Portfolio updates – Biotech M&A valuations and ADCs

It was nice to see M&A picking up in the 2nd half of 2019, with multiple high profile acquisitions. Two sectors of interest were kinase inhibitors for oncology (Array Biopharma, Loxo, ArQule) and Gene therapy for rare diseases (Spark, Audentes). siRNA came back to the limelight with Novartis’ $9.7B bid for MDCO for its twice-yearly PCSK9 treatment, marking a radical change in sentiment towards siRNA.

This uptick is great news for investors in small/mid-cap biotechs for which acquisitions are the primary exit route. Looking at some of the deals, I am having a hard time justifying valuations or seeing the acquirers making a decent ROI in the long run. What bothers me is not the fact that many acquired assets eventually fail but the amount some biopharmas are willing to spend for high risk assets, sometimes even preclinical ones. Continue reading