Administration's Policy Rx for Biotech Industry Will Have Side Effects
The pharma and biotech sectors are seeing significant policy shifts and a recent pickup of M&A activity.
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It has been an eventful year to this point for the pharmaceutical and biotech industries. A new administration has ushered in some significant policy shifts with the promise of more change to come. We've also seen an uptick in deal volume here in September, which could mean we see more companies merging and snapping up smaller names. And nothing perks up this sector more than a series of high-profile buyouts. In today’s column, we will take a more in depth look at both topics.
One of the major changes the new administration is pursuing with gusto is pushing large pharmaceuticals to move more manufacturing to the United States. This will create high-wage jobs and make the industry less reliant on global supply chains — a vulnerability that was exposed during the Covid lockdowns. It has had some success on this front with names like Eli Lilly LLY, GSK, Inc. GSK, Roche RHHBY and AstraZeneca AZN have all announced new multi-billion commitments on this front in recent months.
There have been numerous changes to policies and personnel in the vaccine space with the Food and Drug Administration no longer appearing it will be a rubber stamp as it has been in the past. I am going to avoid politics here and just say what lies ahead is unclear and has caused a considerable amount of volatility in vaccine related companies.
Changes are apparently coming to direct-to-consumer, or DTC, marketing that big pharma spends billions on annually. It should be noted that the United States and New Zealand are the two developed countries that allow this practice, and this was not allowed here until the late 1990s. While not banning the practice outright, the administration did just launch some reforms to rein in misleading direct-to-consumer pharmaceutical advertisements. It will be interesting to see if this slows the sales of mass marketed drugs like Skyrizi. In addition, this could have negative ramifications to some media companies’ revenues, given how significant a television advertiser Big Pharma has become.
Ending on a more positive note, we have seen a bit of a pickup in M&A recently. Last week, Roche purchased a clinical-stage MASH developer called 89bio in a deal worth up to $3.5 billion. Then on Monday, Pfizer PFE agreed to acquire Metsera (MTSR) in a deal worth $47.50 per share in cash, or around $4.9 billion upfront. Metsera shareholders can also earn an additional $22.50 a share via contingency rights tied to future milestones. Metsera had just come public earlier this year to much fanfare. This clinical state biotech was focused on developing obesity and cardiometabolic treatments.
Both acquisitions contained considerable buyout premiums. I'm hoping this makes companies such as Viking Therapeutics VKTX likelier buyout targets. Viking has a GLP-1 weight loss candidate being developed as an oral and subcutaneous version that has shown considerable promise. It also has an intriguing mid-state candidate targeting MASH.
At the time of publication, Jensen was long PFE and VKTX.
