2020 saw a substantial increase in the number of acquisitions of startup biotechnology companies. Many buyers are becoming increasingly interested in buying these promising companies before they go public, as this often makes the purchase more economically feasible.
Acquisitions of startup biotech firms increased in 2020 in spite of the ongoing pandemic, which caused many buyers to negotiate contracts remotely. Silicon Valley Bank reported that drug companies bought 19 biotechnology startups in 2020, which was up 15 from the prior year. In 2020, the number of buyouts of private biotechnology firms was the highest since 2016, which saw a total of 20 acquisitions. The median upfront payment for these acquisitions in 2020 reached approximately $300 million versus $250 million in 2019.
Buyers of biotechnology firms are racing to purchase startups while the companies are still private and before they become highly valued, as this makes the buyout cheaper than buying public firms. In 2020 alone, the median biotechnology initial public offering (IPO) pre-money valuations reached $500 million. A total of 84 biotechnology companies went public last year, which represents a significant increase from the peak of 66 in 2014.
One of the largest acquisition deals to close 2020 was Bayer AG’s $2 billion upfront purchase of Asklepios BioPharmaceutical, a gene-therapy startup. The deal included up to $2 billion success-based payments, culminating into a potential $4 billion purchase.
Tokyo-based Astellas Pharma made an upfront cash payment of $127.5 million to acquire startup company iota Biosciences in 2020. The two companies previously agreed to a Research and Development agreement in 2019, but the new merger allowed Astellas to acquire the bioelectronic medicine startup. Shareholders in iota are also eligible to receive up to $176.5 million in milestone payments.
Compared with biotech, acquisitions in the biopharma industry decreased in the first half of 2020, likely due to the lack of internal resources caused by the COVID-19 pandemic. A PwC analysis found an 87.2% decrease in deal values for the first quarter of 2020 compared with the same time period in 2019. Despite this slowdown, the number of mergers in biopharma appear to be accelerating at rapid speed, partially due to the fact that many companies have repositioned their activities to a virtual platform.
Currently, it’s unclear the direction of many of the top life sciences startups in 2021, including whether or not they will go public or be acquired by larger companies. Some of the most promising startups to watch out for in 2021 include Sana Biotechnology, EQRX, ArsenalBio, Triumvira Immunologics, Immuneering, Cellarity and Omega Therapeutics, among several others. One of the top biotech companies to look out for, Nuvation Bio, will be merging with Panacea Acquisition Corp. this year, which will take the company public and provide it with significant financing for its operations.
Emerging Seattle-based startup company Sana Biotechnology recently announced it was seeking to raise a $150 million IPO. Once public, the company plans to list itself on the Nasdaq stock exchange under SANA. In the last quarter of 2020, Sana acquired Oscine Corp., which integrated the acquired company’s glial progenitor cell program, in addition to its other technologies.