The adage 'biotech companies are bought, not sold' means an acquisition is typically not the result of a company actively seeking a buyer. As with Portola's sale to Alexion, it is often a fiduciary responsibility to consider an unsolicited offer, even if the internal plan is independent growth.
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While staying private can offer strategic advantages, particularly for future M&A, the biotech industry lacks a mature private growth capital market. Companies needing hundreds of millions for late-stage trials have no choice but to go public, unlike their tech counterparts.
The old assumption that small biotechs struggle with commercialization ("short the launch") is fading. Acquirers now target companies like Verona and Intracellular that have already built successful sales operations. This de-risks the acquisition by proving the drug's market viability before the deal, signaling a maturation of the biotech sector.
Ainsworth believes a responsible biotech entrepreneur envisions the end goal—acquisition or IPO—from day one. At RetroSense, this meant constantly engaging with potential acquirers like Allergan to understand their needs and generate the specific data required to become an attractive M&A target.
Despite a pivotal data readout pending, an acquisition of Abivax could happen beforehand. Historical deals like Merck's acquisition of Prometheus and Pfizer's of Arena show that large pharma companies are willing to 'roll the dice' and pay a premium for pre-data assets when their conviction in the science is high.
With patent cliffs looming and mature assets acquired, large pharmaceutical companies are increasingly paying billion-dollar prices for early-stage and even preclinical companies. This marks a significant strategic shift in M&A towards accepting higher risk for earlier innovation.
The M&A landscape is evolving beyond Big Pharma's patent cliff-driven acquisitions. Mid-to-large biotechs like BioMarin, Insight, and Ionis are now positioned as buyers, creating a richer, more diverse deal-making ecosystem.
M&A is often framed as a win, but it can be detrimental to patients. The acquisition of an aggressive, fast-moving biotech by a large pharma company can lead to slowed development timelines and more conservative regulatory strategies, ultimately delaying access to life-saving treatments.
Unlike in tech where an IPO is often a liquidity event for early investors, a biotech IPO is an "entrance." It functions as a financing round to bring in public market capital needed for expensive late-stage trials. The true exit for investors is typically a future acquisition.
The current biotech M&A boom is less about frantically plugging near-term patent cliff gaps (e.g., 2026-2027) and more about building long-term, strategic franchises. This forward-looking approach allows big pharma to acquire earlier-stage platforms and assets, signaling a healthier, more sustainable M&A environment.
Instead of remaining a single-asset M&A target, companies like Madrigal are acquiring complementary assets to build a broader franchise. Inspired by bidding wars for multi-asset companies, this strategy can increase long-term value and acquisition appeal beyond that of a single-drug company.
