According to Bloomberg News, the top drugmakers of the world are saturated with cash, and the biotech investors are just hoping that they get some share out of the money from the same.
The SPDR S&P Biotech fund (XBI) increased by as much as 2% Monday following a $6.7 billion deal of Pfizer Inc for Arena Pharmaceuticals Inc, a deal at 100% premium to the close of Friday. The exchange-traded fund was also seen to be pushed higher up by Eli Lilly & Co’s $380 million cancer drug deal with that of Foghorn Therapeutics Inc.
Bloomberg News also reports that the Pfizer-Arena pact is among one of the largest biotech takeovers in 2021 in the United States. This pact will likely enhance the investors’ confidence, and they can look forward to more such deals coming their way following a sluggish year. JPMorgan Chase & Co’s healthcare conference is another impetus that more such deals can happen in January.
In 2021, M&A deals of total value worth $89.9 million above $100 million have been declared so far. And this is only 44% of what was recorded in 2020. Since September, the deal activity in this sector dropped, and as many as ten new deals were placed forward in the 4th quarter as compared to only 23 that were announced in the 3rd quarter.
SVB Leerink of late placed the cash and debt capacity of the biopharma industry at a value above $1.6 trillion by the end of the following year. Experts say that many such drugmakers have to face a looming growth crisis as the patents begin to run out on the leading drugs.
According to Bloomberg News, some analysts think it is not adequate to make the entire sector turn around just yet with just one deal.
Foghorn, Arena, and XBI of late were seen to be trading at a 52-week low since the antitrust concerns, aside from the Congressional action that might as well weigh high on the prescription drug sector. The slump that was witnessed recently could serve as an ideal environment for the takeover of many biotechs.
