Deal Outlook for 2024 Includes GLP-1 Investments, APAC M&A, and More Spinoffs
Our lawyers share the top investment and regulatory trends from last month’s agenda-setting JP Morgan Health Care Conference. We expect an abundance of novel financing structures, investment focus on new disease states, and important new U.S. Food and Drug Administration (FDA) guidance.
- Regulatory developments in the U.S.: The FDA has issued several new policy documents on issues such as clinical trial design and conduct, affirming the agency’s high bar for approvals. We have seen indications that the U.S. regulators intend to approve new cell and gene therapies (CGTs) as much as possible, making use of all the tools the FDA has available and working closely with companies to advance these therapies. There are expedited pathways and exclusivities for CGTs available, and several new guidance documents are expected. Additionally, eight lawsuits related to the Inflation Reduction Act (IRA) are currently going through the courts. Some investors are taking the IRA into account in their investments, but others are continuing to pursue innovation while they await the outcome of the lawsuits. New guidance on the IRA is also expected in 2024.
- Hot investment areas: The biotech space is moving into areas of unmet need that have been historically underfunded. These include treatments for obesity, diabetes, and cardiovascular conditions, as well as immunotherapy, including CGTs, for cancers. GLP-1 agonists, which target Type 2 diabetes but can also impact other aspects of metabolic syndrome and lead to weight loss, are likely to attract a large amount of investment.
- Deal activity: The valuation gap between buyers and sellers is beginning to narrow, and big pharma companies are looking to fill their pipelines with new projects. Emerging life sciences companies are looking for exits, including through M&A, particularly mergers of equals between biotech companies that went public between 2020 and 2021. We anticipate increased activity in licensing transactions, especially ones that are cross-border with China.
- Emerging growth and pre-commercial companies: We are likely to see more spinoffs and out-licensing transactions. We are also seeing boardroom dynamics where one group of investors is behind one strategy and another group of investors is behind another, and some interesting financing structures are emerging as a result of how that plays out in spinoffs.
- Investment windows: We are likely to see limited IPO windows in 2024, but companies with strong investment theses are working to access these. We may also see a repeat of 2014 – 2016, when there were many smaller capital raises in IPOs.
- Asia: We are likely to see more M&A transactions in the APAC region. Because the IPO market is still somewhat slow in Asia, as in the U.S., M&A transactions will be a natural choice. We expect more carve-out and spinoff transactions, particularly in connection with secondary listings for companies that are already listed in Hong Kong. Investors are now considering Southeast Asian countries, particularly fast-growing Singapore and Malaysia, as a destination for their investments.
- Europe: The life sciences industry in Europe remains a key strategic focus for developers and industry leaders. This is particularly true in the UK, where the government’s stated policy continues to drive innovation, deal-making, and scientific development within life sciences and healthcare.
For more information, contact Sharon Flanagan on transactions and investments in the U.S., Stephen Abreu on transactions in the U.S., Robert Darwin on investments and transactions in Europe, Ruchun Ji on investments and transactions in Asia, Carlton Fleming and Frank Rahmani on financing for emerging and pre-commercial companies, Meenakshi Datta on the IRA, Emily Marden on CGTs, and Torrey Cope on clinical trial regulation.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.
