Feb 28, 2019 · 21m · a16z
What’s with All the Bio M&A in 2019?: A Quick Take
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this video, host Frank Chen and Andreessen Horowitz bio team experts Koki Hirasaki and Nate Chang analyze the massive surge in biotech M&A activity during early 2019. They unpack the macroeconomic drivers, platform acquisition strategies, partnership structures, and practical guidance for biotech startup founders navigating corporate deals.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 3.9 Guest teaching 4.7 Guest disagreement 1.0 The host pushing back 1.3
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 7:41 Nate reframes bio platform definition to include downstream manufacturing
In a completely non-confrontational interview, Nate offers the strongest analytical pivot by correcting the narrow definition of bio platforms to highlight physical manufacturing facilities as key platform assets.
Hardest push from the host ▶ 6:20 Frank challenges the team to define a bio platform for software audiencesFrank explicitly challenges the bio team to unpack abstract jargon by contrasting tech platforms like Linux and AWS with biological platforms.
Biggest teaching moment ▶ 0:59 Koki delivers comprehensive macroeconomic analysis of the 2019 M&A waveKoki delivers a detailed, data-backed breakdown of patent cliffs, $150B balance sheet cash reserves, and NASDAQ index valuation drops that cleanly explains the surge in M&A.
The host holds their own ▶ 6:20 Frank demonstrates tech ecosystem expertise to frame bio platform discussionFrank draws on his deep tech knowledge by referencing Linux, Win32 APIs, and AWS to create an insightful comparative framework for understanding bio platforms.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Legal Disclaimer and Presentation Disclosures | 3 | 4 | 1 | 1 | Frank introduces the episode by highlighting recent major acquisitions and asks why bio M&A is surging in early 2019. Koki responds with detailed industry statistics on patent cliffs, $150B cash reserves, and biotech index valuation drops. The dynamic is purely collaborative and educational. | |
| Buyer Mindset Shift and Data-Driven Deal Catalysts | 4 | 5 | 1 | 2 | Frank synthesizes Koki's macro points and asks Nate to explain what shifted in buyer psychology between mid-2018 and Q4. Nate and Koki detail how clinical data catalysts, drug launch controls, and platform moats drive acquisition decisions. Frank guides the conversation with targeted follow-up prompts. | |
| Defining Bio Platforms and Downstream Manufacturing Capabilities | 5 | 5 | 1 | 2 | Frank uses tech platform examples like Linux and AWS to prompt a clear definition of a bio platform. Koki contrasts discovery platforms with single assets, while Nate reframes bio platforms to include critical downstream manufacturing capabilities. Frank demonstrates cross-domain expertise by bridging tech and bio concepts. | |
| 2019 M&A Pace and Dollar Volume Snapshot | 4 | 5 | 1 | 1 | Frank asks for YTD M&A dollar volume comparisons, leading Nate to share that 2019 reached $94B by February compared to $123B in all of 2018. Frank then frames the strategic choice between late-stage mega-deals and early-stage venture bets. Nate outlines why pharma remains conservative on early-stage acquisitions. | |
| Partnership Structures, Option Agreements, and De-Risking Deals | 3 | 5 | 1 | 1 | Frank asks for elaboration on rent-versus-buy deal structures. Koki details option agreements, corporate venture arms, off-balance-sheet R&D, and Phase 2a proof-of-concept thresholds. Frank offers a brief inline summary clarifying binary bets on single assets. | |
| Guidance and Best Practices for Biotech Startup Founders | 4 | 4 | 1 | 1 | Frank shifts perspective to biotech founders seeking advice on approaching big pharma partners. Koki and Nate offer tactical guidance on identifying internal champions and articulating line-of-therapy positioning in treatment paradigms. The tone is highly constructive and advisory. | |
| Evolution of Standalone Models: US Rights vs. Ex-US Licensing | 4 | 5 | 1 | 1 | Frank introduces physical props and frames the classic dynamic between startup innovation and incumbent distribution strength. Koki explains how modern biotech companies retain US commercial rights while licensing ex-US rights to remain standalone entities. Frank wraps up the panel discussion smoothly. |
Statements from this episode (22)
Hirasaki: Major biopharma companies faced critical patent cliffs in 2018
“Roche lost exclusivity on Zolaire and Rituxin. Pfizer lost exclusivity on Lyrica. And GSK lost exclusivity on Advair.”
Hirasaki: Top 10 biopharma companies held $150B cash entering 2018
“And then on the topic of cash you know, the top 10 biopharma companies came into 2018 with about a hundred fifty billion dollars of cash on the balance sheet.”
Hirasaki: NASDAQ Biotechnology Index dropped 7% in 2018
“Between January and December of 2018 the NASDAQ biotechnology index went down seven percent.”
Chang: Pharma Acquirers Strengthened Position During Q4 2018 Market Downturn
“I think the buyer psyche changed too, specifically in the fourth quarter where across all sectors of the market saw a downturn in, in trading, but I think the buyer universe actually strengthened across pharma.”
Chang: Pharma Buyers Acquire Biotech Startups to Control Drug Launch Messaging
“So I think part of it also is buyers want to control the launch and control the commercial message.”
Chang: Gene therapy modalities create moats providing sustained cash flows
“If you actually think about gene therapy and new technologies, they are creating the moat. Meaning, for example, Avexis and SMA, they are the, probably the leading gene therapy program out there, and they want to continue building that franchise and have not o…”
Hirasaki: AveXis acquisition gave Novartis an AAV9 platform for gene delivery
“So the lead asset AXVS- one-on-one it, you know, certainly is going to be probably best in class for SMA, but it also gave Novartis an AAV nine vector platform that it could use to deliver other gene therapies.”
Hirasaki: Spark acquisition vaulted Roche forward in gene therapy platform technology
“And then with the Spark acquisition same thing BMS, I'm sorry Roche was a laggard in the space, and now suddenly leaped ahead with not only a marketed gene therapy, but this AAV platform that it could use for delivering other gene therapies.”
Chang: Spark Therapeutics' Philadelphia manufacturing plant was a key acquisition asset
“If you actually look at Spark, it's, it definitely has its anchor in gene therapy, but I think the thing that gets underappreciated in biopharma is downstream capabilities, and so they have a manufacturing facility on Market Street in Philadelphia, and I think…”
Chang: Bio platforms require end-to-end operational solutions, not just discovery
“The platform is not just an enabling technology to source and discover new drugs, but it's also the breadth of end to end solutions for modality.”
Chang: Novartis acquired AAA and Endocyte to secure radioisotope supply chains
“He made two acquisitions in the radio label target oncology space. So with AAA and Endocyte being the most recent acquisition they were able to secure that supply chain for that specific radio isotope.”
Nate Chang: Biotech M&A deals totaled $123 billion in 2018
“So in 2018, the industry announced one hundred twenty three billion of MNA transactions.”
Nate Chang: Biotech IPO exits will slow down in 2019
“I think we're gonna continue to see slightly slower pace in terms of IPO exits”
Nate Chang: Celgene set the standard for early-stage biotech licensing deals
“Celgene had a great playbook. They were very active in looking at earlier stage companies in terms of licensing, licensing with equity or also licensing with the option of buy. They had all those structures laid out for a lot of their early stage investments.”
Nate Chang: Most biotech acquisitions target late-stage or commercial companies
“I think most acquisitions that you see in, in biotech are late stage to marketed
stage companies, so they are, I think pharma companies are still very conservative in terms of making big bets on early stage platforms for acquisition.”
Hirasaki: Pharma Companies Wait for Phase 2a Data Before Doubling Down
“So, so, you know, it's typical to You know, see pharma companies wait for proof of concept, you know, phase IIa data that shows safety and some efficacy before doubling down.”
Hirasaki: Immuno-Oncology Acquisitions Occurred Before Human Clinical Data
“Now, there are some areas of clear exception. So, so very competitive hot areas like oncology, immuno-oncology over the last few years. You've seen this shift in acquisitions earlier on. In, in phase one, and actually even earlier just because it was so compet…”
Hirasaki: Roche Allows Acquired Companies Like Spark to Operate Semi-Autonomously
“Some big pharma companies will just tend to fully integrate the company whereas others will like Roche and Spark will allow the acquired companies to operate semi-autonomously.”
Hirasaki: Top Corporate Buyers Fly In Executive Committees for Priority Biotech Deals
“I can tell you that big companies that really want an asset, that really want to show commitment to that program, will fly, you know, a big portion of their executive committee out in final negotiations to say, hey we're committed.”
Biotech Boards Increasingly Retain U.S. Rights and Out-License Ex-U.S. Rights
“What we've seen really over the last 10 years is a lot of boards want the companies to be able to be standalone. And so, what you see are, in this fairly typical and actually Spark is a good example, where the company will keep commercial rights for the U.S. A…”
Pharma Demands Manufacturing Control Unless Assets Require Specialized Know-How
“If the asset is very critical to the business the pharma company will In all likelihood, want to control the manufacturing and distribution unless it is a very niche specialized product like gene therapies and AAVs, which require specialized know-how.”