Two More Chinese Biotechs Eye Acquisition as MNCs Deploy $170 Billion War Chest for 2025 M&A Surge

Jan 10, 2025 21:34 CST Updated 21:34

Johnson & Johnson

Medical Device R&D and Manufacturer

"Acquisitions remain the absolute mainstream for global Biotech fundraising. Since 2022, merger and acquisition deals have increasingly become a funding source for China's biopharmaceutical enterprises, and are likely to reach a new peak by 2025."

Writing | Runyu

On the eve of the JPM conference, there are always various M&A and BD deal announcements. Today, Johnson & Johnson officially announced its collaboration with Hezheng Pharmaceuticals/Shanghai Institute of Materia Medica, marking the birth of the first China-produced BTK degrader to go overseas. On the same day, Sinovant announced a global development and commercialization licensing and cooperation agreement with Verdiva for its GLP-1 portfolio, excluding Greater China and South Korea, with a transaction value exceeding $2.4 billion; Connova achieved its third NewCo overseas expansion.

However, unlike the flurry of mergers and acquisitions before the JPM conference last year, there have been almost no major acquisitions so far this year, and the number of cross-border acquisitions by Chinese pharmaceutical companies is 0.

But it cannot be ignored that mergers and acquisitions (M&A) will absolutely remain the highlight of the pharmaceutical industry in 2025, as the financial impact of M&A on Chinese pharmaceutical companies far exceeds that of investment and financing, IPOs, or traditional business development (BD) activities. Last year, Provention Bio, the first antibody-drug conjugate (ADC) company in China to be acquired, allowed its Series B shareholders to make a pure profit of 400% compared to the valuation at its Series B funding round; although no financial details were disclosed for the acquisition of Baoyuan Pharmaceutical, it clearly helped maximize the commercial value of its products.

The 2025 JPM conference will undoubtedly be a major event for Biotech companies to seek BD and M&A opportunities amid a challenging fundraising environment, during which some potential targets may be acquired by overseas Pharma and Biotech firms.

Especially the top-tier Pharmas globally, although they are collectively more conservative in their current M&A strategies, they still have ample firepower for medium and small-sized acquisitions. Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer, Roche, and 21 other MNCs,With over $170 billion in ample cash reserves and debt leverage capabilities, it is undoubtedly a catalyst for mergers, acquisitions, and business development (BD) in 2025.Among them, seven companies have cash flow exceeding 10 billion US dollars: Johnson & Johnson with approximately 20 billion US dollars, Merck with approximately 15 billion US dollars, and Novartis with approximately 14 billion US dollars, making them absolute potential large buyers.

Source: Oppenheimer

Two Chinese Biotechs May Be Acquired

According to Seeking Alpha analysts, nine companies are expected to be acquired soon, including two Chinese companies: Structure Bio and Shanghai Tuozhen Biological Technology Co., Ltd.

Shoreline Bio was once highly favored by well-known institutions and industry capital both in China and abroad, such as Sequoia, Lilly Asia Ventures, and WuXi AppTec. It also caught the GLP-1 wave, with its oral small-molecule GLP-1 product R&D progress ranking among the forefront in the industry. Moreover, its unique biased agonist design demonstrates clear differentiation. Additionally, Shoreline Bio benefits from a strong international founding team.

Shanghai Tuozhen Biological Technology Co., Ltd., listed on NASDAQ in 2021, with Eli Lilly and OrbiMed as its shareholders at the time of the IPO. Currently, the company’s key product pipeline includes an oral small-molecule GLP-1R agonist. Last year, Tuozhen Biological Technology announced positive Phase I clinical trial results for its oral GLP-1R agonist.

In fact, the GLP-1 market is currently a highly volatile and closely watched niche market.Although the growth rate is astonishing, the competitive landscape is far from settled. Those with a first-mover advantage or better clinical data at this stage are not necessarily the ultimate winners. Take Eli Lilly's tirzepatide as an example: despite its remarkable rise, the sales of its brands Mounjaro and Zepbound in the first three quarters failed to meet market expectations.

In this scenario, many industry insiders believe that the GLP-1 market will continue to see M&A and BD activities, with relatively the highest level of certainty.Among the nine companies potentially being acquired, besides Shanghai Tuozhen Biological Technology Co., Ltd. and硕迪生物, there is also a GLP-1 star publicly listed company — Viking Therapeutics. Its stock price surged in 2024 due to positive GLP-1 clinical data, but it later experienced a decline because of manufacturing issues. Merging with a large pharmaceutical company with stronger production capabilities could be a good "outcome."

In addition, Seeking Alpha analysts predict that the companies to be acquired also include:

Madrigal, holding the world's first MASH drug Resmetirom, which was approved by the FDA for marketing last year.

Summit, a key overseas commercial partner of Akeso Biopharma. The head-to-head victory of Eftilagimod Alpha (AKA "Yiwok") over K drug gained significant global attention after it was licensed to Summit in 2022. Currently, Summit's market value has exceeded 10 billion US dollars.

Sarepta, one of the three giants in small nucleic acid drugs, received accelerated FDA approval in 2023 for its gene therapy SRP-9001. The company’s underlying technology is impeccable, but the market has consistently questioned its commercial returns, with concerns about its profitability. In recent years, this company has been a popular target for MNC acquisitions.

uniQure, holding the world's first gene therapy Glybera (approved by the European Medicines Agency in 2012), shares a similar situation with Sarepta in that their commercial performance has been rather disappointing.

Overall, the profile of potential acquisition targets is very clear:Possessing a differentiated technology platform in a certain cutting-edge field, or a globally competitive product pipeline focused on a specific disease area, or a single blockbuster product. These companies have a strong international background, are supported by prominent capital, mostly have revenue foundations and low valuations, but may be constrained by certain commercialization challenges.

Besides, in 2025, there is still a pending "mystery" of M&A to be resolved: will the previously rumored Legend Biotech really be sold?

Last year, industry insiders speculated that the acquirer might be Johnson & Johnson, the current partner of Legend Biotech.

However, recently, some overseas pharmaceutical analysts believe that, based on the relatively mature cooperation, Johnson & Johnson's acquisition of Johnson & Johnson at this stage does not make much sense. They can continue to observe the development prospects of Carvykti. Meanwhile, the aforementioned analysts believe that, except for Carvykti, the competitiveness of Legend Biotech’s other pipelines is still relatively weak.

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Looking Forward to 2025: How Much Will M&A Amount to?

In 2024, "M&A exits" have drawn significant attention, but the biopharmaceutical M&A wave has reached a new turning point: the scale of transaction amounts has decreased, with no mega-deals exceeding tens of billions of dollars; competition for the same acquisition target is no longer intense; meanwhile, cross-border M&A in the Asia-Pacific region has become the "main character" in this wave.

Compared to 2023,In 2024, the number of multi-billion-dollar M&A deals by MNCs has significantly decreased, with almost all deal sizes being under $5 billion.The largest deal did not come from a global large Pharma, but from Biopharma Vertex Pharmaceuticals acquiring Alpine Immune Sciences, with the average premium also significantly decreasing compared to 2023.

The competition among potential buyers is no longer as intense as before. In 2023, almost every merger and acquisition deal over $1 billion had at least six or more bidders, but this phenomenon ceased to exist in 2024.

In addition, Goldman Sachs Investment Bank pointed out that cross-regional M&A recovered in 2024, with the Asia-Pacific region standing out the most, accounting for nearly 30% of global transaction volume.Apart from the Chinese market, the Japanese market also showed relatively strong performance, with M&A transaction volume increasing by 30% year-on-year; India has also become a hotspot for cross-border transactions due to regulatory and government policies that support M&A.

Based on this foundation, in 2025, there are three major trends in the global biopharmaceutical industry mergers and acquisitions that deserve attention:

First, based on the fact that the M&A market has entered a rapid growth track in 2024 (especially cross-border M&A), global M&A activities will undoubtedly continue to accelerate in 2025.

In fact, against the backdrop that the expected sustained recovery of biotech stocks in 2024 has failed to materialize and there are no clear signs of recovery in 2025, mergers and acquisitions remain a key pathway for small and medium-sized innovative pharmaceutical companies to "raise funds," ensure survival, and seek development.

Goldman Sachs Investment Bank also noted that although signs of recovery have emerged in some regions and industries, the capital markets have not yet seen a true global M&A recovery over the past three years. However, the key conditions for M&A are now converging: a more favorable macroeconomic environment (with monetary policies gradually returning to normal), a more relaxed regulatory outlook, and an increase in corporate risk appetite. Accelerated technological innovation is driving industry transformation, financial investors are seeking liquidity, and companies are increasingly turning to M&A strategies to reshape their portfolios.

At the same time, combined with public data, some capital institutions predict that due to drug patent expirations, pharmaceutical giants will face varying degrees of revenue loss from 2025 to 2029. For example, BMS could see a staggering 76% loss, while GSK and Amgen are expected to lose over 50%. Merck, Eli Lilly, and Johnson & Johnson are also projected to experience revenue declines of more than 40%. Particularly as their blockbuster products gradually lose market exclusivity, finding potential blockbuster drugs externally to take over remains one of the core reasons for large pharmaceutical companies to engage in mergers and acquisitions.

Secondly, the prosperity of mergers and acquisitions is inevitable,But it may be difficult to see particularly large-scale M&A deals again, while medium and small-sized M&A transactions continue to be the mainstream.Large pharmaceutical companies are still digesting the large-scale M&A transactions that occurred during this cycle of adjustments. Coupled with numerous uncertainties in the macroeconomic environment, multinational corporations (MNCs) remain cautiously observant about whether to pursue mid-sized acquisitions and how much to spend on them. Meanwhile, the wave of AI is bound to further drive M&A activities in the biopharmaceutical industry.

Reference: Oppenheimer, a Wall Street investment management institutionBiopharma M&A and Strategic Collaboration Insights: 2024 Year-In-Review and 2025 Outlook》

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