European listed biotech landscape: 2021 review and outlook for 2022

2021 Lowlights

A very bad year in terms of clinical trial success rate at the mid-late stages

If the approval rate was in the highlight this year, one can say that this was the opposite for the most important stages of development, at the mid-late stage. The 2021 newsflow density was roughly similar to 2020, although slightly more biased towards earlier stages, for the topline results. But the European bios scored an awful 42% for the success rate in phase 2b/3 & phase 3 altogether (lowest number in recent history – industry standard in the 60-70 range% but closer to 60%, as the most reported range in recent reports), and 37% in phase 2 (also the lowest in recent history, within the industry standard but much lower than recent rates), whereas the success rate was 50% in phase 2b (rather neutral versus history). The data at the earlier stages were within the usual values (very high in phase, and 60-ish at the phase 1/2 & phase 2a both combined. Clearly, the European bios have underdelivered in 2021.

Deception on recent commercial launches

Unfortunately, many launches did not reach the expectations of investors and analysts among the recent launch of European bios. Launching a first product with you own organization is already challenging, and the pandemic does make things easier, even if one may assume that the “new normal” is somewhat integrated now, in terms of method, staffing, engagement, etc.

We already talked about Monjuvi (Morphosys), for which the consensus was once higher than 200 mUSD for 2021, according to figures mentioned by Fierce Biotech, later adjusted downwards. The preliminary numbers disclosed last week by Morphosys tend to indicate FY21 US sales as low as 79 mUSD. A big miss, even if the company had only guided for total revenues, with a perimeter prior to the Constellation acquisition. Last week at the JP Morgan conference, the CEO of Morphosys mentioned a very shorty average time on treatment ("a couple of months") for Monjuvi, well below the expectations from what was seen in clinical trials. Even if the real-world patient mix is worse, when compared to clinical trials, the gap on the time on treatment seems to be huge. Jean-Paul Kress added that some education was needed. Hopefully, this indicator will improve over time.

The launch of Jyseleca in Europe by Galapagos and Gilead experienced the usual lengthy process to gather the individual reimbursement coverages in each Member States (usually focusing on EU5). It is also early days in Japan. Moreover, we know that Jyseleca will not be launched in RA by Gilead, and it seems it won’t be the case either in IBD. Galapagos initiated the full takeover of the sales in Europe, but it also takes some time. The European sales should be between 20-30 mEUR pro-forma (all in-market EU sales counted for Galapagos), and the royalties from Japan will land in the very low single-digit mEUR, which is another miss versus early 2021 estimates of most analysts. The road to breakeven does not seem very close, even if the company guides it for 2024.

Another very slow European launch came from Hansa Biopharma, from Sweden. After having sold some doses of Idefirix in Germany in Q1’21 (via EAPs), the company booked no revenue in the 2 subsequent quarter, adding a single digit-mSEK revenue in Q4’21, according to the preliminary report from last week. The total FY21 product sales were 15mSEK, or a bit below 1.5mEUR... Once again, this is well below the consensus (from early in 2021). The total revenues (34mSEK) even ended below the lowest estimates from after the HY’21 report (39 mSEK, highest 131mSEK). No FY22 guidance was provided yet.

On the same flavor, the launch of Zegalogue by Zealand Pharma seems to be close to catastrophic, with recent weekly scripts sometimes not even reaching a triple digit. To be fair, the management had always guided for a slow launch, while being bullish in long term. The only thing that is certain is that the first part is valid. Recent competitors also experienced slow launches, but it seems Zegalogue struggles to gain market share. The Danish company lowered its revenue guidance late in 2021, adjusting total the FY21 revenues from 220 mDKK ± 10% to 190 mDKK with the same margin. One has to pay attention to the fact that Zegalogue is not the only product marketed by Zealand. Indeed, the V-Go sales are within the expectations, and will make most of the company’s product sales in 2021, which makes the performance of Zegalogue even worse. Unless the company saw a large stocking effect in Q4’21, the Zegalogue sales should land in the low single digit mUSD for 2021. The marketing team of Zealand Pharma has to wake up in 2022, to gain market share against Xeris and Eli Lilly competitors.

We can also mention the US launches of BARHEMSYS & BYFAVO by Acacia Pharma, who recorded extremely low revenues in H1’21. The other KPIs were more positive. Acacia’s products target the hospital setting, thus the launch mechanics involve some delays specific to this setting. One may guess that 2022 should materialize the positive signs that the company saw on these KPIs during 2021.

Finally, the US sales by Jazz for Zepzelca in SCLC (royalties due to PharmaMar) had a strong start in Q3’20. But the sales in the next 3 quarters were basically flat. An improvement was seen in Q3’21, but it’s possible that the FY21 figures end up a bit below what was expected when starting the new year.

Sweden caught a bad cold

Signing a terrible -34.5% on average, and a -37.6% median performance for 55 Swedish public companies in 2021, that makes it probably the most impressive regional fall in Europe since the UK of 2018, when the British public bios imploded, following the crash of the Woodford Fund (-46.3% average /-52.3% in the UK for 32 companies in 2018).

The most significant decline obviously came from Oncopeptides, with the withdrawal of the PEPAXTO marketing authorization in the US (rescinded in January 2022). A negative read through from Novartis phase 3 of canakinumab in NSCLC impacted Cantargia, while more clinical failures were experienced by Asarina or XSpray Pharma. Alligator’s hopes for the lead programs were diminished by weak data from competition on the same targets. Moreover, high discounts were applied to large financing operations for Alligator or Index (large with respect to their market cap). Hansa launch of Idefirix was slow, and some clinical trials were quite slow to recruit. The weak data of Sarepta in DMD was also negatively seen for the collaboration potential between Hansa and Sarepta. Diamyd had a regulatory setback for the launch of its phase 3. The main performers were XBrane, whose phase 3 for Lucentis biosimilar succeeded. Bioarctic was positively impacted by the approval of Aduhelm, and IRLAB signed a deal with IPSEN.

As reported by HedgeNordic, all these negative news flow made damages. The Gladiator Fund, heavily weighted in Swedish bios and seen as a start fund in the region, crashed by more than 50% in 2021. So that the fund manager decided to merge it with another smallcap fund.

Can Sweden bounce back in 2022? That’s what the UK did in 2019 and 2020.

A weak year for business development

We counted 146 deals in 2021 (all categories excluding in-licensing), down from the 174 of 2020, but higher than the 110-120 from 2018-2019. The number of R&D collaborations decreased from 68 in 2020 to 58 in 2021. The largest sequential drop, in proportion, was observed for the supply and distribution agreements (35 in 2020, down to only 25 in 2021). A more modest decline was found for the out-licensing agreement (61 in 2020, 57 in 2021). The rest of the deals (JV, Sale/Divestment, IP Licensing) are mainly sales of assets/divestments, which are not significant.

The total deal value, including all the possible earnouts decreased by 28% from 2020, to 10.0 bEUR in 2021, versus 13.9 bEUR a year ago. This is the lowest amount of the recent years (15.3 bEUR in 2019 of which 8.5 bEUR only for the Galapagos/Gilead long-term alliance, and 13.4 bEUR in 2018).

The total cash upfront payments in 2021 amounted to 1.6 bEUR, down from the 1.9 bEUR of 2020 (3.9 bEUR in 2019, 1.2 bEUR in 2018). However, the 2021 figure includes 1425 mUSD/1167 mEUR from the deal between Morphosys and Royalty Pharma to enable the acquisition of Constellation. Excluding this outlier transaction, the total cash upfronts payments would only amount to 457mEUR, which is very low!

According to EY M&A Firepower Report 2022 for 2021, the total biopharma deal value for 2021 would be a bit north of 154 bUSD (data as of 15/12/2021) or 130 bEUR (1 EUR = 1.183 USD average parity). The same figures for the full year 2020 were 162 bUSD, or 142 bEUR. Still very at high levels then, but the report also notes a sharp decline in total upfront amounts (cash and/or equity) in 2021, as compared to 2020, with 53 bUSD (45 bEUR) vs 84 bUSD (74 bEUR) a year ago. Overall, the total deal value of 10 bEUR from the European listed biotech companies in our universe would represent approximately 7.7% of the total amounts in 2021, versus around 10% last year (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 2021 by total deal value can be found below:

Product Candidate(s)Indication(s)Out-licensing CompanyStageIn-licensing companyTerritoriesTotal Deal Value (mEUR)Cash Upfront (mEUR)
guselkumab (Tremfya); gantenerumab; otilimab; pelabresib; CPI-0209Psoriasis; Psoriatic Arthritis; AD; RA; Autoimmune Disorders; Myelofibrosis; Solid Tumors; LymphomasMorphosys (DE)commercializationRoyalty Pharma (US)WW1371.51166.8
3 siRNA products; siRNA PlatformVariousSilence Therapeutics (UK)N/AHansoh Pharma (CN)Greater CN1134.513.8
3x Onco & 2xID Vaccibody-based VaccinesCancer; Infectious DiseasesNykode Therapeutics (NO)N/ARegeneron (US)WW822.34.4
RNAi Discovery PlatformVariousEvotec (DE)researchTakeda (JP)WW670.40.0
TALEN/UCART Platform; TALEN Gene-editing R&D ServicesCancerCellectis (FR)researchCytovia Therapeutics (US)WW639.012.4
DARPin-RLT; DARPin platformCancerMolecular Partners (CH)researchNovartis (CH)WW515.217.8
GFT505 (Elafibranor); Other Genfit programsPBC (Pts w/ Inadequate Response to UDCA); Various (Mostly Liver Diseases)Genfit (FR)phase 3Ipsen (FR)WW ex-CN508.0120.0
varoglutamstat; PBD-C06AD (Mild Cognitive Impairment); ADVivoryon (DE)phase 2b; preclinicalSimcere Pharma. (CN)Greater CN473.816.8
Up to 3 Bispecific Programs Based on Alligator-GOLD/RUBY PlatformsCancerAlligator Bioscience (SE)researchOrion Corp. (FI)WW469.00.0
ebopiprant; OBE022Preterm LaborObsEva (CH)phase 2aOrganon (US)WW423.121.2

The Top 10 deals of 2021 by cash upfront amount are listed in the following table:

Product Candidate(s)Indication(s)Out-licensing CompanyClinical StageIn-licensing companyTerritoriesCash Upfront (mEUR)Total Deal Value (mEUR)
guselkumab (Tremfya); gantenerumab; otilimab; pelabresib; CPI-0209Psoriasis; Psoriatic Arthritis; AD; RA; Autoimmune Disorders; Myelofibrosis; Solid Tumors; LymphomasMorphosys (DE)commercializationRoyalty Pharma (US)WW1166.81371.5
GFT505 (Elafibranor); Other Genfit programsPBC (Pts w/ Inadequate Response to UDCA); Various (Mostly Liver Diseases)Genfit (FR)phase 3Ipsen (FR)WW ex-CN120.0508.0
efgartigimod (VYVGART)Myasthenia Gravis (generalized); ITP (Primary); Pemphigus Vulgaris; CIDP; Autoimmune Diseasesargenx (BE)phase 3Zai Lab (CN)Greater CN60.8141.9
clascoterone (Winlevi)AcneCassiopea (IT)commercializationSun Pharmaceutical (IN)US, CA38.1199.1
mesdopetam; IRL790PD-LID; Psychosis (Parkinson's Disease); PDPIRLAB Therapeutics (SE)phase 2b/3; phase 1Ipsen (FR)WW23.7307.3
ebopiprant; OBE022Preterm LaborObsEva (CH)phase 2aOrganon (US)WW21.2423.1
Nefecon (TARPEYO)IgANCalliditas Ther. (SE)registrationSTADA Arzneimittel (DE)EU, CH, UK20.097.5
DARPin-RLT; DARPin platformCancerMolecular Partners (CH)researchNovartis (CH)WW17.8515.2
Temgesic; Buprex; BuprenexPainIndivior (UK)commercializationEumedica Pharmaceuticals (CH)WW ex-US/CA17.717.7
varoglutamstat; PBD-C06AD (Mild Cognitive Impairment)Vivoryon (DE)phase 2b; pre-clinicalSimcere Pharma. (CN)Greater CN16.8473.8

One may note the 2 deals by Ipsen with European listed bios during 2021, in the Top 10 ranking by upfront amount. The French company had been vocal about their need to replenish their pipeline, by deploying some of their 3bEUR firepower available at the end of 2020.

We can count 17 Out-Licensing deals with a total deal value of 100 mEUR or more in 2021, close to the numbers in the recent past but still the lowest (20 in 2020, 19 in 2019, 20 in 2018). For the Out-Licensing deals with a cash upfront of 10mEUR or more, we can count 10 deals in 2021 matching this criterion (16 in 2020, 8 in 2019, 18 in 2018), a weak figure again.

The Europe-China axis remained active in 2021, although at low levels. There 7 Out-Licensing deals specifically granting rights for Greater China, a bit better than the 6 in 2020 (12 in 2019, 8 in 2018). There was no Supply/Distribution deal inked in 2021 for this region (2 in 2020 and 2019, none also in 2018). Focusing on the Out-Licensing deals specifically - only/mainly- for China or Greater China, the total deal value reached 1.99 bEUR in 2021 (7/7 deals with terms disclosed), likely the record (273 mEUR in 2020, 703 mEUR in 2019, 333 mEUR in 2018). This performance was mainly attributed to 4 deals: Silence/Hanso Pharma (3 siRNA programs) for up to 1134mEUR (largest total deal value by companies in our universe for Greater China), Vivoryon/Simcere Pharma (varoglutamstat in AD) for up to 474mEUR, Nanobiotix/LanBio for NBTXR3 for up to 198 mEUR, and argenx/Zai Lab (efgartigimod) for up to 142mEUR (largest upfront by companies in our universe for this territory). Therefore, the 2019 record deal (31mEUR upfront, 200mEUR total deal value) of Genfit for elafibranor with Terns Pharmaceuticals is now beaten. The total upfront payments also signed a new record in 2021, to 114 mEUR (7 deals with disclosed numbers), versus 15 mEUR in 2020 (3 deals), 60 mEUR in 2019 (7 deals), and 56 mEUR in 2018 (6 deals).

As usual, most of the largest biopharma companies said they were looking for mid-size/bolt-on deals (acquisitions) at the JP Morgan Healthcare Conference earlier this month. None seemed very open to large/transformational deals. Outside the problem of the high valuations, it seems there is not a plethora of programs that are worth it, if we refer to Novartis’ Jay Bradner comments in a fresh Fiercebiotech article, on the “presumed lack of interest in of M&A” last year. On the other side, he also added that Novartis might still play some cards, despite the high prices. More comments from the JP Morgan Healthcare Conference reminded that Big Pharma is always ready to pull the trigger for breakthrough innovation. It just seems that in terms how to appreciate the level of innovation, or in terms of discipline, the bar has been raised somehow. Ending with this topic is a nice segway for the next one.

M&A: almost not a topic in Europe

M&A is traditionally weak in Europe, especially when it comes to acquisitions of public companies. Sticking to this universe, we recorded only 6 M&A transactions in 2021, down from 8 in 2020, 11 in 2019, and 7 in 2018.

Cosmo Pharma re-acquired Cassiopea for 370 mEUR / 400mUSD, approximately 6 years after having spun it out. Given that the investors don’t seem to believe in the potential of Winlevi / Breezula in dermatology, the former parent company, apparently still convinced of the contrary, finally made a move. Cassiopea inked a deal with Sun Pharmaceuticals for Winlevi in North America. It is to be de-listed in February.

Polyphor merged with the American Enbiotix, after multiple failure, the most prominent one being the one of their lead asset in oncology. The post-merger combined value was on the base of 63.5 mEUR / 75 mUSD. The deal closed at the end of 2021, and the new company is now called Spexis.

The French company Abionyx also combined its business with assets brought in kind by IRIS Pharma Holding, a specialist in ophthalmology. Abionyx paid 5 mEUR for IRIS Pharma Holding, but the originality was the fact the IRIS shareholders accepted to be paid with very unfavorable terms for them, since accepting a 240% premium on the pre-deal valuation of Abionyx. The idea of this strategic transaction is to build on former Abionyx bio-HDL, but in rare diseases and ophthalmology, whereas it was originally thought for cardiovascular diseases, where it failed, like all the other HDL therapies before them.

Of note, 2 European listed companies (both dual-listed on Nasdaq) acquired US-listed companies, which is not common. Amryt paid an 80% premium to acquire Chiasma for 247 mEUR / 297 mUSD. The Ireland-based company continued its expansion strategy, 2 years after the acquisition of Aegerion Pharmaceuticals, who was basically selling the same therapies, but held the US rights. Later, Morphosys acquired Constellation Pharmaceuticals for 1.4 bEUR / 1.7 bUSD (68% premium). The German company had been vocal on its intention to make a BD move. But as discussed before, the company surprised by the target, and the amount paid through an innovative deal structure involving Royalty Pharma.

Counted in 2021 but still to close in 2022, UK’s AI-driven Drug Discovery specialist BenevolentAI has decided to merge with the Odyssey Acquisition SPAC (listed in the Netherlands). A first-of-its-kind in Europe. The SPAC, formed by notorious bankers, also involves Sanofi’s former CEO Olivier Brandicourt. The post-merger valuation is planned to be 1.5 bEUR, or 1.7 bUSD.

Additionally, one may still mention the takeover of Vectura (UK specialist of development of devices and formulations for inhaled substances) by Philip Morris Intl (yes, the tobacco manufacturer). Vectura had been removed from our universe, following the company’s strategic shift towards being a service/contract-based only company. But Philip Morris is also operating its own strategic shift, “Beyond Nicotine”. PMI had to go into a bid war with the Carlyle fund, but eventually won, by paying as much as 1.0 bGBP / 1.2 bEUR / 1.4 bUSD. The German Biotest had also been removed from our universe in the past years. The Chinese Creat Group had gained control of Biotest in 2017 via its subsidiary Tiancheng. Biotest is a specialist of plasma-derived products. It was planned to be brought in kind in a complex operation with another Chinese company, but this was never concluded, which made the Chinese investors likely willing to resell it again. The Spanish Grifols acquired Biotest for 1.4b EUR / 1.6 bUSD. Still an excellent operation for Creat who only had to buy 45% of the shares to gain control of the company for 344 mEUR / 427 mUSD in 2017, thanks to the acquisition of preferential shares.

In the biopharma world, Sweden’s SOBI, specialized in rare/orphan diseases, was acquired by a syndicate of international funds, for 6.8 bEUR / 8.1 bUSD. But the largest buyout in Europe came from Australian CSL on the Swiss Vifor, for 10.9 bCHF / 10.5 bEUR / 11.7 bUSD. BioNTech made a small acquisition in the space of infectious diseases, buying Austria’s private Phagomed Biopharma for 150 mEUR / 174 mUSD.

According to our M&A data, and restricting the data only to biopharma acquisitions (excluding SPACs, services, CROs, CDMOs), the global M&A amount reached 90 bUSD in 63 operations (127 bUSD in 54 operations in 2020), or 77 bEUR (108 bEUR in 2020). The average premium from the last known price on public companies was 66%, close to the median of 61% (61% average according to EY data for 2021, versus 74% in 2020). Compiled by Evaluate Pharma, the biopharma M&A data for 2021 (up to early November) also exhibit a drop from 2020. The premium computed on the last-30-day average was more around 100%. Likely with a more extended “biopharma” perimeter (but narrower than in 2020 data), the EY M&A data, as of mid-december 2021, indicate an aggregate of 108 bUSD. Adding the 28 bUSD for the last 15 days of 2021, which were definitely very active, the EY data for the full year of 2021 would land at approximately 136 bUSD, slightly higher than the 128 bUSD of 2020 (159 bUSD for 2020 with their old, broader, perimeter).

Our conclusion made last year remains intact for the long term: one can expect more acquisitions as the European landscape matures, but one may also expect European companies to become actors, and buyers as well.