Troublesome acquisitions: when biotech M&A goes wrong

Failed acquisitions

Some would argue that mergers and acquisitions (M&As) are the cornerstone of the biopharma industry. Indeed, many deals do help to bring revolutionary treatments to market. But, as biopharma companies have spent hundreds of billions of dollars on M&A over the last decade, there are some deals that did not turn out as expected for a variety of reasons, from underwhelming drug sales to legal issues. In this article, we take a look at some of the most prominent failed acquisitions that have taken place in the biopharma scene in the last decade. 

Table of contents

    Sanofi’s closure of NK cell therapy company Kiadis 

    After acquiring Kiadis in April 2021 for €308 million ($357 million), Sanofi recently decided to shut down the Dutch NK cell therapy company, which was founded in 1997. 

    Initially, the move was announced quietly in an update to a clinical trial for SAR445419, an off-the-shelf natural killer cell therapy in development for relapsed/refractory acute myeloid leukemia, which had supposedly been terminated due to the “divestment of Kiadis.”  

    However, it turned out that Sanofi would instead close down the company entirely. In a statement made to FirstWord Pharma, a Sanofi spokesperson said that “despite exhaustive efforts to explore potential divestment options, including sale, we are proposing to close the legacy Kiadis business.”  The spokesperson also added that the proposal was made after “careful consideration of various factors, including market conditions and strategic priorities.”

    When Sanofi acquired Kiadis three years ago, it said that its natural killer (NK) cell technology platform would have “broad application against liquid and solid tumors, and create synergies with Sanofi’s emerging immuno-oncology pipeline.” But Sanofi has recently shifted its pipeline priorities, which impacts research and development (R&D) in oncology, as the company expects to save about €700 million through “reallocation of pipeline resources.” The move to sell Kiadis aligns with this reshuffle.

    Johnson & Johnson: trouble with Actelion 

    When Johnson & Johnson (J&J) acquired Actelion for $30 billion in 2017 after a long-fought battle that included fending off a bid from competitor Sanofi, the idea was to bring in a new therapeutic area – pulmonary arterial hypertension (PAH) – to the big pharma’s business portfolio. However, things didn’t quite go to plan and, by 2018, the deal was already starting to cause a headache for J&J. 

    Along with Actelion’s PAH portfolio, J&J also received two late-stage pipeline assets through the acquisition, one of which was Actelion’s antibiotic, cadazolid, that was being developed in a phase 3 program for clostridium difficile-associated diarrhea. But in April 2018, J&J decided to scrap the drug. Actelion’s other asset, ponesimod – a drug to treat relapsing multiple sclerosis (MS) – fared slightly better, as it gained approval in 2021 under the brand name Ponvory. In December 2023, however, Vanda Pharmaceuticals acquired U.S. and Canadian rights to the drug. 

    There have also been issues with Actelion’s PAH assets. For example, in January 2017, Opsumit failed a phase 3 trial in patients with Eisenmenger syndrome, a heart condition that causes PAH. And, in September 2023, J&J decided to halt a phase 3 trial for Opsumit in patients with chronic thromboembolic pulmonary hypertension (CTEPH) after an independent data monitoring committee performed an interim analysis and figured the trial wouldn’t succeed.

    Even analysts at SVBLeerink issued a report listing J&J’s purchase of Actelion as one of the worst biopharma acquisitions of the last decade, due to the fact the deal wouldn’t create value over J&J’s lifetime. In fact, they said it would actually destroy value, to the tune of about $15 billion.

    Gilead’s failed acquisition of Kite

    Also listed by SVBLeerink analysts as one of the worst acquisitions of the last decade, Gilead’s $11.9 billion acquisition of Kite Pharma in 2017 is another deal that has brought a lot of skepticism with it. It was a deal that broke a long-running dealmaking hiatus for Gilead, which had amassed billions in cash from its hepatitis C drug sales. 

    Although Kite gained approval for its CAR-T therapy Yescarta for the treatment of patients with relapsed or refractory large B-cell lymphoma (R/R LBCL) in 2017, initial sales of the drug were disappointing; for the full year of 2018, Yescarta generated only $264 million in sales. Having said that, Gilead reported earlier this year that Yescarta sales had increased by 29% to $1.5 billion in 2023 compared to 2022, primarily driven by increased demand in R/R LBCL. However, this improved figure is still below the up to $2 billion in peak sales predicted when the drug was approved. 

    Furthermore, in November 2023, Gilead announced that it would have to cut 7% of its staff at its Kite Pharma cell therapy unit. The layoffs came just as the FDA announced a safety review of CAR-T therapies after reports of secondary cancers following treatment with approved cell therapies. Kite’s Yescarta and Tecartus were among the six approved cell therapies on the FDA’s list of medicines that are subject to review, and the agency has since concluded that changes to the Boxed Warning are warranted to highlight the serious risk of T cell malignancies.

    Bayer and Monsanto: the worst deal in recent memory?

    Although related to agricultural biotech, Bayer’s $63 billion acquisition of Monsanto is often regarded as one of the worst deals in recent biopharma history. In fact, just over a year after the acquisition, The Wall Street Journal called it “one of the worst corporate deals in recent memory.”

    Although the buyout did boost the volume of Bayer’s agrichemical franchise, it also brought with it major headaches regarding lawsuits claiming that Monsanto’s polychlorinated biphenyls (PCBs) and its glyphosate-based weed killer Roundup caused cancer and other health problems. This has cost Monsanto and Bayer billions of dollars. 

    In one of the latest court cases, in December 2023, Monsanto was ordered to pay $857 million to seven people who said they were affected by chemicals leaking from light fittings at a U.S. school. This figure was then slashed by almost half by a judge in April 2024, who ruled that the company should only be liable to pay $438 million. A Monsanto spokesperson told Reuters at the time that the company was pleased with the decision but plans to appeal the jury’s findings, stating that the award is still too high and that the plaintiffs were not exposed to unsafe levels of PCBs.

    As of March 2024, Monsanto has reached settlement agreements in around 100,000 Roundup lawsuits and the company has now paid out approximately $11 billion. 

    M&A: a risky game of probabilities

    Of course, no company goes into a deal thinking that it will fail, but trying to predict whether an acquisition will lead to unrivaled success or fall short is difficult, particularly when so many deals involve assets that are still in development, carrying clinical and regulatory risk. Despite M&A being risky, the analysts at SVBLeerink found overall that deals with a transaction value of $1 billion to $5 billion had the highest success rate, compared with lower success rates for larger transactions. They also noted that deals within the oncology space had two times the success rate as deals in other therapeutic areas.

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