< PreviousM&A ROUND-UP 10 Pharma Business International www.pbiforum.net pharma giants are sitting on alone could, when leveraged with additional assets for borrowing additional capital, leave these 18 companies with up to $1.7 trillion to throw around! Out of 18 companies Porges’s team looked at, 12 are expected to have more than $20 billion in cash by the end of 2022 when excluding existing debt. Even after factoring in debt, Porges expects Pfizer, Moderna, Johnson & Johnson, Novartis and BioNTech to have net cash of more than $20 billion. Meanwhile, the team expects Regeneron, Vertex, Novo Nordisk and GlaxoSmithKline to have between $11 billion and $18 billion in cash on hand when including debt. Of course, having the firepower to spend doesn’t necessarily mean there will be many acquisitions. At the start of 2021 the cumulative buying power of the industry was marked at around $1.5 trillion and yet the largest buyout of 2021 was only $11 billion. Other than one other (Jazz Pharmaceuticals takeover of GW Pharma) there weren’t any other deals over $5 billion. That said, 2021 had the excuse of lockdown and COVID-19 and the pharma industry is not one to sit idle for too long. The other options for the use of such large cash reserves might be to pay off debt, buyback shares or pay shareholders dividends, but said shareholders shouldn’t sit back expecting it. The market is in a good position for acquisitions heading into 2022. With the 2020 nosedive having evened out and 2021 showing a higher uptake. With healthcare also moving drastically to digital and virtual in the wake of patients being forced to monitor their conditions 08-11.qxp_Layout 1 08/12/2021 12:18 Page 3Pharma Business International 11 www.pbiforum.net M&A ROUND-UP from home, the industry is posed for huge moves in the tech sector. Any one of these innovations could end up being the next pharma version of Facebook, Instagram or Snapchat – that is, to say, incredibly hot commodities sure to draw attention of big investors. These could also come from private equity firms who have had a bit of a turbulent year with many sectors struggling and who are posed to see pharma as a reliable investment opportunity. “It doesn’t take a rocket scientist to see that we’re in a healthy climate for M&A,” said Don McDaniel, CEO of Canton & Company and a healthcare economist, entrepreneur and advisory services leader. “I think this is, by most accounts, a benchmark year in terms of overall M&A. It doesn’t matter which sector you focus on; I think we’re going to continue to see that, we won’t see a lessening of the appetite.” There are big expectations going into 2022 and while the Omicron variant of COVID-19 may have an impact, the M&A market is still expected to be an exciting one. The big eighteen pharma giants are expected to be the biggest movers and shakers, and economists have already taken to highlighting several firms that could be viable targets. Most noticeably, companies that are high in science but low in finance are often acquired. This refers to businesses that have their drugs far up the clinical trials, close to approval, but who may be running low on cashflow as a result of the expensive testing process. As always, Pharma Business International will be reporting on the mergers and acquisitions as they happen. © stock.adboce.com/wladimir1804 08-11.qxp_Layout 1 08/12/2021 12:18 Page 4COVER STORY 12 Pharma Business International www.pbiforum.net © stock.adobe.com/PhotoGranary 12-15.qxp_Layout 1 08/12/2021 12:19 Page 1Pharma Business International 13 www.pbiforum.net COVER STORY In November, South Africa announced the identification of a new strain of COVID-19, seeing the World Health Organisation (WHO) quickly designate Omicron (variant B.1.1.529) a variant of concern. The decision was made based on evidence presented to WHO’s Technical Advisory Group on Virus Evolution (TAG-VE), that Omicron has numerous mutations that may impact how it behaves (how easily it spreads, the severity of illness caused et al.). Evidence for example indicates a potential increased risk of reinfection with Omicron in comparison to other variants. The global risk related to Omicron is stated as very high. The first known confirmed B.1.1.529 infection was from a specimen collected on 9 November 2021 and the variant has since made its way to further countries, from England to Portugal, Hong Kong, Australia amongst others, with many putting travel restrictions in place. At time of writing no deaths have been linked to Omicron, and researchers across the globe are conducting studies to understand it. At present, according to WHO, it is not clear if the variant is more easily spread than the likes of others, such as Delta, though its mutations, which includes mutations seen in the Delta A new variant With a new strain, panic over COVID-19 has flared once again - but what is Omicron and what do we know so far? 14 Á 12-15.qxp_Layout 1 08/12/2021 12:19 Page 2COVER STORY 14 Pharma Business Internationalwww.pbiforum.net variant, suggest it is even better at transmitting. While the numbers in South Africa testing positive for Coronavirus has risen in those places affected by Omicron - and cases of this variant look to be increasing in almost all provinces in South Africa - we await the results of epidemiologic studies to discover whether this is because of Omicron or alternative factors. In terms of severity of disease it is not yet known if Omicron leads to worse illness, though preliminary data indicates that there are growing hospitalisation rates in South Africa. This, however, might be a result of increasing overall numbers of people becoming infected and low vaccination levels instead of specific infection with Omicron. With initial infections reported coming from younger individuals (university students), who generally experience more mild disease, work to understand the level of severity of the Omicron variant may take days to weeks, while treatments are being assessed to see whether they are as effective against Omicron. Omicron should still be responsive to antiviral drugs, including molnupiravir, and anti-inflammatory drugs are likely to work against the new variant too as they target the body’s response to the virus rather than the virus itself. When considering symptoms of the variant, WHO says there is currently no information to suggest that symptoms associated with Omicron are different to other variants, though the doctor who alerted South African government scientists to the possibility of the new variant has noted symptoms to be mild, with fatigue one of the main reported alongside head and body aches, and sore throats. In contrast to the Delta variant, loss of taste and smell were not reported. Considering the detection of COVID-19, commonly used PCR tests remain effective in uncovering infection with Omicron. Studies meanwhile are underway to see if there is any impact on additional tests, like rapid antigen detection tests. As we learn more about Omicron, work is being conducted to comprehend how it will influence vaccines - what has risen to be the world’s key line of defence in the war against COVID-19, and vital in mitigating the pandemic. Vaccines are crucial in reducing severe cases of COVID-19, as well as death, including against the dominant circulating variant, Delta. With multiple mutations of the spike protein in the receptor-binding domain, it has been suggested that Omicron can 12-15.qxp_Layout 1 08/12/2021 12:19 Page 3COVER STORY Pharma Business International 15 www.pbiforum.net evade immunity, reducing effectiveness of current vaccines. With this, there is of course the possibility of modifying existing vaccines to suit Omicron, and pharma companies are already doing this, but simultaneously there is some confidence that those with three doses will be well protected. COVID-19 vaccine-maker Moderna has announced a strategy to address the new variant and is testing the ability of its vaccine (mRNA- 1273) to neutralise the Omicron variant. Should the authorised 50 μg booster dose of mRNA-1273 prove insufficient to boost waning immunity against the Omicron variant, Moderna says it has already tested a higher dose booster of mRNA- 1273 (100 μg) in healthy adults and is working to rapidly test sera from its high dose booster recipients in neutralising assays to determine if the 100 μg dose provides superior neutralising protection against Omicron. It is also studying two multi-valent booster candidates in the clinic that were designed to anticipate mutations such as those that have emerged in the Omicron variant and says it will also quickly advance an Omicron- specific booster candidate. Pfizer/BioNTech have additionally started work on a new jab against Omicron. The future of COVID-19 and our defences against it may be cloudy, but work is being completed rapidly to provide us with the essential answers to questions over illness severity, transmissibility, symptoms, vaccine and treatment effectiveness, and more. © stock.adobe.com/CROCOTHER Y © stock.adobe.com/golibtolibov 12-15.qxp_Layout 1 08/12/2021 12:19 Page 4GLOBAL TRADE 16 Pharma Business International www.pbiforum.net Despite challenges posed by the COVID crisis, the UK’s pharmaceutical sector is still being impacted by Brexit red tape, risking the nation’s premiere life science status on the global stage. Reducing the red tape 16-19.qxp_Layout 1 08/12/2021 12:20 Page 1Pharma Business International 17 www.pbiforum.net GLOBAL TRADE Despite the supply chain and R&D challenges presented by the ongoing COVID crisis – exacerbated by the arrival of the Omicron variant – the UK’s pharmaceutical industry is still feeling the effects of Brexit and the new trading status it ushered in. The industry was dealt a significant blow in March 2019 when the European Medicines Agency (EMA) relocated to Amsterdam, taking with it some 900 jobs and an annual budget of more than $300 million. When it comes to Britain’s ability to compete on the world stage, it’s been a mixed picture over the five years since the referendum. Brexit or no, Britain is a life sciences powerhouse. According to figures from the Association of the British Pharmaceutical Industry (ABPI), more than £23 billion worth of medical and pharma products were exported around the world in 2019 – double the £11.4 billion worth of branded medicines procured by NHS England in the same year. This is a fundamentally export- orientated sector, and it’s no exaggeration to say that its lifeblood is global trade. So, how has it fared in the policy wars and trade spats between Britain and the Bloc? Among the myriad provisions included in the ‘EU-UK Trade and Cooperation Agreement’ published at the end of 2020, there was a sectoral annex on medical products providing mutual recognition of Good Manufacturing Practice (GMP) inspections and certificates. In short, this means that manufacturing facilities do not need to undergo separate UK and EU inspections. What it didn’t include, however, was the mutual acceptance of batch testing certificates. To put that into perspective, every batch of every medicine and vaccine needs to be tested, so a certain number of doses are taken out of the supply chain and tested for purity and toxicity in a lab environment. An understandably costly and often difficult process, but one which is incredibly time consuming – especially © stock.adobe.com/pogonici 18 Á 16-19.qxp_Layout 1 08/12/2021 12:20 Page 2GLOBAL TRADE 18 Pharma Business International www.pbiforum.net considering that the UK has 12,000 types of medicine going to the NHS, with multiple batches of those medicines delivered every year. Without this provision in place, UK medicines exporters must factor parallel batch testing when exporting to the EU, meaning they have to qualify for every batch twice, doubling the cost and time involved to do so. Until 2023, the UK has agreed to unilaterally recognise batch tests certified in the EU. At the time of writing, it’s unclear what provisions will be in place from that date. It’s curious how the UK’s COVID-19 vaccination scheme has been politicised and spun as a Brexit victory. Indeed, the speed at which vaccines were approved and rolled out has been held up as a shining beacon of what post-Brexit Britain can achieve – an idea proclaimed in 2020 by former Health Secretary Matt Hancock who evangelised the UK’s trading status, claiming that the nation could only approve the vaccine ahead of its European neighbours because it was no longer subject to EU rules. Yet the outcome would have been the same regardless of the UK’s state at the time, as it was subject to the same rules as member states. What can be attributed to Brexit, however, is the increased workload needed to manage the payments of tariffs and taxes and processing of paperwork etc involved with customs clearance. One of the most egregious is the new rules of origin requirements – if the country-of-origin content of a shipment is above fifty per cent, then it may be subject to tariffs and additional border checks, potentially holding up critical shipments of medicine or clinical trial material up at customs, leading to bottlenecks at borders and potential supply and demand issues. The government’s ‘Life Sciences Vision’ positions the industry as fundamental to the future of UK plc and, in the first quarter of 2021, the ABPI recommended the government establish three core pillars for its trade policy for pharmaceuticals to achieve these aims and allow the nation to thrive as a life sciences superpower. These three pillars are: * Companies will continue to invest in pharmaceutical R&D and manufacturing in the UK, creating highly skilled and productive jobs across the entire country. * The removal of tariff and non-tariff barriers will boost high-value UK exports. * Streamlined supply chains and regulatory practices support the UK’s public service priorities by helping to deliver the best possible treatments and value to the NHS. Yet it isn’t only UK-based organisations with a vested interest that are suggesting the removal of tariffs in order to boost exports. The International Federation of Pharmaceutical Manufacturers & Associations, a Geneva-based trade association representing pharmaceutical companies around the world, has shared very similar sentiments, stating “…governments should avoid imposing taxes, tariffs, and other unnecessary barriers to trade.” Indeed, it says that trade in medicines and health technologies should flow freely and effectively across national boundaries for the benefit of patients in need, and that taxes, tariffs and other barriers delay the flow and increase cost of medicines and other health related products and so should be removed. Proclaimed a life sciences hub, and home to major pharmaceutical companies, the UK is a key player in the global medical and vaccines trade. In order to maximise that reputation, protecting both patients and profits alike, trade needs to flow freely. As the Omicron variant emerges, the UK and its trading partners are in an ideal position to address these trade issues and create a better bedrock to build on for the future. 16-19.qxp_Layout 1 08/12/2021 12:20 Page 3Pharma Business International 19 www.pbiforum.net GLOBAL TRADE © stock.adobe.com/.shock 16-19.qxp_Layout 1 08/12/2021 12:20 Page 4Next >