28 March 2019

Our Q1 sector review: M&A and IPO activity highlight busy start to year


Following a busy start to 2019 across the global healthcare sector, Consilium looks back on a first quarter that has seen a raft of M&A activity and an IPO market that has exceeded market expectations.

A recent report published by EY noted that in 2018, life sciences companies used just 16% of their $1.2 trillion worth of M&A firepower ‒ defined as the debt, cash and other balance sheet items that can facilitate deals. This leaves a lot of money on the table for deal-makers in 2019. Similarly, law firm Baker McKenzie predicted that a fertile environment brought on by falling valuations and large balance sheets would result in healthcare transactions reaching $331 billion in 2019.

True to such predictions, the year kicked off with two huge M&A deals announced in January with Bristol-Myers Squibb Co. announcement of an agreement to buyout Celgene Corp. in an industry record deal that could fall just short of $100 billion – although at the time of writing there is some doubt that BMS shareholders will approve the deal. Just days later Eli Lilly & Co. announced the acquisition of Loxo Oncology Inc. for a slightly more modest $8 billion. Momentum has carried through into the second half of the quarter, with Nightstar Therapeutics, a clinical-stage gene therapy specialist founded by Syncona, agreeing a $877 million sale to Biogen in a deal ranking as one of the most valuable British biotech exits of the past two decades. Most recently, Smith & Nephew forged a $660m deal to buy Osiris Therapeutics as the FTSE 100 medical equipment maker looks to acquisitions diversify its business.

Market volatility in 2018 led many commentators to predict that investor caution would result in a decline in the number of companies making the leap into the public markets in 2019. While IPO markets in Europe have been subdued, with the exception of Sequana Medical’s flotation on Euronext Brussels, in the US the IPO market has so far defied such predictions with biotech continuing to be the most active sector in for new issuance. This quarter has seen eleven IPOs pricing in the sector on Nasdaq, with Alector, Gossamer Bio, Harpoon Therapeutics, Stealth BioTherapeutics and Genfit all coming to market. Interestingly around half of the IPOs that launched so far in 2019 are relatively young in terms of clinical development, a sign that bodes well for emerging companies looking to access healthcare specialist investors.

Chris Welsh, Associate Partner,
Consilium Strategic Communications.

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