At the end of Jay Bradner’s interview for Fierce JPM Week, the Novartis innovation chief turned to the camera and implored small biotechs to get in touch to talk M&A or potential partnerships.
“Please reach out, please don't presume even though the market is showing a decline in large cap M&A,” Bradner, M.D., said. “There's never been a better time to do earlier stage partnering.”
And Bradner would know. He’s now the president of the Swiss pharma’s innovation engine, Novartis Institutes for BioMedical Research (NIBR), but he cut his teeth in biotech. He co-founded five biotechs before landing at Novartis in 2016.
“When you're halfway through an A round—even the big ones that are raised today—people start to get really pragmatic,” he said. “And being out in the public markets, exposed with preclinical programs, I think can create an appetite for real partnering.”
Bradner specifically noted companies involved in genome engineering, next-generation biologics, molecular glues and protein degradation.
“Through partnership with NIBR, I think there's quite a lot that we can do together. So please do reach out—and don't read through any lack of ambition or interest in partnering, especially at this important time,” said Bradner.
With that invitation, though, Bradner made clear earlier in the interview that Novartis is looking for real innovation, not next-generation therapies that redo existing medicines.
“We absolutely have a real hungry appetite to do deals, whether they're early-stage partnerships or partnerships to bring later-stage assets to patients around the world through the intergalactic capabilities of our global pharmaceutical company,” Bradner said. “I can assure you that the demand and appetite is there.”
The pharma giant does not want to follow its peers into oversaturated fields to create follow-on therapies. He attributes the presumed lack of interest in M&A to two themes that he saw play out over 2021.
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“The first is—I hate to say it—a lack of over jaw-dropping innovation,” according to Bradner. “Though there's never been a more exciting time to practice drug hunting, there's quite a lot of fast follower research out there on the outside, and we internally prioritize our resources for first-in-class—maybe almost to our own detriment.”
Bradner says that as pharmaceutical companies “scurry around to gobble up me-too assets,” deal demand is being driven by large investments in “thinly differentiated next-generation products.”
Novartis does not want to play in that sandbox, which leads to Bradner’s second point: The biotechs that are interesting are just too expensive at the moment. This is also driven by the rise in nontraditional investment that has provided plenty of early-stage capital without the need for Big Pharma backing.
The COVID-19 pandemic catapulted interest in biotech investing, leading large pharmaceutical companies to pull back on acquiring new medicines, especially from publicly traded companies, according to Bradner. To buy a public company—which in biotech is happening earlier and earlier in a startup company's life span—Novartis and its peers have to pay a premium to the stock price.
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All that said, Novartis is prepared to splurge: “There's a small number of assets that we're gonna go after, even though they're priced up.”
So what companies could Novartis be interested in? Bradner, of course, would not say, but he pointed to the pharma’s recent track record as an indication of where it may go. He specifically flagged the “unicorn” Zolgensma, which in 2019 became one of the first gene therapies on the market and treats spinal muscular atrophy.
Two other acquisitions can provide clues: optogenetics-focused Arctos Medical, which joined the similarly focused Vedere Bio last year under Novartis’ wing. Vedere was a $150 million bolt-on, while financial terms for Arctos were not disclosed.
Bradner is one of the pharma industry executives mourning the loss of the in-person J.P. Morgan Healthcare Conference event, where chance meetings can lead to the exact type of dealmaking he's looking for.
“Maybe I'm just an old-fashioned Midwesterner, but I really value face-to-face, shoulder-to-shoulder innovation,” he said.
So while virtual meetings and Zoom conferences are efficient, he can’t wait for the opportunity to get back on the ground. Even so, meetups are continuing to happen, thanks to Novartis’ partnering initiatives and the company’s venture fund.
“We've probably never been easier to find and to connect with, where travel or walking up the big hill to the hotel we occupy at JPM are no longer barriers,” Bradner said.