After a year flush with big deals, pharma M&A watchers have been downright spoiled. But with major drugmakers stuck in slow-growth mode—and biotechs outperforming the market in terms of stock price—big players may be looking for smaller "bolt-on" acquisitions in 2020, rather than the massive mergers of the past year.
Instead of going after the likes of Celgene—or even Otezla, the $13.4 billion psoriasis drug Amgen picked up as a byproduct of that deal—major pharmas will likely downsize their transactions to more closely resemble the $2.5 billion Sanofi agreed to pay for biotech Synthorx earlier this week, Bloomberg reported, citing an investor note from JPMorgan analyst Chris Schott.
In 2019, pharma's average M&A price was $16 billion—a jump from the $13 billion average from the year before. But a couple of factors could drive a downward trend as pharma focuses on snagging biotechs, Schott said.
For one, major pharmas have seen slow growth or even a decline in their stock prices while biotechs, on the whole, have outpaced their bigger counterparts. And big players have already shown a clear interest in adding relatively small-dollar biotech acquisitions, even paying rich premiums to lock them down. Just look at the Synthorx buy and Merck & Co.'s agreement last week to purchase ArQule for $2.7 billion.