Bristol Myers Squibb is set to acquire Mirate Therapeutics for $4.8 billion. Shareholders will also be entitled to an additional payment of $12 per share, potentially worth another $1 billion, if the experimental cancer drug meets certain milestones. The acquisition price represents a 52% premium to the 30-day average price of Mirate shares.

Pharmaceutical companies, including Bristol Myers Squibb, have been actively pursuing strategic acquisitions over the past year to offset the challenges caused by the loss of exclusivity for their best-selling drugs. Last year, for example, Bristol Myers Squibb acquired Turning Point Therapeutics for $4.1 billion in cash, giving it access to a promising cancer drug.

Through this acquisition, Bristol Myers Squibb will acquire ownership of Krazati, a drug approved by the Food and Drug Administration (FDA) for non-small cell lung cancer (NSCLC). In the first half of 2023 alone, the drug achieved sales of $19.7 million and secured a significant market share representing more than 40% of new treatment initiations.

The pharmaceutical and biotechnology sector has seen a significant uptick in deals this year, with a staggering $85 billion spent on acquisitions in the first five months of this year. This surge in M&A activity comes as companies look to replenish their drug portfolios in the wake of impending patent expiries. By comparison, the same period in 2022 saw deals worth only US$35.6 billion, while 2021 saw US$49.1 billion, according to investment bank Stifel. The increased M&A activity is primarily driven by the significant cash reserves that big pharma companies accumulated during the COVID-19 pandemic and investor concerns about future growth prospects.

Given the factors described above, increased M&A activity in the pharmaceutical sector can be expected to continue. Well-capitalized strategic buyers will continue to seek transactions more aggressively and opportunistically, although the broader market environment remains uncertain.