Emerging trends in life sciences suggest cautious optimism for M&A in 2019 | Deloitte US has been saved
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In January 2019, Deloitte and health care executives from around the globe discussed innovation, investment, and disruptors in life sciences at the annual J.P. Morgan Healthcare Conference in San Francisco. Investment in oncology and gene therapies, divestitures to free up cash, and digital health dominated discussions.
Divestitures, pharma-tech collaborations, and bolt-on acquisitions could drive M&A in 2019
We expect many life sciences companies to explore these deal archetypes in 2019:
Oncology continues to be top therapeutic focus
Oncology continues to be the top therapeutic focus for many biopharma companies. The potential to leverage the immune system to treat cancer (immuno-oncology or I-O), especially checkpoint inhibitors and adoptive cell transfer (ACT) therapy, has some companies moving investment from other research and continues to drive alliances and M&A activity among biopharma companies.
Life sciences companies are evaluating investment in autologous therapies (modified patient cells) and allogeneic therapies (modified donor cells) for ACT therapy. While allogeneic treatment continues to attract investment, assets are primarily in pre-clinical or early clinical stages, and the technology will require time to evolve and prove its efficacy.
Therapeutic specialties such as inflammation, dermatology, and cardiovascular diseases also offer investment opportunities, and with a growing elderly population and longer life expectancy, more life sciences companies are prioritizing age-related diseases.
Digital health is a top priority
Life sciences companies, technology startups, and investment firms are all interested in meaningful technology investments, particularly digital health, to improve R&D productivity. Biopharma companies are increasingly interested in leveraging biomarkers to match patients with clinical trials, improve clinical trials accuracy, and more effectively predict adverse events.
We expect to see significant investment in artificial intelligence (AI) and machine learning to improve existing prediction tools. We would not be surprised to see future alliances between biopharma and technology companies to help identify better biomarkers.
We anticipate steady investment in bioinformatics for novel insights from genomic data, and more technology and life sciences companies combining competencies to reduce computing costs and accelerate the pace of drug discovery.
Digital therapeutics has piqued the interest of venture capital and investment firms, as well as health plan and health system executives, who see the potential to reduce care costs while improving care quality.
Personalized medicine could attract significant attention
More patient-centric treatments will drive continued interest in genomics. While biopharma companies focus on developing personalized therapies by interpreting genetic data, technology companies are interested in building bigger biobanks of genomic data and linking it to electronic health records (EHRs). We expect richly networked ecosystems to emerge, linking genotypic and phenotypic information with health care records, with consortia to standardize how health care and genomic information is captured for personalized medicine.
Gene therapies have emerged as a key investment area within personalized medicine. Clustered regularly interspaced short palindromic repeats (CRISPR) is groundbreaking, allowing deletion of undesirable traits and potentially addition of desirable traits. While most gene therapies focus on single-gene mutations, most diseases involve mutation of multiple genes. Until the technology advances to treat polygenic disorders, we expect gene therapies to remain focused on rare diseases and dominate market niches. At that point, the deal-making floodgates could open.
As these trends evolve, relatively low interest rates, combined with a perceptible market correction, have lowered valuations. We would not be surprised to see the frenzied pace for life sciences M&A continue well into 2019.
Susan is a Principal with Deloitte Consulting LLP and leads the M&A Consultative Services practice. Susan has spent over 20 years focused on M&A, predominantly Post-Merger Integration and Divestiture. She has supported over 50 deals with a cumulative deal value of $200 Billion.
Kushan is a Senior manager in the Mergers and Acquisitions (M&A) practice of Deloitte Consulting LLP. He has led multiple engagements with Fortune 500 and private equity clients across the deal life cycle with a focus on creating value through M&A. Kushan has built significant thought leadership on go-to-market strategy and commercial excellence, and has authored multiple whitepapers and taught courses on topics relating to revenue synergy capture, and growth pathways for companies to explore for disruptive innovation.