion for the entire year.
Big Pharma’s appetite for licensing partnerships grows in 2023
According to J.P. Morgan’s report, there is significant potential for smaller biopharmaceutical companies to find licensing partners in Big Pharma. Larger companies are willing to provide larger upfront payments for deals that align with their strategic interests. Median upfront cash and equity payments from Big Pharma for phase 2 deals reached $405 million across five deals, with Merck’s outlier deal bringing the median to $310 million. This is a substantial increase from the $100 million median upfront payment in 2022. Late-stage assets saw a slight decrease in median upfront payments, from $75 million in 2022 to $70 million in 2023. However, phase 1 deals experienced a 42% increase in upfront payments year over year.
ADCs and cancer therapies dominate biopharma deal values in 2023
The report highlights the dominance of antibody-drug conjugates (ADCs) and cancer therapies in terms of deal values in the biopharma industry. ADCs, in particular, have been a major focus, with fewer total deals but significant deals in terms of value. In 2023, $4.6 billion in upfront cash and equity were allocated to ADC licensing deals, contributing to a total deal value of $43 billion. This represents a significant increase from the $23 billion total deal value in 2022. On the other hand, cell and gene therapy, once touted as a major breakthrough in biotech, experienced a decline in deal values, from $1.3 billion in 2022 to $900 million in 2023. However, cancer therapies as a whole reached a new height, with a total value of $86.1 billion in 2023.
In conclusion
The biopharma industry faced challenges in 2023, but licensing deals and ADCs offered a glimmer of hope. Venture investments remained strong, while IPOs and M&A activity showed mixed results. Big Pharma’s appetite for licensing partnerships increased, particularly for therapies with early safety or efficacy data. ADCs and cancer therapies dominated the deal values, indicating their continued importance in the industry. As the industry moves forward into 2024, it remains to be seen how these trends will evolve and shape the future of biopharma.
Analyst comment
1. Licensing deals and ADCs drive biopharma deal flow in 2023: Positive news. The report reveals that antibody-drug conjugates (ADCs) were the hot commodity driving the fourth-quarter spike in licensing deal proceeds, offering hope to the industry.
As an analyst, I predict that the market will see an increase in licensing deals and investment in ADCs, which will drive growth and innovation in the biopharma industry.
2. Venture investments reach $17 billion as biotech closes out the year: Positive news. Despite a decline in IPO activity, the venture investment sector remained strong, indicating ongoing interest and support for biotech innovation.
As an analyst, I expect the biotech market to continue attracting significant venture investments, fostering further growth and advancements in the industry.
3. IPOs and M&A activity show mixed results in biopharma industry: Neutral news. Limited IPO activity raises questions about the industry’s future, but the surge in M&A activity indicates potential opportunities for growth.
As an analyst, I anticipate the biopharma market to experience uncertainties due to the decline in IPOs, but the M&A activity suggests a potential for consolidation and strategic partnerships.
4. Big Pharma’s appetite for licensing partnerships grows in 2023: Positive news. Larger biopharmaceutical companies are willing to provide larger upfront payments for deals, indicating a potential for smaller companies to find licensing partners.
As an analyst, I expect to see an increase in licensing partnerships between Big Pharma and smaller biopharmaceutical companies, driving collaboration and innovation in the industry.
5. ADCs and cancer therapies dominate biopharma deal values in 2023: Positive news. ADCs and cancer therapies have seen significant deal values, indicating their importance in the industry.
As an analyst, I foresee continued focus and investment in ADCs and cancer therapies, contributing to further advancements and breakthroughs in the biopharma sector.
