Biopharma Companies are Undervaluing Early Stage In-licensed Candidates: An Analyst’s Perspective
A recent BioCentury featured a column by Cowen’s Yaron Werber and Eve Reilly, which argued that biopharma companies are still too likely to prioritize “safe,” quickly accretive, late-stage clinical assets over “riskier” early clinical deals, which are both historically more affordable and provide more upside. The pair analyzed returns from more than 50 M&A deals and found that Phase 3/registrational assets tended to be very pricey and – ultimately – to underperform vs. expectations, while assets in Phase 1 or Phase 2 were less likely to strain balance sheets and more likely to post superior returns if they make it to market, albeit over a longer time frame. More specifically:
- Almost all late-stage deals missed peak sales forecasts, while nearly half of early clinical deals that made it to market beat projections. (Of course fewer early clinical assets actually did make it to market)
- The median return on invested capital (ROIC) at year five post-deal for late-stage deals was 26%, compared to 10% for early-stage deals. By year-ten, however, this relationship flipped; the median ROIC for late-stage deals was 58%, whereas it had reached 83% for early-stage deals.
- Overall, the ROIC of late-stage deals is more predictable and evenly distributed across many deals, whereas performance of the early-stage deals was driven by a handful of standouts (i.e., JNJ/Cougar; BMY/Medarex, GILD/Pharmasset).
Joining Forces: EQT Acquires Life Sciences Partners
This week, EQT AB acquired Life Sciences Partners (LSP), a leading European life sciences VC, with about EUR 2.2B in assets under management, with the goal of strengthening EQT’s position as a leading private market investor in healthcare, complementing its existing life sciences knowledge base and expanding its ability to support innovative companies.
As part of EQT, the LSP team will continue to operate as they have been, with the entire LSP team joining EQT.
Mission BioCapital Raises $275M to Help Launch Innovative Startups
Venture firm Mission BioCapital raised $275M though its new fund, Mission BioCapital V, to unite scientific teams of academic researchers and entrepreneurs working across multiple geographies to build companies centered around new technologies. The fund has already made seven investments in its latest fund, four of which were on startups that it co-founded.
The overall markets declined this week, with the NASDAQ, DJIA and S&P 500 closing down 2%, 1% and 1%, respectively. The VIX is at 17.66 as of market close on 11/11, itself exhibiting considerable volatility over the past few weeks. Biotech markets declined as well, with the NBI, XBI and BTK all declining by 5%.
Biotech public capital markets have continued to be active, with several IPOs and follow-ons pricing in recent weeks, including the following:
- IPOs: HeartBeam ($16.5M), IO Biotech ($100.1M), Journey Medical ($35.2M), LianBio ($325M), Mainz Biomed ($10M), MDXHealth (€118.7M), Tivic Health ($15M), Vaxxinity ($89.7M)
- Follow-Ons: Anpac Bio-Medical ($2.9M), ANI Pharma ($75M), Avenue Therapeutics ($2.6M), Cardiol Therapeutics ($50.2M), Compass Therapeutics ($125M), Evaxion Biotech ($27.6M), Helius Medical ($9.6M), Merus ($110M), Timber Pharmaceuticals ($17.3M)
In addition, there were a handful of private financings over the past few weeks, including:
- Private: Acrivon (Series B, $100M); Antios Therapeutics (Series B, $75M); Antiva Biosciences (Series D, $31M); Arbor Biotechnologies (Series B, $215M); bit.bio (Series B, $103M); Cambridge Epigenetix (Series D, $88M); Clade Therapeutics (Series A, $87M); GRO Biosciences (Series A, $25M); Marengo Therapeutics (Series A, $80M); Mekonos (Series A, $25M): Nitrase Therapeutics (Series A, $45M); Novadip (Series B, €19M); Parthenon Therapeutics (Series A, $65M); PlateletBio (Series B, $75.5M); Prilenia Therapeutics (Series B, $43M); Shoreline Biosciences (Undisclosed, $140M); Viome Life Sciences (Pre-Series C, $54M)