If You're Betting on Acquisitions, Bet Private
This article was originally published in Start Up
It's an odd biotech fact: given the choice within a group of more or less similarly sized and staged biotechs, drug firms generally prefer to acquire the private ones. We look at acquisitions of public and private biotechs since 2001 and explain several reasons for the phenomenon.
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For all its noise and parties, speeches, and meetings, the 26th annual JP Morgan Healthcare Conference felt more like an indecisive pause than the industry's first step into the new year. Biotech investors see their best exits through M&A, but activity's been unpredictable and less buoyant than expected. But generics and still-impoverished pipelines will force drug companies to make different choices. The quickest solution to pipeline problems is to imitate biotechs by developing or buying biotech products and technologies. These technologies allow Big Pharma to do with biologics what they used to do with small molecules: create fast-followers. Except that there's far more competition this time around.
It is a world, at least the US corner of it, in which any common understanding of drug value is confused by opposing incentives – to opacity and transparency, to looking at benefit broadly or narrowly, long-term or short-term: value, in short, to whom?
Merck and UnitedHealth's Optum group have partnered to explore various value constructs.