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Biotechnology companies do two things in an ideal world. They create medicines that improve the lives of patients and sell them to large pharmaceuticals, either in whole or in part. This second factor has been difficult to implement recently due to high interest rates and uncertainty regarding the direction of US health policy. Two thick transactions inked on Monday show that biotech investors can still win enough payments if the terms are correct.
French drug giant Sanofi said he agreed to buy the only approved treatment in the world for $9.1 billion in cash. Meanwhile, Bristol-Myers Cybe pays BionTech to $3.5 billion for 50% of immunotherapeutic cancer drugs currently under study, rising to $11.1 billion if conditions are met.
The two deals include drugs at different stages and tackle different conditions, both bringing generous terms to the seller. BluePrint investors are earning a 27% premium on the stock price on Friday. Meanwhile, BionTech has received a valuation that could cost as much as $22 billion in assets acquired in November 2024. On Monday morning, stock prices rose almost 20%.
Both drugs are in hot treatment areas and may explain how these trades were made in a tough market. This is especially true for BionTech compounds. Helping the immune system target cancer better was a very successful strategy. Merck’s keytruda, the grandfather of such drugs, has sold nearly $300 billion last year and faces the expiration date of its major patent in 2028.
Now, a new generation of drugs with one BionTech’s appears to combine immune tumors with other mechanisms such as blocking the blood supply to cancer. Only Pfizer attacked a licensing agreement in this sector with China’s Biotechnology 3SBIO last week, with $1.25 billion upfront and another $4.8 billion conditional payments. Biontech’s drugs hope to be approved to treat multiple types of tumors.
Large drugmakers need to strengthen their respective growth prospects. BMS has a large patent for its expiration date. And while Sanofi may not have the exact same incentive to buy rivals, the disappointing result of one of the homemade drugs on Friday highlights wisdom that diversifies bets.
Biotechnology continues to be challenged. The S&P 500’s biotech subindex has dropped by more than 10% this year, but the wider index is flat. However, investors still have the opportunity to choose the winner. When companies with exciting drugs meet by drilling holes in their pipelines, there are few obstacles to the healthy distribution of money.
camilla.palladino@ft.com
