Biotech’s M&A hot streak
Ahead of JPMorgan Chase’s marquee healthcare conference next week, some bankers thought they faced a high-class problem: they had been on such a hot streak that they were running out of valuable biotech assets to sell to Big Pharma.
After a bumper 2025, when they delivered $125bn worth of acquisitions, they fretted that dealmaking and the resulting advisory fees they earned would slide. Worry not.
The FT on Thursday revealed that Merck is in talks to buy cancer drugmaker Revolution Medicines. A potential deal — if one is ultimately reached — is still weeks away, and another suitor could still nab the prize.
But if a transaction materialises it would be the biggest biotech deal since Pfizer’s $43bn acquisition of Seagen (which Merck also pursued). It would also be the biggest acquisition of a pre-commercial biotech ever.
Merck’s chase of the pricey cancer biotech — which is pioneering a revolutionary targeted therapy for metastatic pancreatic cancer, one of the deadliest forms of the disease with scant treatment options — should be bullish for biotech dealmaking across the board.
Earlier this week, Eli Lilly, the world’s largest drugmaker by market value, struck a $1.2bn deal to buy autoimmune disease-focused biotech Ventyx Biosciences.
Last year, Merck spent nearly $20bn snapping up two biotechs — respiratory drugmaker Verona Pharma and flu-prevention biotech Cidara Therapeutics — and it seems like it’s not done yet.
Of course, Merck’s pursuit of Revolution Medicines may see interlopers enter the mix.
Merck and its chief executive Rob Davis are contending with a classic problem faced by Big Pharma. Merck’s blockbuster cancer treatment Keytruda, which delivered an estimated $32bn in sales last year, will begin to lose patent protection in 2028.
The Revolution Medicines deal could help provide a real substitute for the loss of revenues from Keytruda.
If Revolution Medicine’s treatment is approved for both pancreatic and non-small cell lung cancer, it could generate $11bn in global sales by 2035, analysts at Stifel estimate.