The mood out of San Diego last week was the giddy kind, a market convinced the hard part is over, and on the raw deal count it isn't wrong. The interesting part was who held the leverage in those rooms. Two questions run under every deal: where the assets come from, and what one US pricing rule does to a price agreed anywhere else.
Start with the body language. When a biotech tells a would-be buyer it can just as easily fund itself and walk, that line used to be theater. The bankers at BIO spent the week telling big pharma to take it at face value. Annamaria Sudarov, a managing director for the healthcare investment banking division of Wells Fargo, put it flatly on a June 22 panel: when a company says it is running a dual track, courting acquirers while it lines up its own financing, "they are not posturing. It is for real." And the money backs her up. Sudarov pointed to roughly $65bn of M&A so far this year, capital that has flowed back to investors and is now hunting for a home, in a Series B, a crossover round, or an IPO. A biotech sitting on a mid-stage asset can afford to be coy, because walking away is a real option.
Some are not even choosing between two. Casarine Chong, general counsel in R&D, business development and strategy at CSL, described biotechs running a triple track: a financing, a sale, and a licensing deal all kept alive at once, each played off the others to build value. The tell is the cast of characters. Bankers she used to see only in M&A now run these processes and hand big pharma a deadline, warning there is "a limited period of time to execute on this deal" before an IPO or another bidder ends the conversation. The buyers, for all their appetite, are not swinging for the fences. Sudarov said the sweet spot is the bolt-on, somewhere between $1bn and $5bn, an asset with mid-clinical data the acquirer is happy to develop and commercialize itself. She called those "the flavor of the month, flavor of day" for most buyers.