Ep. 336 - Cautious Optimism and M&A Momentum - BioCentury This Week

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
[AI-generated transcript.]

Stephen Hansen (00:00):
Welcome to a special edition of the
BioCentury This Week podcast.
I'm Stephen Hansen, director ofBiopharma Intelligence here at
BioCentury, and we're coming toyou live from the Victoria House
in London for a 3rd annual CEOand Investor Reception during
the London Life Sciences Week.
Joining me to discuss keytakeaways from the week are
Luciana Griebel, Partner atMorgan Lewis, James Critchley,

(00:23):
Managing Director of PJTPartners, and Carmine Circelli,
Director of Life Sciences atthe British Business Bank.
And then from the BioCenturyside, besides myself, we have
our renowned VP and Editorin Chief, Simone Fishburn.

Simone Fishburn (00:39):
And what you all need to know about
that is that I've gone frombeing esteemed, can't remember
what it was last time.
It was something

Illustrious.

Illustrious.
And now I'm renowned,which is actually also
a bad thing, you know,

just, uh, I have a thesaurus at home
and so I just keep tryingto find different words.

Yeah.

Um.
So we've had about two anda half days of meetings, and
company presentations at avariety of venues, I think
spread all across London, atleast I know sort of personally.
I can kind of attest tothat, how widespread it is.

Give us your step count, Stephen?

Well, yesterday I had meetings with investors
and companies, and I clockedup more than 16 miles of
walking across the city.
so if you're looking to getyour steps in, this is one of
the best places to come to ifyou're, if you're that kind of
person, which I very much am.
Not everyone is, but that'sfine to each their own.
but yeah, I think it justspeaks to how widespread
things have gotten.
It's so, definitely goes wellbeyond the Waldorfs these days.

(01:30):
One other little, maybelittle bone to pick with,
uh, someone, maybe Simone,before we get started, um, I
didn't actually get a badge.
I wasn't actually on the invitelists, and I don't know if
that's your fault, Simone?

Simone Fishbur (01:41):
Uh, it actually, has a badge among all of the
Right.

Did you get, Oh, you got a badge?

Luciana Griebel (01:46):
I got one.

Oh, Luciana's got a badge.
Oh, you had one?
It was just Carmine andme that were left off.

Carmine Circelli (01:49):
Oh, mine's over there.

My, oh, you've got one.
So I'm the only onethat didn't do a badge,

So, so I have to tell you, so it is
not actually my fault, but youknow what, if I'd had a say, it
would've come out the same way.

True.

Probably josh's fault, but I'll, uh,
we can bring that up later.
Alright, anyways, let's let'sdive in, let's get started.
Simone, I'd liketo start with you.
one other thing here is that,you know, everyone I think
is waiting with bated breathto find out whether or not
you're gonna be dancing withthe Kaylee Band, this evening.
I know that you're gonna leaveus in suspense on your decision
about that until later, soyou don't need to say anything

(02:20):
about it now, but we willbe peer pressuring you into
trying to do that, uh, later.
But in the meantime, canyou give us a little kind
of vibe check and kind of,you know, what, what you've
been hearing this week, whatpeople have been saying.

First of all, I'm not gonna talk about
singing or dancing, but I wouldlike to know if there's any
Scots in the room and a big,big, big hand for the Scottish
football team yesterday.
That was somethingelse, wasn't it?
Right.
So that's all.
There we go.
There we go.

There we go.

There we go.
So I don't know thatwe can score goals of
that quality here, butwe're gonna do our best.
Okay.
all right.
So what am I hearing?
I mean, let's just talkabout the recovery and
whether it's happening.
Okay.
Let's just, that, that'sall I'm gonna talk about and
then I'm gonna throw it toothers for their comments.
But here are some wordsthat I've heard this week.
It's a more disciplinedkind of recovery.

(03:08):
It is happening, butit's more disciplined.
Another person told meit was a timid recovery.
Another person said, it'snot really better actually.
So there's sort of a, a littlebit of edging towards optimism.
And I just wanna put thisin context even that you as
our financial writer havein your quarterly previews.
I'm gonna say going back, Idon't know, 14 quarters now,

Three years, at least three years' now.

Right.
Been sort of feelingthat we're on the edge

Always, yep.

And I think everybody is tired of
thinking, are we, aren't we?
But this time they're sort ofsaying, maybe this is for real.
Let me just addtwo points, right.
On the equities market.
One person pointed out tome, you know, follow-ons
are on fire, right?
So that's probably a good thing.
And IPOs are certainly, there's,there's more, not just optimism,

(03:55):
but there's sort of more of afeeling that, of that discipline
that the right companiesmight be getting out and
doing well when they get out.
Now on the private fundingside, I think that is where
there's still quite a lotof caution and sort of
long faces to be honest.
And one, one person said thisto me, but other people really

(04:16):
resonated with this, is stillamong investors there is a
huge herd mentality, thisis VCs and this feeling that
investors don't wanna go italone, they will syndicate.
So we're seeing these largerounds, which is sort of
consistent with that becausesyndicates are going in with
large rounds, but there'sstill a lot of herding and this

Stephen Han (04:36):
More concentration.

Yeah, so there's good and
bad in that, right?
Like on the one handthere's fewer stupid crap
companies getting funded.

Yeah.
Sounds like a good thing.

On.
Which is a good thing, buton the other hand, herding
is not necessarily good.
You know?
Are we gonna end up with, um,like we did a million PD-1s
and obviously GLP-1s and so on.
So I'll stop there.
That sort of, the sort ofquick summary of what I've
been hearing this week and you,know, you take it from there.

Sure.
Well, James, maybe I can cometo you now about, uh, you know,
what, what are some of thekey takeaways you've, you've
been hearing, and maybe youcan frame it around your, your
areas of expertise, which I,you know, I think, spend a
lot of time with M&A, right?
So that's, uh, maybe, maybea good place for us to start.

James Critchley (05:12):
Yep.
Yeah, happy to.
So, uh, I mean, the word,the words that I heard, a
positive momentum severity,that I would put into the mix.

That sounds similar to cautious optimism.

Indeed.

Which is a

indeed, indeed

Stephen Hanse (05:22):
a popular phrase.

That was going to be mine.

So, um, yeah, I mean, it would be remiss
of me, um, wearing my M&A hatto say anything other than
there's lots of talk around thepositive deal momentum, like
we've seen lots of M&A, lotsof BD activity, and it just all
drives this feeling of lots ofactivity, uh, within the sector.
So that's, that's really apositive and are featured in,
not surprisingly, most of the,the conversations I've had.

(05:47):
I think the second, takeawayfor me is there's just a very
noticeable increase in thenumber and the scale and the
quality of private companies.
I mean, again, it's not mutuallyexclusive to the IPO markets
being closed for a periodof time, but the number of
private biotechs that are nowprogressing through the clinic

(06:10):
with decent capital runwayis just been quite impressive
in a market, uh, sort ofmarket shift from I think
where we were 12 months ago.

There's, there's been a lot of that
stay private for longer sortof conversation and, you know,
and VCs being willing to keeptheir companies private longer.
Right?

Yeah.

So,

And then I think the third and final
one is, is probably that the,there's a bit more of a focus
now, I think on thinking harderabout capital allocation and
what that means for thingslike P&L capacity to fund R&D.
Now again, there's variousthings that feed into that.
It could be results of justnatural progression of the
pipeline, attrition, orpositive readouts or, or sort

(06:49):
of pivoting pipeline intodifferent areas that require
increased funding, et cetera.
Or it's a consequence of M&Awhere people are having to make
room in their pipeline in, inthis a prioritization exercise.
But that's, that's comingto a lot of conversations.
again.
For me specifically as itrelates to things like, asset
divestments or whether youreally have the right mix

(07:10):
and things could be spun out.

Are are, are you talking specifically about like
large-cap pharmas or are you,meaning like is that even for
like the small-cap biotechs or,

Yeah, I mean, well intersting question.
So, so yes, yes for large-cappharmas, but interestingly we've
now seen a lot of M&A and BDactivity as well for the bigger
biotechs and the mid-caps.
So I think some of the bigstrategic questions that
you would normally associatewith large pharma have
started to creep a littlebit into the culprit agenda
of the mid-caps as well.

Sorry, I know we wanna bring the others
in, so let, let's do that.
But just, you know, oneperson was talking to me
about this rising class.
So we've seen Genmab, ofcourse, do acquisitions.
We're starting to see thenext generation of big biotech
sort of being acquirers.
We tend to think on the wholeof acquisitions as being the
pharmas, but there's a, a newclass within that, which I think
is really interesting to see.

Um, thank you James.
That was very helpful.
That was very interesting.
Luciana, I wanted to bringyou in on this as well, and
if you could just maybe sharefor me a little bit on just
kind of what you've beenhearing and maybe just your
perception around just, uh,just the event itself and just
kind of how, how it's changed?
I mean, geez.

Absolutely.
So if you think about it, three,four years ago, maybe it was a
smaller event and that's reallynoticeable now and there's
a lot of energy around it.
It's not just the JefferiesHealthcare Conference, it's
a whole London Life SciencesWeek, and I think that's
excellent for the ecosystemand you can really feel the
buzz when you're walking aroundthe Strand and you run into

(08:34):
people that you know thatare from different countries.
And it seems like everyone'scoming together in London,
which is excellent news forall of us who actually live
in London because we get tosee everyone on our doorstep.
But it's also goodfor the ecosystem.
And it's also good to seebecause this aligns very well
with the U.K. government's planfor the life sciences sector.

(08:54):
So getting everyone togetherthis week, is very good.
And I think there have beensome parallels drawn, uh,
with J.P. Morgan in January,so I'm sure you've heard a
lot of, of that this week.
It's a smallerversion at this point.

Can I follow up with a question?
It sort of to you, but alsoto James, maybe also to you
Carmine, which is, uh, youknow, are people starting
to time announcements yetaround this conference?
Is that a thing or, he'ssaying no, you can't see
it, but he's saying no.

Uh, I, I, don't think so yet.
I mean, it's, it is because it'salways a bit of a nice to have.
But I, I mean, if you thinkabout the cadence of deal
flow, many of these dealshave been in, in the works
for a number of months.
Um, I don't, I, I personallydon't feel that it's
specifically timed for thisin the same way as the, as I
agree with it for J.P. Morgan,there might be a, a nice to have
announcement around that time.

Right.
So, so the two key markersthat this isn't yet as big as
J.P. Morgan is the fact thatyou're not timing announcements
for deals around it.
And you're also notpaying $500 for 30 minutes
in a hotel lobby yet.
So,

And, and you can get coffee, you can
get coffee in a coffee shop.

You can get a coffee in the coffee shop.
Yes.
Until those change, maybeit's a, but it's still good.
It's, I think, you know, for aEuropean event, it's still, I
mean, there were more receptionslast night than I think I
even realized were possibleto attend in, in one night.
So, well, Carmine,bring you into the
conversation as well here.
Can you just, you know,share with me a few thoughts
about what, what you'vebeen hearing this week?

I think the focus has been
on large indicationsfrom a lot of angles.
Spoken about thatpreviously, James.
Seeing investorfocus particularly
in the private role.
And also I would probably sayas a proud European, that maybe
Europe is starting to scale.
So we're seeing a number ofcompanies that have scaled
through to commercial sales,which usually is not a risk that

(10:39):
a European company would take.
But, you know, Verona Pharma,as an example of the U.K.
founded company, startedselling commercially, acquired
for a very large sum of money.
And I wonder if that's asign of things to come, you
know, staying private forlonger and building real
scale, and building companiesthat can be, you know, both
impactful for patients.
But very significantcommercial outcomes for

(11:00):
the ecosystem as well.

Obviously there's the GLP-1s.
Are you talking beyond that?
Can you, can you expanda little bit on, on
the kind of indicationsyou're talking about?

Uh, yeah.
Um, so I think well beyondthat, we've seen a number
of things in INI, so yeah.
Arthritis being a,a key indication.
You know, you've got anumber of other things in
oncology as traditionalareas and kidney disease
coming to the fore as well.
It's, there's a strongnarrative over obesity.
But, um, you know, for usas an investor, it's about

(11:31):
supporting and investing ina diversified way across a
number of indications that havelarge impacts rather than being
overly concentrated in one area.

Yeah, I mean, one of the things that
we've talked with peopleabout, especially regarding
something like the kidney, alsocardiovascular, is maybe seeing
that go the way of cancer interms of precision medicine
and segmenting that market.
It may be a very big indication,but are they gonna end up
segmenting the population.
How are you, what are youseeing in terms of the
opportunities coming through?

Yeah.
Um, I'd probably risk talkingabout a few un unannounced
deals, so I'm, I'm probably not.

Simone Fishbur (12:07):
You can do that.

Um, but, you know, I, I think you know,
our own portfolio, we've gotPurespring, which is a genomic
approach, which is a lot moretargeted, but you know, we're
seeing biologics and smallmolecules really addressing the
broader inflammatory pathwaysor the cellular mechanisms.
There are lots of differentcompanies looking at different
stages of the disease, and Istill think there'll be a number

(12:31):
of companies addressing withmechanisms across the broader
category of disease rather thanbeing just solely focused on
one or another patient subgroup.
I know it's easier to get anapproval, but come back to
what is a value to pharma andthey want a big, broad label.

Thanks for that Carmine.
No.
Super interesting stuff.
so we're gonna take, a shortbreak and we will be right back.

Alanna Farro (12:55):
BioCentury This Week is brought to you by
The 5th East-West BiopharmaSummit in South Korea.
An arc of innovation isemerging across Asia, and
Western biopharma leadersare taking note-from
cross-border deals to newcos.
In March, 2026, The 5thBioCentury-BayHelix East-West
BioPharma Summit visits SouthKorea for the first time.

(13:18):
Meet the biopharma leadersputting Korea innovation
on the global map.
Learn why Korea hasbecome a clinical trial
in manufacturing hub.
Discover if Korea is the nexthotspot for NewCo formation.
Plus, meet biopharmainnovators from India to
Singapore, to China and Japan.
Register now atBioCenturyEastWest.com.

Welcome back to BioCentury's This Week.
we are live fromVictoria House in London.
and so before we get startedagain, We kind of have, so we've
done these live podcasts overthe past year, as I mentioned.
I think this is our seventhone, And we've kind of
organically developed somethingof a tradition, I guess, uh,
that we encourage our guests toparticipate in, audience members
participate in if they want to.

(14:04):
Uh, and it is basically to wearsome colorful or interesting
socks as part of the show,so the audience can see them.
But, uh, for the podcastlisteners, just sort of
describe for you to give you ataste of kind of what we have.
Uh, I don't think anyonecan see mine 'cause I'm
behind these tables.
But I have on some T-Rexsocks, which are my six year

(14:25):
old's favorite dinosaur,and he very much encouraged
me to buy, and so thatwas why I went with those.
Maybe James, we can,

I think James wins.

Tell us about your socks.

Well, I, I, I thought London Life
Sciences Week wouldn'tbe the same without a
pair of London socks, so,

Perfect.

mine are, have some key landmarks.
Mostly Big Ben, which is notto be relied upon for actual
timekeeping, by the way.

Correct.
Luciana, you went, you wentwith some spectacular shoes.
You wanna tell us abit about your shoes?

I, I decided to go rogue and do
shoes instead of, uh, socks.
I think the most terrifyingmoment of preparing for this
podcast was when you said, Ihave to find socks to wear.
Uh, so instead Idecided to go with high
heels, rainbow colored.

perfect

on a perfect, you know, gloomy afternoon.
I thought, what's better?

Nailed it.
Great.
Carmine, you have some,some fun socks there?
You wanna tell usabout your socks?

Yeah, so Star Wars theme, uh, which is a bit
odd, but I'll go with it anyway.
Um, and they are Obi-Wan Kenobi.
Main reason for wearing themis Obi-Wan's a, a coach and
a teacher, and it's reallya shout out to all of the
CEOs, EDs, building teams andgreat companies and coaching
and developing the next layerof talent and the future

(15:35):
generations of the ecosystem.

Oh my God.
You totally win.

Yeah, that was, that was not that.
I didn't, I did not seethat, that connection coming.
But you did a very goodjob of tying that together.
That was great.
Simone, you wanted to, uh, youwanna tell us about your socks?

Well, I am flying the BioCentury's This
Week flag with my socks.
I'm wearing thesocks, so Very good.

Are we all getting those often?

Simone Fishbu (15:56):
You actually are.
Play, play your cardsright, but you know.

It's supposed to be a surprise at the end.

Oh, sorry.

Holding those in reserve, but that's okay.
That's okay.
No, very good.
Well, thanks guys.
I appreciate everyone,uh, participating.
It is, uh, it is kindof fun to do that now.
Um, right.
So let's get backto our discussion.
You know, we've been kind ofrecapping the, uh, the vibe
and the sort of the interestingtidbits from, from the London
Life Sciences Week this far.
I'd like to now kind oftransition to more of a
forward-looking conversation.

(16:24):
So, actually Luciana washoping we could start with
you, if that's all right.
I mean, so I know that kind ofone of your specialist areas.
is focused on dealmaking.
Uh, I think in particular,you know, you were mentioning
me a bit about sort of someof the creative sort of
dealmaking that, that you've,been, uh, working with and
seeing over, over the time.
So can you just explain justa little bit how, how are
companies kind of using kindof creative deal terms to

(16:46):
de-risk some of these dealsand, you know, still be able
to get access to some of thesereally high quality products.
Can you kind of walk usthrough what those look like?

Luciana Grieb (16:53):
Yeah, absolutely.
I think we've really started tosee a shift, and it's not just
the very simple, straightforwardM&A deals, and in particular
at Morgan Lewis, working withour clients, trying to solve
some of these problems andaddress the risks, with the
transactions and make sure thatthe products get to the patient.
So a large part of thathas been moving away from

(17:15):
a pure M&A structure andcombining M&A with licensing.
So There are a lot oflicensing elements that
get pulled into M&A deals.
You know, earnouts havetraditionally been used as a
way to bridge the valuationgap, but now we're seeing
other things develop.
I dunno if you've seenit maybe in some of your
deals, but we're seeing alot of option deals as well.

(17:35):
So in an option deal, youwould have an upfront payment,
and then you would prettymuch negotiate the either
asset purchase agreement orthe share purchase agreement
upfront, and then upon atrigger event further down
the line, you would have theoption to acquire either that
asset or the company itself.

So is this, is this like a built to buy
type of structure or is it,

It can be.

is it a modification of that?

It's, it's a modification of that.
Um, so we, we've seen a,an example recently with a
university spinout here in theU.K. That you know, we catered
for from the very beginning.
We nurtured them.
We started with their SeriesA. And went, um, all the way
to the exit, which was donethrough an option agreement.
They were acquired by big pharmaand it was a, a real success

(18:19):
story for for U.K. companies.
And particularly foruniversity spinouts to
see the whole progress.
What's interesting withoption structures, and I
think a lot of people don'tnecessarily appreciate that
early on, is when you enterinto that type of agreement,
you're trying to legislatefor something that may happen
years down the line, and theparties are in a relationship

(18:40):
from the very beginning.
So there will be someadjustments that the
smaller companies willhave to do in terms of
compliance, in terms of.
How they actually, interactwith the buyer, earlier
than, you know, at astage of an integration.
So,

So these U.K. companies, or
are they from anywhere?
Sorry.
Sorry.
The spinouts, are they from U.K.

Yes, yes.

Simo (18:59):
institutions specifically?
thinking about was a U.K.
spinout, but it can be doneanywhere with any company.
Right.

It's a way to get funding in earlier
because you would get someform of payment early on.
And then developthat relationship.
And if the data reads out,what everyone expects it
to do, then you would,

And so who's sort of, is it the tech
transfer office who's sort ofdriving this kind of flexible
thinking or creative thinkingon the deal structures.
Is it you, are you cominginto the room with that?
And, and is it based still on?

You can say yes.

Of course.

I wanna ask you both.
I wanna ask all of youlike, where are we in terms
of valuation expectations?
Right, can we, can weget to that in a minute?
But.
You know, Luciana, maybejust answer the first bit in
terms of who's driving it?

I, I think it's a combination.
I don't think, uh, it, it's astructure that lawyers suggests
that clients come and propose.
So it's a, it's aknown structure.

Mm-hmm.

Um, it doesn't involve any track-transfer.
So unless there's someelement of collaboration or
something built into that,the structure itself would
not involve any track-transferwould just be an initial
investment option agreement.
You get the right stageand then you acquire the
asset of the company.

Can we go there now to valuation expectations?
Have they reset?
Where are we in that curve?

Yeah, I mean, uh, I, I think, uh, I think of
it really as public and, andprivate, just to describe it.
So, I think on the, onthe public side, we have
seen uptick obviouslyin the number of deals.
And we've seen a numberof bigger deals and uh,
you know, we heard lots ofpeople, and lots of discussion
around have the premiumcome down a little bit.
So we are not seeing these 80,90% biotech premiums as a whole.

(20:30):
It maybe come down, we'veseen deals in the 40 to
50%, kind of premium range.
I think, uh, what we sometimesmiss sometimes is that for these
public company announcements,the share prices have actually
traded up materially intothe deal announcements.
And it might be because,companies had better than
expected launch of a product.
Or it might be the, youknow, the market's rewarding
high quality late stagedata sets, et cetera.

So like, like Cidara, I mean, I think that was
a pretty interesting one wherethey had really positive data,
and I think they did a followon deal at like $44 per share.
And then traded all the way up,you know, as to, I'm sure as
the discussions were ongoing,traded up to about $105, I think
it'd taken out for over $220.

Yeah.

Right.
And Stephen, isn't that theone where you sort of basically
posed the question, like, didinvestors undervalue it or

Yeah,

did Merck over pay, kind of thing,

did Merck overpay, or did nobody really
appreciate the value that theyhad post data, which was July?
You know, and so,

You might wanna remind, um, the listeners,
like how much that went for.

Yeah, it was a nine, I think it was

$9 billion.

$9.2 billion I think in total.

Yeah.

Merck's acquisition of Cidara.
So, um, yeah.

But it, um, I mean it has definitely fed into
the decision making for a lot ofthese later stage deals because,
you know, there's only so muchmore headroom you can have.
In your models, we've also seensome CVRs coming back in, which,
you know, helps with logistic.

I was just gonna ask, that was,

That's been a feature for 2025.

I was wondering if that was sort
of gonna be a more of amainstay feature because
that's, I was actually kindof surprised that that didn't
feature in that Cidara dealas you would've maybe thought
that it would be built in.
But obviously we saw inthe Metsera deal, we've
seen it in several others.

Yeah.

Is that, is that a pretty common
expectation now that there'sgonna be some level of.
Trying to mitigate the risk?

Um, yeah, I mean I think we've, it is
definitely been a featurein a number of deals.
Um, and it's been a feature insome of the deals actually where
it didn't end up announcingwith the CVR with CVR features
as part of the negotiations.
So, um, yeah, it's a wayto, it's a way to sort of
bridge that risk and, and,and value expectations.

Hmm.

so yeah, it's a mechanism that you will often
see when, when share priceare, are running quite high.

Because, sorry, we're already going
a little off piece here,but, just, stick with me.
Because that was, I guessI always thought that CVRs
initially kinda came in whenthere was maybe, higher
concerns around sort of, youknow, risk and things and like
maybe wasn't as competitive.
But again, so maybe going backto that Metsera example, I mean
there were seven, eight sortof suitors, so it's not like
that, I mean, that was a verycompetitive deal process yet

(22:52):
you still ended up with the CVR.

Yeah.

You know, a fairly sizable CVR aspect.
I mean, I think it was two and ahalf billion dollars in the end.
I mean, is it no longer, Imean, because I would've thought
that in a really competitivebidding process, like getting
rid of the CVR would be away of sort of, you know,
trying to entice, you know,a company to accept your bid.
I mean, is that still the, theright way to think about it?

Yeah, I mean, look, we, we've definitely
seen examples of, of whatyou just described and, uh,
and, and one deal that weworked on was exactly that,
that situation where the CVRwas proposed, uh, a $20 CVR
was proposed and actually we,we counteroffered and said,
drop the CVR, we bumped $2and, and the deal got done.
So yeah, look, I, I, I think,uh, I think it does feature.

(23:31):
But ultimately it's acombination of, as you
said, the compositiondynamics within the process.
The actual, you know, remainingsort of risk profile of, of
the asset itself because wehave seen some companies, um,
have been acquired perhapsat points where I think
everyone was thinking itmight de-risk further, right.
So there are key, obviouslyM&A catalyst as I call

(23:54):
them, which is typically adata event or, or similar.
Um, and we have seen sometrade where folks have
preempted and moved before,you know, a pivotal data set.
And I think that'sjust indicative of the
competitive market anda high strategic need.

Alright, well, you raised Metsera,
there was the obvious popcornvalue in watching that play
out, and then we had Lundbeck.
Are we gonna see more ofthat or is it just too often,
in, in terms of, uh, oh, youthought the deal was done?
I have a superior offer for you.

Yeah, I mean, look, it, it is a
very interesting point.
Because we haven't beenin a world where we've
seen people interlopingfor quite a long time.
And I guess with, Metsera, youknow, Novo was in that process,
allegedly to, to begin with, um,

Company one.

And.
Indeed.
Um, yeah, look, I, I thinkit's essentially indicative
of a competitive M&A marketand as I said, the strategic
need, and, desire for assetsthat fit within the core area
of expertise of a company.
And we've seen that withpeople acquiring assets that
actually are almost, a, amechanism to defend the core

(25:00):
franchise within their business.
So it just gets verycompetitive very quickly.

I not been prepared to be, have gotten
so deep into the weeds onthe legal definition of a
superior company proposalas I have in the past month.
Didn't realize I wasgonna, go down that road.
It's been a very interesting,uh, as you say, it's been a
very competitive and it justfeels like, I mean, is there
firepower for this to continue?
I mean, what, what, can youtalk a bit about the supply and
demands that's out there, James?

Yeah.
I mean, I, I think in generalthere is sufficient firepower.
I mean, many of the companiescan, have debt capacity
into the 10 of billions.
There are one or two that are atthe other end of the spectrum.
But in general, I think thebalance sheet capacity remains.
What's interesting is tothink about funding the
deals once they're done,depending on that profile.
So P&L capacity in the R&D burnbecomes a talking point as well.

Yeah.

And that's something that has actually
come up in various conversationsduring this week about P&L
capacity and what happens afterthey've acquired the company.

Yeah.

Carmine, I I, I did wanna ask you, 'cause I
know that you've been, you'vebeen working on some interesting
stuff and we actually didn'tget a chance to talk about
this beforehand, so I'mhoping I'm not catching you
out off guard too much here.
But, uh, you know, we had talkeda bit about some of the work
you're doing around ventureand some of the returns there,
and I know that that's oneof the bigger conversations
that's going on this week, andespecially in the U.K. around
the initiative to try and getpension funds involved and

(26:15):
try and get pension funds,more exposure to alternative
investments such as venture.
So can you talk a little bitabout kind of what you're seeing
there and maybe kind of how farwe are along in that process?
And please tell me thatyou have some visibility
on actually getting pensionfund money into some of
these venture capital funds.

So, um, just to, to cover it off, actually,
by way of background, we'reboth a large LP, which means
we invest in fund managers.
We've been doing that fora very long period of time,
been doing it across sector.
So the first pointI, I wanna make is.
In general, people perceivelife sciences to be a
high risk and fairly lowreturn versus the sectors.

(26:55):
And I can say that that'snot necessarily true.
You know, Bruce Booth'spublished it repeatedly.
And we see that in ourown dataset, we see
good liquid returns overreasonable investment
periods and strong IRRs.
And that really feeds throughto the argument that the
industry needs to make tothe institutional investors.
Not that they shouldspecifically invest just to

(27:18):
invest, but much rather it'sin their financial interests
too, because of the way thatultimately the industry is
productive for investors,has great patient benefit,
so what better to do withyour money than both have
an impact on patients longerhealthier lives and good
returns for your savers.
So it's about makingthat campaign.

(27:39):
And in terms of what we willhopefully see over the next
kind of period or windowis that start to solidify.
We're seeing a number ofthe major institutional
investors building theirown investment teams.
Some of them withsector specific focuses.
I'm not gonna call those outfor obvious reasons, but it's
available on the websites.
And then for ourselves, yeah,it's publicly announced that we

(28:01):
are working with the industry onthe British Growth Partnership.
And you know, hopefully there'llbe more news on that soon.

Can I just follow up, a
couple of things here.
So on the pension fund reform,I was talking to somebody about
this and obviously there'sthis argument that, you know,
is brought out quite often andcorrectly that look at what's
gone on in Australia, look atwhat's gone in Canada, look how
well those pensions have doneand look what you're doing.
And you know what I hear isthe pension sort of funds go.

(28:29):
Yeah, yeah, yeah, I get that.
But still, it seemsa bit risky to me.
so, you know, you canchange the law, but are you
gonna change the behaviorsand the risk appetite?

I don't think we can change
the law, unfortunately.

Well, you can't, but one can, the
law can be changed, right.

I I, I, I'm not in a position to advocate
any of the direction on that,but the, um, the point I suppose
is there are an awful lot ofother structural considerations
that are specific to venture.
So if we think about, first ofall, day-to-day pricing, which
is essential for pension funds,you've also got structural.
How do you flow capital fromsavings into an illiquid asset

(29:07):
class and back out, you know,the advent of LIFTS, which
BBB of supported recently.
So it's a 250 million investmentalongside Phoenix Group, it's
a very large institution, andthat's now managed by Schroders
as a LIFTS, essentially.
So it's about seeding these newproducts and new channels to

(29:28):
effectively allow the industryto have access in the U.S.
That happened in 1978.
The ERISA reforms were akind of core piece of that.
And for us in, in the U.K.
and Europe, it's a templatethat ultimately we might have
to follow in order to achievewhat we want to achieve in
terms of broader funding forThose structural pieces I think

(29:52):
there's another thing about howengines are, ultimately, sold
for one of a better phrase,how mandates are acquired.
But you know I think theseare pieces of the jigsaw
that are starting to cometogether, and there's
definitely a concerted effort.
The people to workon this issue.

I wanna follow up on something you talked about
with the perception of riskin biotech, and I don't think
anybody is gonna pretend, youknow, anything other than that.
But one of the themesthat's come up this weekend,
just about every singleconversation, of course is AI.
Okay, and so we're talkingabout these equity markets
I didn't raise before, butyou know, when the AI bubble

(30:30):
bursts, I think most peopleare saying when, not if, but
when, what does that mean?
And so there's this ideathat, okay, everything's gonna
get dragged down, but thenthere's this open question
as to whether you then getthis flight to biotech.
Does biotech become theflight to safety as we saw
in the, in the pandemic?
And I'm just sort of wonderingwhat you all think about that?

Yeah, what happens if it bursts?
Does everybody sink or isbiotech a an island of safety?

Because there's always patients, you
know, there's always patients.

Albeit, albeit a high beta island of safety.

No, no one, no one wonders through
such difficult questions.
Um, yeah, I mean very,very, very hard to predict.
So I, I think we've probablyalready started to see that some
of the Nasdaq, cooling, coolingoff a bit and, and coming down
as that AI sort of rhetoriccools, cools a little bit.
Um, I mean, I, I think, it'sselectively within biotech,

(31:21):
there's almost been assetshave continues to be rewarded
quite well in the marketsupon positive data sets.
And that is fundamentaland specific to biotech.
And I very much hope, thatthat will will continue.
But you know, naturally asmarkets come down, um, it
just leads to a broader inputto send broader sentiment.

Excellent work not answering the
question there, James.

That's, I'm giving, I'm giving, I'm
giving, I'm giving the polipoliticians answers a bit of a
that they borrowed them down.
So I, no, I, I, I, I thinkof the, uh, high quality
biotechs with positive datasets are gonna continue to
be well rewarded for it.
The rest of it will justbe a sentiment value, which
may just see generally themarkets come off with it.

So, kind of be a bit more direct, uh,
hopefully, um, less encumbered.
The first thing I wouldsay is 80% of all biotech
transactions are trade sales.
Only about 20% areinto the IPO range.
So there's a naturalinsensitivity in the returns
market on the basis ofreliance on public pricing.
There are some great publiccompanies, I'm not gonna deny

(32:22):
that, but it's not for themajority in terms of real
cash to cash transactions.
And then building on that,when we look through that
broader data set and we seethe liquidity profile coming
back, it's stable over time.
And it actually, whenwe cross correlated it
is inversely correlated.
So it almost directlyopposes returns from

(32:43):
all of this sectors.
And the really strange thingis it is actually inversely
correlated to public biotech.
So you'll actually see strongreturns even when public
biotech is suffering fromthe private biotech market

For venture, for private, for private biotech?

For private venture biotech.

Yeah.

And we see that in our LP data, and.

That's a good note for anyone who's heavily
overweight on AI at the moment.
They need to swiftly switchinto, uh, transitioning
into private biotech to makesure they can capture those,
uh turns on a downfall.

I, I'll pull this out add one more, one
more point, which is, youknow, when, when we've seen,
a cycle of, M&A and, and this,you know, to the extent that
we have over the last numberof months, there is gonna be a
natural recycling of that money.

Right.

Where, you know, sector specific funds and,

Right.

PMs need to put that money.

There's a lot of specialist money that
was, that was in those names

Yeah.

that can then reinvest in,
in their other names.
So, yeah.
Well, good.
Well, um, Simone, I'm gonna cometo you last, not that you last,
but you just happen to be last

Keep going just

in this one.

Yeah.
Illustrious, nowwhat was it today?

Um, two things I would like you to give
your perspective on kind ofin a forward looking manner.
So clinical trials andtimelines and speed,
those sorts of things.
And then can we talkabout the sustainability
of the NewCo trend, thecross-border dealmaking trend.
And whether you see thatcontinuing into next
year, and I will give youthe choice to start with

(34:06):
whichever one you want.

Yeah.
I'm gonna take my editoriallicense and, and go for
the second one first.

Got it.

This what we do, we, we get drafts
from our writers and thenwe move them all around.

Gee.

Right, right.
So, so, so what I'm gonna, yeah.
I think in terms of theChina NewCo model, so the
other thing we haven'tyet talked about is China.
Which is extraordinarygiven for me, this is the
year and everybody wholistened to the podcast
has heard this many times.
This is the year that the restof biotech woke up to China.
But one of the thingsthat you know, came out of
like listening in our, inour China conference was.

(34:36):
you talked about creativemodels, so in China, they came
up with a NewCo model wherebywhen the capital markets
were extremely constrained,biotech companies would out
license assets to create newcompanies, NewCos in the west.
Now, we all know that'snot actually a new model
that's been going on.
It's been going onin tech forever.
But there was thissort of wave of it.

(34:57):
And I think what wasparticularly important was it
was coming out of biotechs.
It wasn't sort of comingout of academia and
being planted elsewhere.
And so there was thisbig wave of them.
And now the questionis, and you know whether
that's going to continue.
Obviously the capitalmarkets have opened up a lot.
Hong Kong market is,

Right.
IPOs have opened up.
We haven't.
So I was looking at the data,just the, the updated data we
had through last week, and wehaven't seen a material move in
terms of the number of venturedollars venture money that's
being raised in China yet.
So that's not moving,but that doesn't mean
that it won't be moving.
It feels like that's startingto come back as well.

Right.
So there's certainly a feelingof less, of like, there's
no place to go for money.
Right.
And so, you know, there is this,some people sort of think that
the, the NewCo model was a waveand it'll sort of simmer down.
But then there is anothercompany organization
that is actually reallydoubling down on this.
They're raising a very bigfund two funds specifically
to fund NewCos in the West.

(35:54):
And so it's a sortof bifurcated scene.
We don't knowwhich way it'll go.
I'm not gonna predict whichway it'll go, but I think that
there are people who certainlysee a lot of opportunities.
Some of which may have ageopolitical angle to it, but a
lot of opportunities in takingthese China assets and then
developing them in the west.

Yeah, I mean, I, I, I know I spoke to a
couple companies, this weekwho, you know, specifically
mentioned the fact that theywere investing a lot of time
and energy and making surethey had people on the ground
there, people that, you know,spoke the language, you know,
had local access and that waswhere they, they felt like, it
was sort of the one last placein the world where you could
potentially find a diamond inthe rough and find something

(36:36):
that is actually, you know, areal high value asset that you
don't pay a high value price on.
But you know, I I, I thinkthere's probably gonna be
a natural equilibrium thatcomes at some point, right?
Cause as these asking pricesgo up, or if they ask for
more equity or, you know,whatever the flavor of
the, of the dealmaking is.
There's probably gonna comea point to where there's some
sort of equilibrium that youknow, where then maybe pharmas

(36:58):
or, or VCs say, well actually Ican get something just as good
from a struggling US publicbiotech or something like that.
So,

So now we get to a bit of like, where
does China biotech fit intothe overall global growth

That's right.

of ecosystem.
And sort of, I personallythink that there's just
gonna be continued assetscoming outta China.

No, I, I agree.
I'm not, I'm not sayingthat they're aren't.
I, but, uh, you know, I guessI'm saying that I, I imagine
there's sort of a crestto the wave at some point.

Of NewCos

cans.
Yeah.
I, I, I, I think it'll continueto feed into the early stage
R&D pipeline as, as you know,assets come out of China, and
pharma companies develop them.
Because lots of those assetsthat we're seeing, including
the NewCo models, some arebeing developed through to sort
of mid stage development, buttypically they're brought in a,
a relatively early, early stage.

(37:45):
And then, you know, as we'reseeing at the moment, the
wave of M&A really has beenmore skewed towards the more
mature late stage assets.
And that's coming more fromthe, the standard, you
know, US public market.

Alright, so lemme come to the
exact opposite of that.
So, a lot of the NewCos,um, depends on what you call
late stage and early stage.
And this is your secondquestion, Stephen.
A lot of the NewCos are comingwith, with clinical data.
Of course.
A lot of companies in theWest are still saying to
me, oh, can you really trustthat data and whatever.
Remember you are comparingclinical data, early clinical

(38:16):
data with preclinical data,so it is massively de-risked.
Now, the, the real thing thatI wanna talk about though
is what I believe is goingon this for a long time,
South Korea, Australia, otherregions of the world have
really wanted to become adestination for clinical trials.
And what's coming out of Chinais like everybody is waking

(38:38):
up and going, oh, we reallyneed to make that happen.
In the U.K. we've got LawrenceTallon, the new CEO of the
U.K. regulator MhRA, and he hasset a goal to, first of all,
reverse the decline, whetherdecline is a increasing lag
in clinical startup times.
But I think they wannabe even more aggressive.
And there's certainly a lotof effort going in here
to enabling clinical trialsstartup times to be faster.

(39:03):
And this, I think is what weat BioCentury are gonna be
watching and gathering data on.
Many countries now feelingthat this is an area where
they can compete, they canprovide value, a lot of it.
Patrick Vallance has talkedabout that, that's the
Minister of Science here.
Is about getting morepatients, eligible patients
into clinical trials.
And so I think that thatactually is sort of, China's

(39:26):
basically raised the bar.
They may continue to deliveron that, but they've raised
the bar for all these otherareas in the world to start
saying, we need to enableclinical trials faster.

Yep, and everyone's trying play catch up.

Yeah.
And, and I mean even FDA, Ishouldn't say even, and FDA is,
is, uh, recognizing that and,and talking about making it
faster to get into the clinic.
We'll see what goes on there.
But I think it's a reallyimportant area because I think
that just cutting down thedead time of dead translational
research, which is going on.
And preclinical models, someof them are good, but many of

(39:58):
them just don't have predictivevalue, so really trying to solve
that bottleneck I think is key.
And you'll hear me say thisover and over again, so
you can keep tuning to thepodcast to hear me say that

Wonderful.
Well, thank you Simone,for the final word, a
wonderful final word.
That is all that we havetime for, uh, this week.
So I'd like to thank our newpodcast On the Road sponsors,
the British Business Bank,PJT Partners, and Morgan
Lewis for their supports.
Also, a huge thank you to ourlive audience, for joining
us for this Special Editionof the BioCentury's This Week
podcast, and thanks to all ofour listeners for tuning in.

(40:31):
I believe the BioCenturyThis Week podcast, uh, will
be back On the Road nextyear at, the Life Sciences
Week West, J.P. Morgan, Iguess Annual, I don't know

Redo that bit that was rubbish.

Stephen Ha (40:45):
They don't all work.
podcast will be back On the Roadnext year at the J.P. Morgan
Annual Conference in January.
Thanks again for joining us.
We'll see you next week.
Alright we're done.

All Episodes

Ep. 336 - Cautious Optimism and M&A Momentum

Episode Transcript

Popular Podcasts

Stuff You Should Know

Dateline NBC

The Burden

.css-15opob5{left:0;position:absolute;top:0.8rem;} All Episodes

.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Ep. 336 - Cautious Optimism and M&A Momentum