Biotech / Pharma / HC Specific Flashcards
Describe how licensing works in the context of biotech/pharma M&A.
Licensing in biotech/pharma involves transferring intellectual property rights between companies, typically through in-licensing or out-licensing:
- In-Licensing
A larger pharma company acquires the rights to develop and commercialize a product or technology from a smaller biotech firm. The biotech retains ownership of the IP, while the pharma company pays upfront, milestone payments, and royalties. This helps pharma expand their pipeline without internal R&D. - Out-Licensing
A biotech firm licenses its drug or technology to a pharma company for development and commercialization. This provides the biotech with funding and market access while sharing profits through royalties. - Deal Types
Exclusive License: Only one company gets the rights.
Non-Exclusive License: Multiple companies can license the same product.
Licensing helps biotechs gain resources and expertise, while pharma companies acquire innovative products without full R&D costs.
What is a earn-out in biotech M&A and why might it be common?
An earn-out in biotech/pharma M&A is a deal structure where part of the acquisition payment is contingent on the acquired company meeting specific milestones after the deal closes. These milestones often relate to drug development stages, such as successful clinical trial results or regulatory approvals, or commercial achievements like hitting sales targets.
Why Earn-Outs are Common:
Risk Mitigation: Drug development is uncertain, and earn-outs allow the buyer to defer some payment until the drug or technology proves successful, reducing upfront risk.
Alignment of Interests: They incentivize the acquired company’s team to stay motivated and achieve the agreed milestones, ensuring continued progress.
Valuation Gaps: If the buyer and seller can’t agree on a valuation due to future uncertainties, an earn-out bridges the gap by tying part of the payment to future success.
Earn-outs are particularly useful in biotech/pharma due to the long, risky, and expensive drug development process.
Walk me through a biotech DCF.
See written sheet.
What are the 3 most important revenue streams/drugs of the 10 largest pharma companies?
- Pfizer
$58,486
- Comirnaty (Covid-19)
- Eliquis (blood clots)
- Prevnar 13 (pneumococcal vaccine) - Roche
$54,978
- Ocrevus (MS)
- Perjeta (breast cancer)
- Hemlibra (Haemophilia A) - Johnson & Johnson
$54,759
- Stelara (psoriasis, Crohn’s Disease, ulcerative colitis)
- Darzalex (multiple myeloma)
- Invega Sustenna (schizophrenia) - Abbvie
$54,318
- Humira (rheumatoid arthritis)
- Skyrizi (psoriasis)
- Imbruvica (chronic lymphocytic leukemia) - Merck
$53,583
- Keytruda (cancer)
- Gardasil (HPV vaccine)
- Lagevrio (Covid 19) - Sanofi
$47,534
- Dupixent (eczema / dermatitis)
- Influenza vaccines
- Pentacel (Polio/Pertussis/Hib Vaccines) - AstraZeneca
$45,811
- Tagrisso (EGFR+ NSCLCs)
- Farxiga (type 2 diabetes)
- Soliris (neuromyelitis optica spectrum disorder) - Novartis
$45,440
- Cosentyx (psoriasis, arthritis, & psoriatic, ankylosing spondylitis)
- Entresto (Chronic Heart Failure) - Bristol Myers Squibb
$45,006
- Eliquis (deep vein thrombosis and pulmonary embolism)
- Revlimid (myelodysplastic syndrome aka MDS, multiple myeloma)
- Opdivo (melanoma, lung cancer, renal cancer) - GlaxoSmithKline
$38,609
- Shingrix (shingles prophylaxis)
- Xevudy (Covid 19)
- Triumeq (HIV)
“Pfi-Ro-Jo. AbMer-San-Ass. No-BriGlas”
like “Fine, Rojo. Abs more than Ass. No Spy glass.”
See the photos (taken Sept 8th) for this card and the handwritten notes.
What is the two most pressing concerns facing the cash flows of each of the 10 largest pharma companies?
- Upcoming competition to their key therapeutic assets / LOEs
- Gov. pricing pressure (Inflation Reduction Act)
What are the 8 most significant trends in biotech M&A?
- Radiopharma
- ADC
- GLP1 receptor agonists
- CNS / Neuroscience (esp. Schizophrenia treatments)
- Gastrointestinal / I&I developments (read industry reports to see how others qualify this space)
- Car T cell therapies
- mRNA therapies (including vaccines)
- AI drug discovery
Walk me through an interesting biotech trend.
Know the following VERY well (but focus on GLP1s and Radiopharma):
- GLP1s
- Radiopharma
- Schizophrenia / Alzheimer’s
Should also know ADCs at least somewhat.
What are three unacquired biotech companies that you are interested in? (Pitch me a biotech x3)
Perspective Therapeutics (radiopharma)
Viking Therapeutics (GLP1s)
maybe an ADC-tech-based biotech (although I may want to stay away from this trend - it gets hella complex very quickly).
What are three pharma companies that you are interested in? (Pitch me a pharma x3)
Be able to discuss these three IN DEPTH. Maybe only focus on two or even one, and then know like EVERYTHING ABOUT THEM.
BMS
AbbVie
Novo Nordisk
What are some of the most important upcoming LOEs in the coming decade or so?
https://www.fiercepharma.com/special-report/top-15-blockbuster-patent-expirations-coming-decade
How has the Inflation Reduction Act impacted the biotech / pharma industry?
VERIFY THIS CHATGPT ANSWER WITH THE BCG ARTICLE IN MY MAC DOWNLOADS.
The Inflation Reduction Act (IRA) has significant implications, particularly concerning pricing regulations and their impact on investments in the industry:
- Drug Price Negotiations
The IRA allows Medicare to negotiate drug prices for certain high-cost medications, a major shift in U.S. policy. While intended to lower costs for patients and government healthcare, this creates concern for biotech and pharma companies about:
Revenue Pressure: Reduced prices may cut into long-term revenue projections, particularly for blockbuster drugs that were once highly profitable.
Uncertainty for Investment: The prospect of future price controls can make it more difficult for companies to justify large R&D investments, especially in areas with uncertain outcomes like rare diseases and innovative therapies.
2. Impact on Early-Stage Investments
For biotech firms, which rely heavily on investment to develop new drugs, the IRA’s price caps could discourage venture capital and big pharma from investing in early-stage companies:
Lower ROI Expectations: With reduced pricing power, investors may anticipate lower returns on successful drugs, making biotech companies less attractive investment targets.
Shift in R&D Focus: Companies might prioritize developing drugs that are less likely to be subject to pricing negotiations (e.g., orphan drugs, short-term treatments) or focus on international markets with fewer price controls.
3. Strategic Adjustments
Biotech and pharma companies may adjust their strategies to adapt:
Portfolio Optimization: Companies may concentrate investments on high-impact therapies with a clear path to rapid commercialization or diversify into areas less affected by Medicare price negotiations.
M&A and Collaborations: Increased uncertainty could spur more partnerships and mergers, as smaller biotechs seek stability and larger pharma firms look for innovative assets that align with the new regulatory landscape.
Overall, while the IRA aims to make healthcare more affordable, its pricing controls may curb investment and innovation, leading companies to reassess how they allocate resources in drug development.
What are the most significant recent M&A deals.
See the bottom of the Pharma & Biotech sheet.
Be able to somewhat know at least 8 (one from each trend). (Although, of course, more is lovely. 8 should be sufficient, though.) Focus on the following information:
- buyer/target
- offer price & premium
- key asset(s) acquired
- 1-2 sentence summary of how it is indicative of the broader trend.
What is one (or two) worst deal(s) in biotech in the past decade? Walk me through it and why it didn’t work out.
Johnson and Johnson/Actelion $30B
Gilead/Kite $11.9B
Why do pharma companies acquire small biotechs?
Pharma companies acquire small biotech firms for several key reasons:
Innovation & R&D: Biotechs often specialize in cutting-edge research, allowing pharma companies to access novel technologies without internal development.
Pipeline Expansion: Acquisitions help fill gaps in future drug pipelines, ensuring growth and portfolio diversification.
Faster Time to Market: Pharma companies can expedite late-stage clinical trials, bringing drugs to market faster.
Strategic Positioning: Acquisitions strengthen their presence in key therapeutic areas like oncology and rare diseases.
Access to Talent: Pharma gains specialized teams with deep expertise for future projects.
Risk Diversification: Acquisitions spread risk across different technologies.
Financial Gains: Promising drugs can lead to significant returns.
These acquisitions help pharma companies stay competitive in a rapidly evolving industry.
Walk me through a recent biotech deal.
Be able to discuss perhaps 3 deals IN DEPTH - one from each of the major pharma companies you know. In general, I should know everything that has been previously stated about these deals + also how the acquisition fits into the strategic long-term goals of the acquirer and the potential competitors of the assets of the target company (ie. who is the acquirer trying to compete with or who threatens the acquirer’s new assets?)
BMS/Karuna (+ lightly know AbbVie/Ceravel, the competitor deal). = indicative of CNS/Neuro
BMS/Rayzebio or AstraZeneca/Fusion
= indicative of Radiopharma
Maybe Novo/Catalent, maybe Roche/Carmot.
= indicative of GLP1s.
