The world’s biggest drugmakers are racing to buy up biotech companies to fill looming holes in their pipelines and pounce on new discoveries, bringing a hopeful buzz back to JPMorgan Chase & Co.’s big healthcare conference in San Francisco.

“Opening new markets like obesity is adding optimism,” said Victor Bulto, president of the US unit for Novartis AG on the sidelines of the JPMorgan Healthcare Conference, which draws the heads of the world’s biggest drug companies who use the annual confab to broker multibillion-dollar deals.

The renewed energy in biotech, which has been pummeled in recent years, applies even to companies that aren’t working in obesity, Bulto said. “The realization that there’s still a substantial unmet need” is boosting the excitement, he said.

The sector has been through an M&A boom and bust. The pandemic, and the rise of the mRNA technology pioneered by Moderna Inc. and BioNTech SE, drove stock prices through the roof, giving many firms the cash they needed to operate – without the help of buyouts from big pharma that typically drive investment in the industry.

“There was definitely the sentiment of, you know, ‘We’ve got more than enough money. We don’t need you,'” Teresa Graham, chief of the pharmaceutical unit at Roche Holding AG, said at the conference. Enthusiasm for the sector cooled as Covid faded and it got costlier to borrow money, sending biotech share prices tanking. Now interest rates are stabilizing, making more deals possible.

Prices for biotech companies have reached “a better, more realistic place,” Graham said. “There is a lot of energy around what is out there.”

Now, big drugmakers are in a hurry. As many as 170 drugs could lose exclusivity by the beginning of the next decade, representing close to $400 billion in annual sales for big pharmaceutical companies, according to data compiled by Bloomberg Intelligence. At Bristol Myers Squibb Co., for example, three drugs that have been among their biggest sellers are at risk.

That’s why the deals are coming in. On the first day of the conference alone, about $6.4 billion worth of health deals were announced. Merck & Co. spent $680 million for cancer drugmaker Harpoon Therapeutics Inc., Boston Scientific Corp. spent $3.7 billion on a device maker and Johnson & Johnson spent $2 billion for a cancer drugmaker. It follows an even busier December when Bristol and AbbVie Inc. each announced an acquisition within days of doing another deal.

“I haven’t felt this excited about biopharma M&A in over 10 years,” said Michael Beauvais, a partner at Ropes & Gray, a law firm that advises on health deals.

M&A bankers and lawyers say they’re the busiest they’ve been in a while. Adding to the urgency: Bankers say some companies are trying to get deals done earlier in the year to avoid getting caught up in rhetoric around the U.S. presidential election.

James Sabry, head of partnering at Roche, said it’s surprising to see this much deal activity given global risks like two ongoing wars and the upcoming U.S. presidential election. The rapid succession of deals over the past few months – and even days – is “what gets investors excited about continuing to invest in biotech.”

Companies are looking for targets across all therapeutic areas but they don’t all have to be mega-mergers. Except for a few big ones like Pfizer Inc.’s $43 billion purchase of cancer drugmaker Seagen announced in March, many deals now are less than $10 billion. That’s a shift from a few years ago when Bristol bought Celgene Corp. for $74 billion ahead of the 2019 JPMorgan conference.

The run-up in biotech shares in December has also helped the mood. The closely watched SPDR S&P Biotech ETF, known as the XBI, rose 18% in December, and the Nasdaq Biotechnology Index is the highest it’s been since early 2022.

“I would say the mood is optimistic,” said Adam Keeney, head of corporate development at Biogen Inc., which is meeting with 150 companies and venture firms at the conference as it attempts to find new deals to expand its portfolio beyond neuroscience. He called the resurgence of interest in neuroscience drugs, which had fallen out of favor in recent years, “remarkable.”

 

With assistance from Madison Muller and Ike Swetlitz.

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