Early M&A: The Secret of Biotech's Success
As a product-focused biotech with two clinical phase cancer compounds ready to out-license, Wilex stands apart from most of its German--and European--peers. It has got to where it is by virtue of tight focus cost control and an early openness to M&A. Wilex now needs to show it can sign the sort of deals it needs to get to the next level.
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Big Pharmas are beginning to shy away from expensive licensing deals, at least until they begin to see returns on their existing blockbuster agreements. This reluctance is opening the door for mid-sized firms-particularly Europeans-to transform themselves through increased and more creative dealmaking. Moreover, the transition by traditionally in-licensing based firms like Spain's Esteve to out-licensers will accelerate the prominence of Europe's mid-sized players.
The $752 million worth of new funds raised by leading European biotechnology VCs over the past three months suggests that Europe's private biotech market is picking up. But these funds won't simply land in companies' laps. Europe's biotech managers, many of whom have raised funds only during boom times, will have to satisfy increasingly stringent criteria to secure their slice of the pie. Yet although late-stage products and critical mass still top some investors' wish lists, selected platform and early-stage groups capable of rapidly advancing a broad range of compounds into the clinic have also found funding.
Consolidation among Europe's biotech firms is picking up, but less for strategic reasons than simply to secure the cash to survive. Whatever the drivers, though, and however ruthless the concurrent cost- and program cutting, M&A should help create better adapted, bigger companies-something investors have long been calling for. Indeed for most merging companies, M&A is just the first step towards more strategic business-building moves in the near future.