ew corners of the market have been as prone to dealmaking over the last couple of years as the life sciences industry.
“Over the last two years, the valuations of biotech companies have come down due to higher rates. That has resulted in a better price point for acquirers and fewer financing options for smaller biotech companies,” Li Watsek, a biotech analyst at Cantor Fitzgerald, told Investing.com exclusively. “As patent expiries draw closer, M&A is becoming a vital tool for pharma companies looking to bulk up near-term revenue and strengthen drug pipelines,” explains Bryan Luchs, Partner at White & Case.) Ozempic, is another tailwind for acquisitions within the industry as companies hoard more cash into their already hefty balance sheets.
The increasing competition for innovation within the sector may also lead to the payment of high premiums for smaller target companies, which could result in hefty gains for investors positioned in such stocks. “Big pharma is looking for transformative assets – advanced-stage therapeutics with proven efficacy, like Inspirna’s Ompenaclid, or innovative modalities such as Umoja’s in-situ CAR-T candidates,” adds Aaron Rafferty.
Given the historic potential for high-premium deals and the industry’s leveraged balance sheets, investors positioned in the right companies may be looking at triple- or even quadruple-digit gains in case of a takeover.