From current issue of Barron's:
Big Pharma Has Enough Cash to Buy All of Biotech. Why M&A Isn’t Happening.
By Josh Nathan-KazisFollow
May 6, 2022 9:40 am ET
Late last year, Barron's predicted a wave of deals, citing biotech companies' cash holdings.
With biotech stocks off nearly 60% from their February 2021 peak, and big pharma firms flush with cash, why haven’t there been more acquisitions this year? It’s a healthcare market paradox.
A note Friday from Jefferies analyst Michael Yee highlights just how far biotech valuations have fallen, and how much cash the big pharma giants have on hand. The largest biopharma firms right now have almost enough cash to more or less buy every single small-to-mid-cap biotech company.
Yee calculates that the combined market capitalization of all the biotech stocks valued at under $5 billion is around $350 billion. The cash balance of the top 20 biopharma companies combined, meanwhile, is over $300 billion.
“We have reached a point where Big Pharma has so much cash they could basically buy the whole smid-cap universe,” Yee wrote. “We note M&A is tough when markets are falling fast …but eventually a few deals could catalyze things back up.”
Late in 2021, Barron’s predicted a wave of biotech M&A this year that would lift the sector. Citing the “tons of dry powder” in the vaults of Pfizer
Pfizer Inc., Novartis (NVS), and others, we argued that a wave of M&A would “reawaken investor interest in biotech.”
