When Roche acquired Genentech and then Sanofi acquired Genzyme, the wheels were firmly set in motion for a new age of M&A strategy. Big pharma has since been willing to cough up ever-increasing premiums to acquire biotech companies and their rich pipelines of potential blockbusters. Whilst this has resulted in some huge wins – Gilead acquiring Pharmasset, for example – conversely, there have been some huge losses. Moreover, this pond is starting to look a little overfished.
Whilst Big Pharma’s appetite for buying early-stage biotech companies clearly remains ravenous, it does seem to be subsiding somewhat. Roche’s $1.9B acquisition of Flatiron Health, a 5-year old cancer data analytics business, earlier this year is a strong indicator that big pharma’s taste buds are evolving towards a penchant for Digital Health. The ability of companies like Flatiron to collect, clean, utilise and monetise healthcare data has numerous benefits for companies like Roche, none more so than in developing Oncology drugs more time and cost effectively. And given that Roche currently spends $10.8B annually on R&D and their lead cancer drug Rituxan reported total sales of $6.7B last year, $1.9B is starting to look like a snip.
Digital Health companies are now popping up all over the world, with a supercharged investor appetite lighting a rocket underneath all the excitement. According to a recent report from StartUp Health, global VC funding into Digital Health companies hit an all-time high of $14.6B last year. Whilst these businesses tend to vary significantly from one another, they all seem to be creating value in the same way – harnessing patient data. With big pharma starting to value this alongside the next big drug, we can expect deals like this to become far more commonplace.
From a talent perspective, Venari Partners is already seeing this shift from both candidates and clients alike. Our candidates are increasingly asking us about potential opportunities with Digital Health start-ups and data-driven healthcare businesses. And our client base is rapidly evolving to include companies just like this, mostly via dedicated funds and accelerator groups.
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