Health Check: The urge to merge is spurring a global biotech recovery

Three recent big-ticket M&A deals have raised expectations the global biotech sector is recovering from its two-year slump.

Sometimes the urge to merge is simply irresistible. Pic: Getty Images

• A burst of global M&A activity suggests biotech sector is regaining its mojo

• Dimerix is well cashed up as pivotal trial recruitment hits halfway mark

• Pacific Edge wins a two-month reprieve from US reimbursement authorities

Industry watchers expect global biotech mergers and acquisition activity to strengthen in 2025 after a subdued 2024, aiding the sector’s nascent recovery.

In fact, it's starting already.

Ahead of JP Morgan’s biotech jamboree this month in San Francisco, Johnson & Johnson (J&J), Eli Lilly, and Glaxosmithkline (GSK) all dropped big-ticket acquisition announcements.

According to Global Data, biopharmaceutical M&A fell 47% in 2024 (as measured by deal value), with more than 80% of deals valued at under $1 billion.

But J&J last week announced the US$14.6 billion acquisition of Intra-Cellular Therapies, the biggest biotech M&A since Pfizer’s US$43 billion acquisition of Seagen in December 2023.

J&J will obtain Intra-Cellular Therapies’ extensive neurology portfolio, including the approved bipolar disorder/schizophrenia treatment Caplyta (lumateperone).

Meanwhile, Eli Lilly announced plans to acquire Scorpion Therapeutics’ STX-478, a P13K inhibitor which is in phase I trials for breast cancer and other advanced solid tumours.

GSK flagged the US$1.15 billion acquisition of US-based precision medicine company IDRX, which is currently in Phase I trials for gastrointestinal stromal tumours.

We’re not suggesting that Australian biotechs will become overnight takeover targets – that rarely happens – but the M&A flurry shows the sector is regaining its mojo and that should flow through to local valuations.

As with most business topics there’s a Trumpian angle to it all – the departure of Federal Trade Commission chair and aggressive trust-buster Lina Khan.

She is expected to make way for a more laissez-faire Trump appointee that could alleviate challenges hindering biopharmaceutical companies from signing larger deals.

Global Data analyst Alison Labya says “a change in FTC leadership could foster a more favorable environment for larger M&A deals in 2025, conducive to the need to refuel pipelines and drive innovation ahead of upcoming patent expiries faced by large biopharmaceutical companies.”

Labya adds that investors remain wary about the impact of the incoming Trump administration on healthcare policy and US Food & Drug Administration approvals.

Quarterly corner

Quarterly reports from the life sciences sector are trickling in ahead of Friday’s cut-of date.

Kidney drug developer Dimerix (ASX:DXB) today reported a cash balance of $21.1 million, with $1.8 million of inflows.

This is despite expending $5.9m in research and development costs to further its phase III trial for the rare disease focal segment glomerulosclerosis.

The surplus is explained by $7.93m of government grants and R&D incentives.

On January 7, Dimerix unveiled a Japanese licensing deal with Fuso Pharmaceutical Industries, for up to $107m of sales and development related milestones plus royalties ($3.1m upfront, which is over and above the December cash balance).

The compact followed two earlier deals, with Advanz Pharma (Europe, Canada and here) and Taiba (the Gulf countries and Iraq).

Collectively, the three deals involve $458m of upfronts and milestones.

Meanwhile, Dimerix has enrolled 154 patients in its global trial, Action3, with full recruitment of all 286 patients expected in the September quarter.

The trial is pitched at marketing approval for Dimerix’s therapy, DMX-200.

EMvision Medical Devices (ASX:EMV) is also getting to the pointy end with its bedside scanner Emu, which aims to detect strokes faster and more accurately.

The company says “excellent” results of its pre-validation trial, Emview, gives it the confidence to launch a pivotal trial, aimed at FDA approval under the new device route.

Emvision ended the quarter with $15.78 million, having expended $3.26m, with a $2.12m R&D tax incentive yet to be banked.

An about-face, or a stay of execution?

Kiwi-based bladder cancer diagnosis group Pacific Edge (ASX:PEB) has won a two-month reprieve from US reimbursement authorities after they withdrew public funding for the company’s Cxbladder genetic testing tool.

The tests are now reimbursable until April 24 2025, rather than the original cut-off of February 23.

The company is imploring the reimbursement gatekeepers to review their no-pay decision and will lodge an injunction application if necessary.

The extension was by way of an ‘out-of-schedule’ update to the Medicare Coverage Database overnight.

The update doesn’t explain the reprieve, but it comes after Pacific Edge fronted parties including  Novitas (the relevant Medicare administrator), the Centers for Medicare & Medicaid Services, the US health department’s legal eagles and “incoming political leadership”.

Pacific Edge will update shareholders as more information comes to hand. But it sounds kinda promising.

Holy Moses! Former chair linked to Percheron board revolt

The Percheron Therapeutics (ASX:PER) board has announced March 4 as High Noon in its bid to survive a spill motion from a cabal of discontented investors including Bob Moses, chair of antecedent company Antisense Therapeutics.

The ginger group is seeking to replace chair Dr Charmaine Gittleson and managing-director Dr James Garner with Gregory Peters and Gennadi Koutchin.

In mid December, Percheron announced in blunt terms that its long-awaited trial of its lead drug candidate to treat Duchenne muscular dystrophy had failed.

In their requisitioning letter, the candidates said it was crucial to adopt an "appropriate and clearly articulated plan to build shareholder value and restore confidence in the company".

A “refreshed” board is the means to achieve that, in their view.

In its notice of meeting for the March 4 showdown in Brisbane, the board contended Koutchin and Peters did “not appear to have such a plan, nor do they have all the scientific and medical expertise necessary to assets and …  nor do they have experience in running a publicly-listed life sciences company”.

The board also said the trial failed not because of any action or inaction in its part.

Over to you, shareholders …

At stake is the use of Percheron’s material residual cash, courtesy of $14.8 million placement and share purchase plan last year.

Originally published as Health Check: The urge to merge is spurring a global biotech recovery