Drugmakers will remain active in terms of M&A in 2021, in our view, though we recognize that biotech valuations are challenging and Covid-19 makes growth prospects hard to assess. Our investor survey suggests top takeout targets include Alexion and Blueprint Medicines, while Pfizer, Sanofi and Gilead are among the large drugmakers with deal appetite.
M&A may prevail despite challenging valuations
Pharma-biotech M&A should prevail in 2021, though the advent of Covid-19 has made the growth prospects of potential targets harder to assess, while valuations are challenging with 2020 deals fetching EV-to-2025 sales multiples of as great as 9x. We believe bolt-on and in-licensing will remain favored over transformative M&A, with value creation for shareholders inherent to large drugmakers' unchanged business-development strategies.
Despite the pandemic, the number of acquisitions with a price tag of $1 billion or more announced or completed in 2020 appears broadly on par with 2019, when average deal values were boosted by the Bristol Myers-Celgene and AbbVie-Allergan deals. In-licensing activity has already exceeded 2019's total, based on BI-compiled data, partly aided by collaborative efforts vs. Covid-19.
Investors see Alexion, Blueprint as top Biotech M&A targets
Among U.S. and EU large drugmakers, Pfizer, Sanofi, Gilead, Biogen and Vertex are likely to participate in M&A in 2021. Pfizer and Sanofi have cash to burn after recent spinoffs and divestitures. Investors responding to our survey believe Trillium, Mirati and Blueprint Medicines could be top targets for Pfizer, while Alexion and Biomarin are favored for Sanofi. With $20 billion in firepower and Jyseleca's delay in the U.S., Gilead could continue its M&A spree, albeit at a slower pace vs. 2020. Investors cite Blueprint as a potential target, in alignment with its prior cancer deals. Biogen may need to lean on acquisitions too, especially if its Alzheimer's drug fails to get approved, with Neurocrine believed to be a good fit. Our respondents picked Global Blood Therapeutics as a possible option to shore up Vertex's pipeline.
