The overall deal flow in biopharma tapered off in 2023 but the big companies sure know what they want (what they really, really want), according to a new report from J.P. Morgan.
And that’s antibody-drug conjugates, which drove a fourth-quarter spike in licensing deal proceeds and provided a glimmer of hope to an industry battered by outside forces and grim financing prospects.
J.P. Morgan’s annual 2023 Biopharma Licensing and Venture Report arrived on the eve of the firm’s famous conference, which is set to welcome thousands of attendees in San Francisco today—East Coast weather permitting.
2023 was tough, but clinical biotechs still had a lot of opportunities to wheel and deal, according to J.P. Morgan. While licensing deals, venture investments, M&A and IPOs were down overall in the fourth quarter, deal values stayed fairly high thanks to a flurry of late-stage tie ups.
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Biopharma licensing partnerships accounted for $63 billion in total value during the fourth quarter from 108 deals. Just one deal—Merck’s ADC partnership with Daiichi Sankyo—accounted for $22 billion of that. Another huge one was another ADC bet, with Bristol Myers Squibb signing on to work with SystImmune for a total value of $8.4 billion. If you exclude the Merck deal, the total value of these partnerships is still higher than the previous quarter, which ended with $32.1 billion.
The total number of licensing deals compares to 149 in the same quarter a year earlier, 195 for Q4 2021 and 223 for Q4 2022.
As for venture investments, the year closed out with $17 billion total across 250 rounds, thanks to $3.5 billion earned through 79 rounds in the last quarter. Aiolos Bio snagged the title of largest venture round of the quarter with $245 million, which also proved to be the largest series A, too.
There was just one IPO in all of the fourth quarter—Cargo Therapeutics making the plunge for $300 million—and 13 overall for the year. It’s a far cry from the heyday of 2021 and experts are still unsure what 2024 will hold. J.P. Morgan reported $2.5 billion raised from 12 completed biopharma IPOs for the year on Nasdaq and NYSE. Nine out of the 12 companies had clinical programs when they took the leap to the public markets. As of December 13, five of the companies were trading above their IPO price.
As for M&A, December saw a rush of Big Pharmas snapping up companies around Christmas. J.P. Morgan tallied the fourth quarter at $37.6 billion and $128.8 billion across 112 total acquisitions for all of 2023.
AbbVie was the top buyer of the quarter with the two largest acquisitions thanks to the $10 billion outlay for ImmunoGen and $8.7 billion buy of Cerevel Therapeutics.
All of this adds up to 270 total deals in the fourth quarter total, which is lower than the third quarter which exceeded 300.
J.P. Morgan sees some big potential for smaller biopharmas looking for licensing partners, as Big Pharmas have been handing out larger upfront payments for the deals they really want. Large companies are particularly happy to splash out cash on therapies that have early safety data or efficacy data already in hand. Median upfront cash and equity payments from Big Pharma reached $405 million across five deals in phase 2, according to the report. Taking Merck’s outlier deal, the median is $310 million. This compares to $100 million in 2022.
The median upfront dropped for late-stage assets from $75 million in 2022 to $70 million in 2023, while phase 1 deals saw a 42% increase in upfront payments year over year.
Cancer was once again the most in-demand therapeutic areas, reaching a new height of $86.1 billion in 2023. Followed by $21.1 billion for neurological disorders. For the top modalities, biologics and complex molecules raked in $80.3 billion in collective deal value followed by $38.6 billion for small molecules.
ADCs have been all the rage this fall. J.P. Morgan says there have actually been fewer total—but the deals that did happen were huge. There was $4.6 billion in upfront cash and equity doled out to ADC licensing deals in 2023 out of 35 deals, which hit $43 billion for total deal value. This compares to $23 billion total deal value in 2022 with $1.1 billion in upfront value over 20 deals.
Meanwhile, cell and gene therapy, once one of the biggest things in biotech, fell to just $900 million compared to $1.3 billion the year before. There were 57 total deals compared to 69 the year before.
The trends were similar for venture rounds, with biologics and oncology attracting the largest share of initial fundraising for the year. Biologics snagged $2.3 billion in series A funds, followed by $1.2 billion for small molecules. Cancer was the top therapeutic area with $1.4 billion in initial funding rounds followed again by neurology with $639 million.