The swing balance of pharmaceutical investment

This may be the cruelest reality in today's grim medical situation.

In such a harsh environment, some people can't hold the tragic end, and some people struggle to transform... At the end of the year, Amgen gave a different voice.

Recently, Amgen and Horizon Therapeutics jointly announced that Amgen will acquire the latter for about $28.3 billion.

This means that Amgen has won the top three competition with Sanofi and Johnson & Johnson, and has entered the field of rare diseases and rheumatism strongly.

It is reported that Horizon, a biotech company, has a history of 14 years and has 4 commercial products: Krystexxa for chronic gout, Uplizna for the treatment of optic nerve and spinal cord inflammation, Ravicti for the treatment of urea cycle disorders for rare genetic diseases, and Tepezza, a monoclonal antibody for innovative therapies for rare ophthalmic diseases

Amgen's deal with Horizon could become the largest M&A in the pharmaceutical industry in 2022.

On the one hand, the "extinguished" pharmaceutical investment, on the other hand, the huge acquisition of nearly 30 billion US dollars, will pharmaceutical investment be good in 2023?

"Flame-out" pharmaceutical investment?

Finding certainty in the pharmaceutical industry amid uncertainty has become a swinging state of mutual investment in the pharmaceutical industry.

According to incomplete statistics, as of the end of November, the global pharmaceutical and life sciences sector M&A transactions reached US$416 billion in 2022.

Compared to 2021, there are indeed some decreases.

2021 continued the boom in mergers and acquisitions, with global pharma and life sciences transactions totaling more than US$590 billion.

In contrast, total investment M&A volumes are expected to decline by more than 25% throughout 2022.

On the other hand, taking stock of the investment and M&A hot spots since 2022, the total transaction events of the top 10 exceeded 88 billion US dollars, which is expected to account for more than 20% of the total transaction volume of the whole year.

Total deal volume declined year-over-year, while big event deals continued to reach new highs, reflecting everyone's desire for quality assets.

Comparing Amgen and Horizon's deal of the century, the largest M&A deal in 2021 was Thermo Fisher's acquisition of PPD for $17.4 billion. When Thermo Fisher Scientific is included in net debt of approximately $3.5 billion, the total value of the transaction is approximately $20.9 billion.

$28.3 billion compared to $20.9 billion, the largest single transaction value increased by 35%.

Table 1 Top 10 M&A transactions in the global pharmaceutical and health field in 2022 (incomplete statistics)

From the top 10 investment M&A transactions, the following three trends can be seen:

• The focus of investment has gradually shifted to high-quality late-stage assets, or new technologies that can achieve medical breakthroughs in the early stage, and basically the targets of investment are unique in the segmented field.

• Giant enterprises are investing more and more. Pfizer, Amgen, GlaxoSmithKline, and UnitedHealth occupy eight of the top 10 lists. These large enterprises achieve overtaking on the track through rapid investment and mergers and acquisitions.

• Leading enterprises will focus on increasing their presence in emerging fields such as kidney disease drugs, neurological disease drugs, inflammatory drugs, rare disease drugs, vaccines and health management services, so as to further strengthen their R&D pipelines, investment in R&D and upcoming blockbuster products.

In the context of the continuous spread of the pandemic, from being affected by the epidemic to shouldering the heavy responsibility of fighting the epidemic and restoring stable development, major pharmaceutical companies have reconsidered their corporate strategies, enriched and strengthened core pipelines, and divested non-core assets.

In general, the pharmaceutical industry has also entered a period of deep adjustment since the beginning of this year.

In the cold winter of investment,

How are businesses responding?

Enterprise investment and mergers and acquisitions are an important manifestation of self-digestion and self-integration within the industry.

There are many M&A opportunities emerging during the industry downturn, and if companies can grasp the transaction opportunities, the greater the probability of future rise.

After the current stage of Taoguang Yanghui, pharmaceutical enterprises will leap to a new stage of development in the future.

However, under the cold winter of the investment boom returning to rationality and the superposition of economic, industrial, capital and other cycles, the era of arbitrage that can only be broken quickly has passed, how should pharmaceutical companies make choices?

(1) Explore the path from R&D homogenization to R&D differentiation and innovation. The early growth path is too similar, and the commercialization stage is more crowded, and enterprises cannot cover up strategic laziness with tactical diligence. When looking for new investment and M&A targets, enterprises can look at a broader field of disease.

(2) Closely focusing on the original intention of "clinical needs", starting from clinical value steadily, based on patient needs, and laying out a blue ocean with high practicality, wide audience and Chinese characteristics. Of course, we must also realize that the ability to gain insight into actual clinical needs is not achieved overnight, and requires long-term experience accumulation and massive research rooted in a field. The layout of each transaction is like every move in the chess game, and winning thousands of miles needs to be considered holistically.

(3) The implementation of China's policies, the inflow of funds and talents have brought innovation into an unprecedented golden age, but the reality that medical resources in small and medium-sized cities are still relatively scarce must also be fully considered. At this stage, China's medical insurance policy is still aimed at covering a wider range of people, and the sustainable development of local pharmaceutical enterprises needs to be based on an objective understanding of China's basic medical needs, and the direction of products and research and development must always take into account the needs of the local medical market, not only to pursue innovation, but also to always consider the accessibility and affordability of products. Therefore, innovative breakthrough therapies abroad may not be fully applicable in China at this stage.

(4) Consolidate the capabilities of enterprises at the front end of the industrial chain, strengthen the capacity building in the field of pharmaceutical R&D, and build a high-quality R&D team and commercial promotion team based on their own advantages and experience in commercialization. Iron also needs to be hard, this law always applies, especially in the trough, this is the root of hard gas.

The cycle of traversal is too grand, may we all live and live wonderfully.