Podcast Summary
Pharma Industry's $100 Billion Investment Spree in First 15 Days of January 2019: Pharma companies invest in biotech firms for transformative drugs to increase productivity, reduce time-to-market, and become market leaders, while facing challenges of serendipity, political pressure, and patient relationships.
In the first 15 days of January 2019, the pharmaceutical industry has already made deals worth $100 billion. Big pharma companies are investing heavily in biotech firms leading research on treatments and cures. The trend is driven by the industry's long-standing challenge of increasing productivity and reducing the time it takes to bring new drugs to market. However, finding the next blockbuster drug involves a degree of serendipity, making it a difficult nut to crack. With payers and health systems increasingly focusing on transformative drugs, pharma companies need to become market leaders to make significant profits. Despite continued price increases, especially in the US, the sustainability of these practices is becoming increasingly challenging politically and in terms of patient relationships.
Rising drug prices in diabetes and presidential elections: Biotechs making groundbreaking discoveries and FDA's engagement with them earlier in the process are challenging big pharma's dominance in the pharmaceutical industry.
The increasing intolerance of rising drug prices, particularly in the field of diabetes, is becoming a significant issue that could impact the 2020 presidential elections. Big pharma companies are under pressure to explain why they charge high prices for their medications, and biotech companies are gaining ground with their nimble approaches and groundbreaking discoveries. The FDA's willingness to engage with biotechs at an earlier stage in the drug development process is also helping to alleviate some risks for these smaller companies. In the recent news, we saw the first major deal of the final days of 2018, with GlaxoSmithKline buying US cancer specialist Tessaro for $5.1 billion. This trend of biotechs making groundbreaking discoveries and the FDA's engagement with them earlier in the process is likely to continue, making it increasingly important for big pharma to adapt and innovate in order to remain competitive.
Big Pharma's pursuit of biotech partnerships for oncology drugs: Big pharma companies acquire or partner with biotechs to leverage their capabilities, personalized medicine expertise, and promising drugs or compounds in the oncology sector, aiming for winning combinations and competitive edge.
In the pharmaceutical industry, big pharma companies are actively seeking to acquire or partner with biotechs to enhance their capabilities and make the most of promising drugs or compounds. This trend, particularly in the oncology sector, is driven by the increasing importance of personalized medicine and the potential for combination therapies. For instance, GSK's acquisition of Tesaro was motivated by the opportunity to leverage GSK's genetic analysis capabilities and 23andMe partnership to identify the most effective patient populations for a specific oncology drug. Similarly, Bristol Myers Squibb's acquisition of Celgene was aimed at boosting its immunotherapy asset, Opdivo, by combining it with Celgene's portfolio to create winning combinations and gain a competitive edge. These deals underscore the value of collaboration between biotechs and big pharma in bringing innovative treatments to market.
Biotech Acquisitions by Big Pharma on the Rise: The abundance of promising drugs in biotech pipelines, complementarity of assets, and relatively low valuations are driving an expected surge in biotech acquisitions by big pharma, despite potential risks to R&D investment.
The biotech industry is facing increased pressure to find new ways to generate revenue beyond a single drug, leading to an expected surge in biotech acquisitions by big pharma. This trend is driven by several factors: the abundance of promising drugs in biotech pipelines, the complementarity of assets between biotech and pharma, and the relatively low valuations of biotech companies. While there is a risk that acquisitions could lead to reduced investment in research and development, some companies, like Bristol Myers Squibb, are positioning themselves as attractive destinations for top scientific talent to assuage such concerns. Overall, the coming year is expected to bring significant deal-making activity in the biotech sector.
Cultural challenges in biotech-big pharma integrations: Big pharma's bureaucracy may hinder progress of cutting-edge drugs from biotechs through clinical trials
The integration of biotechs into big pharma companies can face cultural challenges, particularly when it comes to the willingness to invest in cutting-edge drug development. Biotechs often take more risks and pursue less bureaucratically approved molecules or compounds, which may not align with the decision-making processes inside big pharma companies. This could potentially hinder the progress of drugs through clinical trials, especially in later stages. If you're interested in learning more about the healthcare sector, check out FT.com. Don't forget to rate, review, and subscribe to Behind the Money, and visit fg.com/offer for the latest Financial Times subscription offer. Shopify is also a great resource for businesses looking to sell online and grow. Try Shopify for a $1 per month trial period at shopify.com/work. Tune in next week for a new episode of Capital Ideas, featuring unscripted conversations with investment professionals.
