The life sciences industry has seen a steady pace of mergers and acquisitions (M&As) in recent years as pharmas and biotechs continue to expand their pipelines. For life science executives, positioning your company as an attractive acquisition target or merger partner requires strategic planning across multiple areas. From intellectual property (IP) protection to financial stability, here’s how to best position your biotech for a successful deal.
1. Develop a Comprehensive IP Strategy
Intellectual property is one of the most valuable assets a biotech can have. A strong patent portfolio and a clear freedom-to-operate analysis are great deal enablers, helping to reduce transaction risks for the buyer.
Potential acquirers will examine:
- The strength and breadth of your patents
- Whether your IP is protected in key global markets
- Any risks of infringement or pending litigation
2. Establish a Unique Value Proposition (USP)
Potential buyers look for biotechs that offer something unique – such as a first-in-class therapy, a differentiated drug delivery platform, or a novel mechanism of action. Your USP must be clearly defined to position your organization as an ideal M&A target.
Potential positioning strategies include:
- Defining the scientific differentiation of your asset
- Demonstrating a strong competitive edge in cost-effectiveness, safety, or efficacy
- Displaying compelling preclinical and clinical data that validates your approach
- Highlighting the unmet medical need your asset is addressing
3. Ensure a Strong Product-Market Fit
Beyond scientific innovation, acquirers assess whether your biotech fits within the current market landscape. This takes into account factors such as:
- Market Demand: Is there a strong commercial potential for your asset?
- Regulatory Pathway: Are there clear and attainable approval strategies?
- Payer & Reimbursement Landscape: Will insurers and healthcare systems be willing to cover your product?
A biotech developing a rare disease therapy, for instance, should highlight orphan drug designation benefits, strong patient advocacy and existing market sentiment. This provides confidence to potential acquirers about the likelihood of regulatory approval and the commercial success thereafter.
4. Strengthen Financial Position & Capital Structure
A biotech’s financial health significantly impacts its attractiveness in an M&A deal. Companies with sound financial management, clear revenue potential and well-structured funding are more likely to command higher valuations and better deal structures.
To optimize financial positioning:
- Maintain transparent and accurate financial records that showcase sustainability
- Optimize burn rate and capital efficiency to demonstrate responsible fiscal management
- Secure non-dilutive funding or partnerships to extend your runway and reduce reliance on equity financing
- Address any outstanding debts or financial obligations that might deter potential buyers
A biotech with a clear pathway to funding its operations – whether through revenue generation, grants, or milestone-based partnerships – will be deemed a more attractive proposition to acquirers.
5. Build Strategic Alliances & Partnerships
Strategic alliances are a strong signal of credibility and potential. Some M&A deals have been preceded by successful licensing agreements or strategic collaborations, giving the future buyer a chance to evaluate the performance of the asset and partnership in general before committing to a full acquisition.
One example of this was the 2023 acquisition of Provention Bio by Sanofi. It began with a co-promotion agreement for the former’s asset, TZIELD, laying the groundwork for what was ultimately a USD 2.9bn acquisition. A well-placed partnership can serve as a stepping stone to a future M&A deal.
6. Maintain a Strong Management Team
Leadership has an important role in acquisition decisions. Even if a company eventually integrates or restructures your biotech’s operations, they often value teams with deep industry expertise and execution capabilities. Retaining key personnel during and after an acquisition can be a major point of negotiation.
To Sum It Up…
Positioning your biotech for a merger or acquisition requires long-term strategic planning, strong intellectual property protection and financial discipline. By addressing these areas, biotechs can increase their valuation, reduce transaction risks and position themselves as a high-value acquisition target.