Overall, mergers and acquisitions slowed in Q3:16, down 11% compared with Q2:16, and 10% lower than in Q3:15. The biotechnology sector saw just the opposite phenomenon. Biotech transactions grew by 58%, to 52 deals, compared with the previous quarter’s 33 deals, and by 24% compared with the same quarter in 2015, when 42 deals were announced. Not all deals in this sector involve the purchase of an entire company, however. Just 42% of the third-quarter transactions fit that description.
The remaining 58% deals involved the purchase of exclusive rights and licenses to products, product candidates or intellectual property from a biotech firm. Pharmaceutical companies have pulled back (or cease) their in-house research and development efforts, and now are doubling down on research collaborations, partnerships and licensing promising clinical-stage assets—and even pre-clinical ones.
In Q3:16, $601 million was spent in upfront payments for exclusive rights to certain products. This figure would be significantly higher if milestone and royalty payments were factored in. But since any additional payments are contingent upon factors such as future net sales, successful clinical trial results and time of commercialization, it is hard to predict the final value of these purchases.
For the 42% of deals that were straight M&A, $2.4 billion was committed to finance those acquisitions.
The largest acquisition in the quarter was Allergan plc’s (NYSE: AGN) $639 million purchase of privately-held Vitae Pharmaceuticals. The acquisition strengthens Allergan’s medical dermatology pipeline with VTP-43742, a Phase 2 first-in-class, orally active RORγt inhibitor for the potential treatment of psoriasis and other autoimmune disorders. It also adds VTP-38453, a topical LXRβ selective agonist for the potential treatment of atopic dermatitis, currently in a Phase 2a proof-of-concept trial.
The largest upfront license purchase of this quarter was Pfizer’s (NYSE: PFE) purchase of privately-held OncoImmune’s license to ONC-392, a preclinical monoclonal antibody designed to help reduce the immune related toxicities while retaining potent anti-tumor immunity. The upfront price is $250 million, plus a $36 million equity investment and up to an additional $2.3 billion in future milestone payments across all programs included in the collaboration.