Biotech in Focus as Activists Circle Healthcare (Diligent Market Intelligence)
“Trust the science” or walk away is arguably the key to how activists view biotech companies as they size up targets. Fluctuating valuations, capital-intensive business models, product pipeline cliffhangers and long-tenured incumbents have kept biotechnology on the radar of activists seeking value in the US healthcare space. In the five-year period from 2021 to 2025, biotech has driven the lion’s share of activism in the wider healthcare sector, with six companies accounting for one-third of US targets in the space last year, Diligent Market Intelligence (DMI) data show. “You’ve got one or two lead pipeline candidates, and the number of key questions that are facing the board of directors may be comparatively limited: Do we go out and get more funding and move on to the next phase of testing, or do we close up shop and pursue a strategic transaction or other exit,” Leonard Wood, a partner at law firm Goodwin, told DMI.
Big Pharma’s patent cliffs and the need for fresh pipelines mean activists frequently push companies to run sales or partnership processes. With higher interest rates and the change in capital market conditions, buyers are also viewed by market participants as more disciplined in their approach. “They are looking for deals that are on a post-data basis. They’re waiting for these certain validation points to be hit, and that creates an opportunity for the larger biopharma to come in with an offer,” said Wood. “Activism comes into this mix to essentially accelerate strategic outcomes, basically pushing boards to run processes where it seems like the public markets aren’t recognizing values.” Wood added, “Activists may see low-hanging fruit where there are directors that have been serving for 10 or more years. The fact that a director has a long tenure does not, however, necessarily mean it’s in the best interests of the company or shareholders for that director to be replaced.”
Read the Diligent Market Intelligence article for more.