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European biotech companies with oncology projects attract Big Pharma – Snapshot

Oncology is a growth area for the European biotech industry and experts see large pharmaceutical companies continuing to snap up new intellectual property (IP) over the coming few years.

“Interest in oncology M&A is continuously growing as the top 20 pharma companies face the imminent loss of exclusivity of some of their best performing cancer drugs in the next five to six years,” said Fady Riad, CEO of the consulting firm Centurion Life Sciences.

MorphoSys, a German biotech company founded in 1992, has led the way by participating in some of the largest deals involving biotech companies in oncology in Europe, the Middle East and Africa (EMEA) in recent years, according to Mergermarket data.

In 2022, the firm sold global development rights to two antibody therapy candidates to Human Immunology Biosciences (HI-Bio) in a deal worth up to EUR 973m. In April of this year, Novartis [SWX:NOVN] snapped up the whole business for EUR 2.6bn, as reported.

Antibody treatments for cancer were also the focus of a deal worth EUR 1bn between Sanofi [EPA:SAN, NASDAQ:SNY] and Regeneron [NASDAQ:REGN] in 2022.

Large-cap and specialty pharma companies are continuously hunting for targets, said Ali Pashazadeh, founder, chairman and CEO of the financial advisor Treehill Partners. Pharma companies often have internal programs already in place for most tumor types but will acquire where there is a “white space” in their pipeline, he added.

One of the hottest topics in the space is antibody-drug conjugates (ADCs), which are designed to deliver chemotherapies to tumours with fewer side effects than the chemotherapy alone, Pashazadeh said. The technology has been around for years and the next generation of ADCs are aimed at addressing toxicity issues with earlier versions of the technology, he added. There is also appetite for other technologies including radiopharmaceuticals and CAR-T cell therapy, Riad said.

There have also been large oncology deals outside EMEA in the last two years, especially in the case of ADC players, including Pfizer’s [NYSE:PFE] USD 43bn takeover of SeagenAbbVie’s [NYSE:ABBV] USD 10.1bn acquisition of Immunogen and Genmab [NASDAQ:GMAB] snapping up ProfoundBio for USD 1.8bn.

Meanwhile in Europe, interest in ADCs drove a EUR 516m licensing deal between Synaffix of the Netherlands and MacroGenics [NASDAQ:MGNX], followed by the acquisition of Synaffix by Lonza [SWX:LONN] for EUR 160m in 2023.

The radiopharmaceuticals developer ITM Isotope Technologies Munich of Germany raised EUR 255m in one of the largest private investment rounds in European biotech in 2023; and the cell therapy specialist Autolus Therapeutics [NASDAQ:AUTL] of the UK received a EUR 197m investment from BioNTech [NASDAQ: BNTX] in 2024.

Some European biotech companies in the space are advancing towards an exit, according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm.* One of the highest scores belongs to Carrick Therapeutics of Ireland, which has an LTE score of 57 out of 100.

Development on a ‘shoestring budget’ 

Cancer therapies have been in development for centuries, with traditional approaches including surgery, radiotherapy and chemotherapy. In recent decades, technologies such as personalised medicine and immunotherapy have reached the spotlight — one of the most important types of immunotherapy to hit the market in the last decade was immune checkpoint inhibitors such as Keytruda, developed by MSD [NYSE:MRK] of the US.

The landscape of oncology also has moved from monotherapy to combination therapy, with hundreds of combinations with immune checkpoint inhibitors in development, Pashazadeh said. With Keytruda coming off patent in the 2028 timeframe, this will have “massive implications” for companies marketing and developing these combinations, he said. These companies must ask themselves if their business plan will work once the price of Keytruda drops, and if investors will still want to cash in, he added.

At the same time, developing treatment combinations is “exponentially harder” than for monotherapies, Pashazadeh said. Many biotech companies are working with a “shoestring budget” due to the adverse biotech market of the last three years, he said, adding that many consequently lack the management expertise to run late-stage clinical trials of their treatments.

The stormy biotech public markets have also led to a two to three-year backlog of companies that will need to raise capital via IPOs and secondary offerings when the “cash spigot gets turned back on again,” Pashazadeh said. This backlog impacts both European companies that want to tap into domestic markets and those that aim to enter US markets, he said.

Harsher and fragmented European healthcare markets 

The fragmented nature of the EU healthcare market and the more risk-averse approach of EU-based buyers makes M&A activity in the EU slower and with smaller deal sizes than in the US, Riad said.

Additionally, some US companies are reluctant to enter European markets as the European reimbursement landscape has “become increasingly harsher for advanced oncology therapeutics, with payors demanding to see more long-term data that would justify high price tags,” Riad said. This trend will hurt European players with late-stage assets optimised for the EU regulatory system and market but not for those of the US, he added.

The global oncology market was worth USD 203.42bn in 2022 and is projected to soar to more than USD 470.61bn by 2032, according to a report by Precedence Research. The long-term growth in the oncology space will be driven by a global ageing population and novel treatment modalities, primarily immunotherapies, said Riad.

“Traditionally, there has been this perception that oncology drugs were relatively immune to certain pricing pressures, but this is gradually changing due to European governments looking to aggressively contain their healthcare costs,” Riad said. “That being said, oncology remains one of the — if not the — most lucrative therapeutic areas for pharma and biotech companies.”

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.