European listed biotech landscape: 2020 review and outlook for 2021

Mixed take on deal activity in 2020: more R&D collaborations and licensing deals, but no clear signal on deal economics. M&A Still scarce.

Along with the record financial figures in 2020, the number of deals (all categories outside in-licensing), increased markedly for the European listed biotech companies, from 108 in 2019 to 174 in 2020 (121 in 2018). An increase was seen across all the main categories (Out-Licensing, Supply/Distribution, R&D).

While we had observed a drop in R&D collaborations from 2018 to 2019, the number of R&D collaboration roughly doubled in 2020 versus 2019, rising to 68 from 24 (32 in 2018). More importantly, the number of Out-Licensing agreements also progressed, to 61 in 2020 from 54 in 2019 and 53 in 2018. Finally, there were 36 Supply/Distribution agreements in 2020, versus 22 in 2019 and 26 in 2018. The other types of deals (JV, Sale/Divestment, IP Licensing) have marginal numbers, so we will skip this part.

The total deal value (maximally achievable with the “biobucks”) reached 13.9 bEUR in 2020, down 9% from 15.3 bEUR in 2019 (but 8.5 bEUR excluding the Galapagos/Gilead long-term alliance deal), and slightly higher than the 13.4 bEUR seen in 2018. The total cash upfront payments amounted to 1.9 bEUR, down by half from the 3.9 bEUR of 2019 (but sharply up from the 400 mEUR if excluding the Galapagos/Gilead deal), and still much higher than the 1.2 bEUR seen in 2018. This is probably the most promising figure on deal activity.

According to EY's Annual Firepower Report, the total biopharma deal value for 2020 worldwide reached approximately 136 bUSD, as of 30/11/2020. Assuming a proportional contribution of the last month of the year, the order of magnitude for the FY2020 total deal value could have reached 148 mUSD, or 130 mEUR (1 EUR = 1.141 USD average parity). Therefore, the deals from the European listed biotech companies in our universe would represent roughly 10% of the industry grand total (N.B. given the total number of deals indicated by EY, we believe that their data have a lower granularity than ours, so their figures probably include the most important deals, but might still be slightly underestimated – though the order of magnitude we can derive from their data still has an interest).

The Top 10 deals of 2020 by total deal value can be found below:

The Top 10 deals of 2020 by cash upfront amount are listed in the following table:

There were 20 Out-Licensing deals with a total deal value of at least 100 mEUR in 2020, which remains stable (19 in 2019, 20 in 2018). In contrast, there were twice as much Out-Licensing deals with a cash upfront payment superior or equal to 10 mEUR in 2020, with 16 such occurrences (8 in 2019 and 18 in 2018). So overall, there is still room for improvement on the business development area.

The Europe-China axis was clearly impacted by COVID in 2020, with only 6 Out-Licensing deals including rights for China or Greater China (products only, no IP), versus 12 in 2019 and 8 in 2018. There were also 2 Supply/Distribution deals in 2020 (2 in 2019 and none in 2018). Focusing on the Out-Licensing deals specifically -and only- for China or Greater China, the total deal value of these agreements reached 273 mEUR in 2020 (4 out of 5 with disclosed terms), significantly down from the 703 mEUR in 2019 (9 out of 10 with disclosed terms), and also lower than the 333 mEUR recorded in 2018 (7 out of 8 with disclosed terms). The sum of the upfront payments also dropped dramatically to 15 mEUR (3 deals with disclosed numbers), from 60 mEUR in 2019 (7 deals with disclosed numbers), and 56 mEUR in 2018 (6 deals with disclosed numbers).

Out of 19 Out-Licensing deals specifically for China or Greater China, the average total deal value was 64 mEUR (56.5 mEUR median), and the average upfront payment was 8.5 mEUR (4.2 mEUR). Roughly half of the deals were for mid-late stage or commercial stage in at least one jurisdiction outside China (N.B. before 2020, the regulatory pathway in China usually required that the in-licensees run new trials in China before being able to file for approval, but the regulation changed in 2020, at least in some cases, which should unlock new partnering opportunities). Overall, the considerations remain quite low when it comes to ink a deal for China. Genfit recorded in 2019 the largest Out-licensing deal to date for China (200mEUR total deal value with Terns). Despite the phase 3 failure of elafibranor, the rights still have not been returned to Genfit.

As we highlighted before, an important wave of approvals was recorded in 2020 by the European listed biotech companies. It should also help the companies who obtained these approvals to ink more deals, at least for the regions they do not to intend to serve by themselves. In China, the built-in constraints for this market require that the companies either create subsidiaries in China, either create joint-venture with Chinese companies (there is no example to successful JV story so far, among the companies in our universe). Otherwise, it’s a non-starter. Given that we still navigate in a COVID world, one may wonder whether some companies with in-licensing or M&A thoughts might not defer some operations? So far, 2021 isn’t off for a very strong start. The temperature at the JP Morgan Healthcare conference this week was not the hottest, with most of the Big Pharma companies looking at mid-size / bolt-on deals.

To end this section, there were 8 M&A operations in 2020 in the European biotech companies in our universe, down from the 11 of 2019 and up from 7 in 2018. 3 buyouts of companies occurred in 2020: Molmed (IT) by AGC Biologics (JP) for 240mEUR (264 mUSD), Genkyotex (CH) by Calliditas (SE) for 88 mEUR (104 mUSD), and Kiadis (NL) by Sanofi (FR) for 308 mEUR (336 mUSD). Additionally, Galapagos (BE) sold its Hungarian subsidiary Fidelta to Selvita (PL) for an Enterprise Value of 31.2mEUR. 4D Pharma (UK) merged with the US SPAC of Longevity (145 mGBP consideration, or 160 mEUR / 189 mUSD). Finally, there were 3 acquisitions of companies by the European companies in our universe: Zealand Pharma (DK) acquired Valeritas (US) for 23 mUSD (21 mEUR), Calliditas acquired Genkyotex (both listed and within our universe), and Immunicum (SE) acquired DCprime (NL) for 588 mSEK (or 58 mEUR / 68 mUSD). The maximum total value of these transactions was 956 mEUR in 2020, up from 583 mEUR in 2019 and well below the 5.2 bEUR from 2018 (3 “large” acquisitions of Ablynx by Sanofi for 3.9 bEUR, Wilson Therapeutics by Alexion for 690 mEUR and of TiGenix by Takeda for 520 mEUR).

According to our data, the global M&A had reached 127 bUSD (54 operations), or 108 mEUR. But this time, this is our data granularity that might not be as extensive than the one of EY data, and/or our “biopharma” perimeter might be more restricted or different. By adding our December data to their M&A figures as of 30/11/2020, we would reach a FY2020 global M&A value of 180 bUSD or 156 bEUR in 64 operations. Overall, the listed European listed biotech companies only play a marginal role on the global M&A arena. But this is expected, as this is primarily the field of play of the largest biopharma companies. The number of attractive candidates for a takeover in our universe was probably very small. Also, among the acquired companies we listed in 2020, none of them had a large market cap, and none of them had the high profile of an Ablynx, example given (even if Ablynx was likely overpaid). Genkyotex was struggling to find decent financing, despite claiming themselves as a phase 3-ready companies with a platform. Kiadis, despite being part of the Cell & Gene Therapy boom, was just becoming a new company after transitioning from its HSCT platform to their NK cell platform. And Molmed, a service provider operating also in Cell & Gene Therapy, was doing some progress but their balance sheet was not exceptional either.

In conclusion, one might expect some progress over the coming years, both in terms of potential acquisition of companies, but also for a few of them to be potential acquirers, as some of these actors have been very vocal at aiming to become profitable integrated biopharma companies.