Call it the JPMorgan effect. Every year at the beginning of January dealmakers from around the globe head to San Francisco to talk about biotech deals. There's almost always a flurry of new deals just ahead of the scrum in the lobby at the Westin St. Francis, with the financial panic of 2008 creating a notable exception. And investment bankers get giddy at the prospects of the money to be made in the year ahead.
Then they talk to someone at Bloomberg, which relies on good contacts in the investment banking area to feed it tips on who's trying to buy what.
"We see M&A in the health-care sector being up materially in 2014 at all size levels and across all subsectors," JPMorgan's Jeff Stute tells the business news service. "Buyers and sellers will get comfortable with the new reality of where assets are priced."
The "new reality," of course, is that after a year of big stock gains and a suddenly buoyant biotech IPO market, prices are high. They are a lot higher, in many cases, than Big Pharma has been willing to pay. But don't expect any of that to cast a pall on the party in San Francisco, where the theme is always distinctly upbeat.
The dynamics behind the dealmaking in the industry is fairly obvious to all. Even after most Big Pharmas triggered major reorganizations of their research efforts, there's still clear evidence that new drug approvals at the majors are lagging badly even as generics continue to inflict major damage. They need big new drugs, and they're going to have to buy some experimental programs if they want to convince investors that they are managing their future.
The same sort of confidence was on display a year ago, though big M&A deals still proved to be in short supply--even if Amgen ($AMGN) did buy Onyx.
There are reasons for optimism. The FDA has been vowing to spur along new drug approvals for breakthrough therapies, and big companies like Merck ($MRK) and Bristol-Myers Squibb ($BMY) are signaling that they have the billions needed to make a mark in the field.
"I've been going a long time and I've been through moods where everybody wants to kill themselves and everybody is giddy," Chimerix ($CMRX) CEO Ken Moch tells Bloomberg. "Everybody wants to see how this year starts off."
FierceBiotech will be there with a team of four. We also want to see how the year will start. -- John Carroll, editor-in-chief. (email | Twitter)