Two weeks ago, we wrote how the growth in venture capital funds for Q1 2023 was an early sign that private money in biotech was being accumulated and looking for deals to put the money to work (read here). This week, we’re seeing another early trend that is pointing to an improving biotech sentiment: growing mergers and acquisitions (M&A) volume.
There has been $64B in M&A volume announced through April 16th, putting 2023 on pace for a $300 billion M&A year. The pace is close to the all-time record biopharma M&A volume set in 2019.
The above graph does not include the latest M&A of the month that saw GlaxoSmithKline ($GSK) acquire Bellus Health ($BLU) for $2B for their Phase 3 chronic cough drug. With 2023 on pace to hit M&A record volume, it shows that big pharma has sufficient cash and enough interest in available assets to bring in-house. Most importantly, rising M&A demand demonstrates that biotech valuations are nearing a reasonable level.
Post-COVID, while biotech was rocking during 2020 and 2021, money was flowing into VC deals and IPOs. During this time, M&A activity was dwindling as valuations were approaching levels where the risk/reward did not make sense. Big pharma was not spending on "overpriced" assets. This trend is reversing so far in Q1 2023.
P.S. Not investment advice. Read the Liability/Disclaimer subsection to learn more.