What’s with All the Bio M&A in 2019?: A Quick Take | Summary and Q&A

February 28, 2019
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What’s with All the Bio M&A in 2019?: A Quick Take


Bio M&A activity has increased due to patent cliffs, excess cash, and decreased valuations. Platform plays and early-stage acquisitions are common strategies, while start-ups should focus on finding the right partner and determining their contribution to the partnership.

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Key Insights

  • 👶 The increase in bio M&A activity is driven by the need for new assets, excess cash, and decreased valuations.
  • ❤️‍🩹 Platforms are important in the bio industry as they enable shared R&D and provide end-to-end solutions for different therapeutic modalities.
  • 🙃 Start-ups should carefully choose partners who share their vision and consider whether they want to be standalone or benefit from the resources of an incumbent.
  • 😃 Big pharma companies tend to acquire assets at later stages, while early-stage companies often opt for licensing agreements or partnerships.
  • 🙃 Timing, commitment, and value contribution are important factors in negotiations between start-ups and incumbents.
  • 💨 Bio M&A activity in 2019 has already reached $94 billion, with a fast start compared to the previous year.


well hello YouTube welcome to the Tube channel my name is Frank Chen and today I'm here with Koko ki Jairo sake and Nate Chang members of the a 16 Z bio team Cokie works on what we call our market development team which helps startups find friends and the big companies and Nate does the same thing for our corporate development partners which are so... Read More

Questions & Answers

Q: What are the three major trends contributing to the increase in bio M&A activity?

The three major trends are patent cliffs, excess cash on balance sheets, and decreased valuations of biotech companies.

Q: Why are big pharma companies seeking new assets?

Big pharma companies need to replace lost revenue streams due to the expiration of exclusivity on major drugs. Acquiring new assets is crucial for maintaining growth.

Q: What are the advantages of platform plays in the bio industry?

Platform plays allow companies to leverage shared R&D and know-how to discover and develop multiple new drugs. They also provide a breadth of end-to-end solutions for different therapeutic modalities.

Q: How should start-ups approach conversations with incumbents?

Start-ups should research and identify potential partners who share the same vision and have high priority therapeutic areas. They should also consider the type of partnership or merger they want and what capabilities they can contribute.


In this video, Frank Chen from Andreessen Horowitz interviews Cokie Hasi and Nate Chang, members of the a16z bio team, about the recent surge in bio M&A activity. They discuss the three major trends that have contributed to this trend: loss of exclusivity on major drugs, excess cash reserves, and a decrease in valuations across the board. They also explore the changing psychology of corporate buyers, the importance of platforms in the biotech industry, and the different strategies employed by start-ups and incumbents in M&A deals.

Questions & Answers

Q: What are the three major trends that have led to the recent surge in bio M&A activity?

Looking back over the past year, there are three major trends that have contributed to the increase in bio M&A activity. The first is the loss of exclusivity on major drugs by major biopharma companies such as Roche, Pfizer, and GSK. This has created a need for these companies to replace their revenue streams. The second trend is the excess of cash reserves held by the top biopharma companies, which gives them the ability to make acquisitions. Finally, there has been a decrease in valuations across the board for biotechnology companies, making them more attractive or vulnerable to acquisition.

Q: Why did the psychology of corporate buyers change, leading to more M&A activity?

The psychology of corporate buyers changed because of the combination of the downturn in trading across all sectors of the market in the fourth quarter of 2018 and the stronger position of pharma stocks. This shift in mindset led these buyers to reevaluate their strategies and consider new assets. Additionally, the timing became favorable for certain acquisitions as companies wanted to control the launch and the commercial message of these assets.

Q: What might drive the decision to buy or sell a company for a corporate buyer?

The decision to buy or sell a company for a corporate buyer can be driven by various factors. Growth and total addressable market (TAM) are important considerations, as well as the patient populations and revenue capture potential of the new product. For gene therapy companies, the decision to buy or sell may also revolve around establishing a leading platform in a specific disease area, as well as maintaining sustained cash flows through new modalities. Ultimately, the decision is driven by the desire to strengthen and expand franchises.

Q: What are bio platforms and why are they of interest to big pharma companies?

Bio platforms in the biotech industry refer to proprietary drug discovery platform methodologies that promise to discover multiple new drugs. These platforms allow companies to generate shared R&D and know-how, potentially leading to the development of different assets. Big pharma companies are interested in these platforms because they offer enabling technologies to source and discover new drugs, as well as end-to-end solutions for different modalities. They provide opportunities for big pharma companies to strengthen their R&D productivity and secure new revenue streams.

Q: How much M&A activity has occurred so far this year compared to last year?

In 2018, the biotech industry announced $123 billion in M&A transactions. As of now, in early 2019, there have been $94 billion worth of M&A transactions. This indicates a strong start to the year and suggests that the pace will continue throughout 2019. The capital markets are also expected to drive the M&A activity, with a slightly slower pace in IPO exits but many companies still in the market.

Q: How should startups and corporations think about deploying capital? Is it better to invest early or make larger acquisitions?

Startups and corporations should consider multiple factors when deciding how to deploy capital. For early-stage companies, it is important to focus on R&D and consider partnerships or licensing agreements to enable R&D productivity in the short term. Most acquisitions in biotech are of late-stage or marketed stage companies, indicating that big pharma companies are still conservative in making big bets on early-stage platforms. However, in highly competitive areas like oncology, there has been a shift towards earlier stage acquisitions. The decision ultimately depends on the specific circumstances and goals of the company.

Q: What are some best practices for start-up executives when engaging with incumbents for partnerships or acquisitions?

Start-up executives should avoid viewing big pharma companies as a distant entity and instead analyze the landscape, understand therapeutic areas of interest, and identify potential ideal partners. It is crucial to share the same vision with the chosen partner and have an internal champion within the big pharma company who is committed to the science and technology of the start-up. The desired partnership or merger should be considered, with a focus on the respective contributions of each party. Start-ups should also be mindful of their place in the treatment paradigm and how that aligns with the partner's commercial strategy in the long term.

Q: What has been the shift in the partnering model between start-ups and incumbents?

Traditional co-development models involved start-ups passing on assets to big pharma partners for development and distribution. However, the trend in recent years has been for start-ups to retain commercial rights, especially in the US, while out-licensing ex-US rights. This allows start-ups to be more standalone and have more control over the asset. The level of commitment and the importance of the asset to the partner can dictate the degree of manufacturing and distribution control. Option agreements, where big pharma companies outsource RD and make a decision at a later date, are also common for early-stage platform technologies.

Q: How has the battle between start-ups and incumbents intensified due to changes in selling and distribution?

The battle between start-ups and incumbents has intensified with the advent of new selling and distribution models. Start-ups now have the opportunity to retain commercial rights and leverage new technologies or partnerships to establish themselves. Incumbent companies, on the other hand, have the advantage of established distribution channels and reimbursement systems. The trend has shifted towards partnerships and licensing agreements that allow start-ups to benefit from incumbents' distribution expertise without losing control of their assets.


The recent surge in bio M&A activity can be attributed to three major trends: loss of exclusivity on major drugs, excess cash reserves held by biopharma companies, and a decrease in valuations across the board. The psychology of corporate buyers has changed, leading to a shift in strategies and increased interest in new assets. Platforms play a crucial role in the biotech industry, providing enabling technologies and end-to-end solutions. Start-ups should carefully consider potential partners and engage with them early, sharing the same vision and understanding the long-term commercial strategy. Deployment of capital depends on the stage and goals of the company, and partnerships and licensing agreements can be more favorable in certain cases. The battle between start-ups and incumbents has intensified, with start-ups retaining commercial rights but leveraging incumbents' distribution expertise through partnerships.

Summary & Key Takeaways

  • 2019 has seen a significant increase in bio M&A activity, with major deals like Bristol-Meyers Squibb buying Celgene and Takeda acquiring Shire.

  • Three major trends have contributed to this activity: patent cliffs, excess cash on balance sheets, and a decrease in valuations of biotech companies.

  • Big pharma companies are seeking new assets to replace lost revenue streams, and the ability to acquire attractive assets has increased due to decreased valuations.

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