Good morning,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
Big market volatility over the last few weeks.
Buyers hesitant, stocks oversold…
But there is one buyer in the market that is not slowing down.
A big chequebook with a big problem.
Who is it?
Big Pharma.
Over the next few years, a number of key drugs will come off patent.
This means that generic competitors can enter the market and rapidly erode Big Pharma’s revenue from drug sales.
Big Pharma needs to replace (and even improve on) that lost income through new drug development and acquisitions.
The last six months have been a deal frenzy, and the war in Iran is not slowing things down.
If the pace of $500 million-plus deals continues, 2026 could reach US$172 billion in total deal flow.
Just this week, there were two more $5B+ deals announced:
Biogen’s acquisition of Apellis for US$5.6B
Gilead’s acquisition of Tubulis for $5B
Here are just some of the $1B+ deals over the last three weeks:
According to the discussion on the latest Biospace podcast, AbbVie, Amgen, Novartis, Eli Lilly and BMS look likely to be the next companies to make a deal.
(worth listening to the first bit of this podcast to get an idea of the biotech M&A landscape right now)
These deals are an important part of the biotech investment ecosystem.
They set off a cascade of signals to investors:
If you invest in mid-late stage biotechs, there is exit liquidity and opportunities
If the science is good and the fit is right, the “bet” isn’t on whether there will be a partner, but how much they will pay.
Then comes the IPO market.
In January and February this year, we saw multiple upsized IPOs in the US. Indicating the investors' sentiment for public biotech companies.
With more upsized capital being raised and stocks actually going up on good news, this is the signal for the broader retail market.
Speculators are now open to invest in earlier-stage, riskier companies with higher upside potential.
It’s kind of like a waterfall effect.
This is happening right now in the US.
(With the Nasdaq biotech index up 53% from this time last year)
But what about Australia?
The biotech industry in Australia generally lags the US by 6 to 12 months.
We are still waiting on the first part of the waterfall to materialise…
Late-stage deal exits.
While it seems that there is a new M&A deal every other week in the US, this has yet to reach Australia.
But eventually, big pharma will come knocking.
While the Immutep result was a setback, there are still plenty of promising late-stage companies and technologies that ‘fit the bill’.
Dimerix, Mesoblast, Starpharma, Clarity, Actinogen, Avecho, Neuren, Telix, Paradigm, Syntara, Cynata… (and many more)
The American pond has been fished. Australia is ripe for the picking.
Now we just need a deal or two to drop to get the waterfall of capital and attention flowing through Australian biotech markets.
Let’s dive in…
The Pulse Check
Quiet day on the markets today. I expect a flurry of news next week as the market returns from Easter Break/School Holidays.
The FDA has accepted Telix Pharmaceuticals’ (ASX: TLX) NDA resubmission for its PET imaging agent for glioma detection, with a PDUFA goal date set for September 11, 2026.
Pacific Edge (ASX: PEB) quarterly test volume update, a modest 2.7% rise in Q4 test volumes. (PEB)
🪑 Reading through the CEO comments, PEB ‘is on the cusp of a major commercial inflection point’...
But how long is “the cusp”? Next quarter? The one after? It’s impossible to know until you’ve passed it and see some meaningful test volume growth.
Report: Hormone therapy prescriptions jump as FDA removes black box warning (Bloomberg)
Jeito Capital has raised €1bn for the next biotech fund in Europe. (Biopharma Dive)
See you all tomorrow,
The Armchair Analyst
