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This Week in Apps: Apple-Epic antitrust battle resumes, Apple sued over tracking, Google’s new rules for kids’ apps

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy….

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Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

Global app spending reached $65 billion in the first half of 2022, up only slightly from the $64.4 billion during the same period in 2021, as hypergrowth fueled by the pandemic has slowed down. But overall, the app economy is continuing to grow, having produced a record number of downloads and consumer spending across both the iOS and Google Play stores combined in 2021, according to the latest year-end reports. Global spending across iOS and Google Play last year was $133 billion, and consumers downloaded 143.6 billion apps.

This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and much more.

Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters

Top Stories

The Apple-Epic antitrust battle resumes

Image Credits: Andrew Harrer/Bloomberg / Getty Images

This week, Apple’s antitrust battle against Fortnite maker Epic Games returned to the courtroom after both sides appealed last year’s ruling in a potentially precedent-setting case over Apple’s alleged anti-competitive behavior. Last year, a U.S. District Court judge had largely favored Apple by ruling the tech giant was not acting as a monopolist with regard to its App Store practices. Epic Games was unhappy with that decision, of course, as it had wanted the court to force Apple to support third-party payments and/or third-party app stores which would have allowed Fortnite to maximize its revenues. Meanwhile, Apple didn’t want to agree to the court’s order that said it would have to permit apps that provide links to alternative payments.

Oral arguments kicked off this week at the U.S. Court of Appeal for the Ninth Circuit, in what will be an even higher-stakes trial for determining Apple’s future in the app market and its ability to set its own rules around payments and commissions. This time around, the U.S. Department of Justice and the State of California were granted time to present their own arguments to help explain the proper legal framework for evaluating the antitrust claims against Apple. Though both were technically being neutral, they expressed concerns over how the lower court had too narrowly interpreted parts of U.S. antitrust law, the Sherman Act, among other issues. The DoJ, notably, is in the early stages of filing its own antitrust suit against Apple, so how the appeals court rules on this matter could ultimately shape its own ability to effectively prosecute Apple further down the road.

In the opening arguments, the lawyer for the DoJ, Nickolai Levin, began by stating the district court erred in saying the Apple Developer Program Licensing Agreement (DPLA) is not concerted action. He explained that Section 1 of the Sherman Act prohibits contracts that restrain trade, which would include the licensing contract Apple is enforcing here. While the U.S. government wasn’t prepared to call out Apple’s contract as either reasonable or unreasonable, it wanted the court to understand that it was not above Section 1 scrutiny.

One of the judges pushed back against this claim, asking if Epic had actually agreed to Apple’s Developer Program Licensing Agreement with the intention of “going forward to restrain trade?” He suggested Epic signed in order to get into a market, actually. The lawyer responded that’s true, but the terms of the contract are binding, with one party forcing terms on another — so excluding contracts from Section 1 scrutiny would allow anti-competitive terms to go unpunished.

The court also asked for information on how the government believes the pro-competitive and anti-competitive effects should be weighed against one another to make a judgment, as there was no specific formula to make such a calculation. Levin explained that this boiled down to whether or not the effect of the restraint was to suppress or restrict competition, and cited legal precedent to guide the judges’ understanding.

The U.S. government also believed the lower court misapplied the rule of reason and erred in how it analyzed monopoly power. For example, Apple was able to set prices and keep them there regardless of what its competition did. “And, as Microsoft explained, that’s something only a monopolist can do,” Levin noted.

Of course, Apple’s legal team came well-prepared too. And, as one judge discovered, Apple’s lawyer, Mark Perry, who had been a longtime partner at Gibson, Dunn & Crutcher, was now at a new firm, Weil. But that didn’t mean Apple had changed firms — it just meant it now had two. Or as Perry put it, “we are one big happy family.”

Perry’s arguments re-iterated points from the lower court’s decision, particularly noting that the iPhone was designed to be more secure than the Mac, which is why there’s no “sideloading,” and instead puts apps through human review. And it’s a requirement that’s hard-coded into the iOS, the lawyer explained. “That’s a technical requirement. Apple then reflected that in the DPLA,” he said.

The lawyer also told the court Apple does allow developers to communicate with their users, and there are “no restrictions on communications.” Expect, of course, the restrictions he mentioned in his very next breath: that “Apple does not allow links and buttons because we can’t review them. We can’t track them. We can’t protect users from malware, fraud, porn, hackers, and all those other things. It would be a breach in the wall, an opening that bad actors could exploit. And it’s not well-thought-out.”

The case will likely continue for six months or more, so don’t expect any near-term resolution. And, if neither party is satisfied, it will likely be appealed to the Supreme Court, delaying the decision even longer.

Apple faces a potential class action lawsuit over data collection practices

App Store icon on iPhone screen

Image Credits: TechCrunch

While the Epic-Apple antitrust battle is one of the most significant lawsuits facing Apple right now, the company was also sued this week over another matter.

Another lawsuit is taking on Apple’s data collection practices in the wake of a recent report by independent researchers who found Apple was continuing to track consumers in its mobile apps, even when they had explicitly configured their iPhone privacy settings to turn tracking off. The proposed class action lawsuit, filed by plaintiff Elliot Libman on behalf of himself and other impacted consumers, alleges that Apple’s privacy assurances are in violation of the California Invasion of Privacy Act.

As reported last week by Gizmodo, app developers and independent researchers Tommy Mysk and Talal Haj Bakry discovered that Apple was still collecting data about its users across a number of first-party apps even when users had turned off an iPhone Analytics setting that promises to “disable the sharing of Device Analytics altogether.” In their tests, the researchers examined Apple’s own apps including the App Store, Apple Music, Apple TV, Books, and Stocks, and found that disabling this setting as well as other privacy controls didn’t impact Apple’s data collection.

The plaintiff is looking to have the lawsuit certified as a class action and is seeking compensatory, statutory, and punitive damages in addition to other equitable monetary relief.

More on TechCrunch here

Google Play revamps policies around kids’ apps

Google Play rolled out a series of changes to its programs and policies around apps designed for children. The company described the update as an expansion of its previously launched “Teacher Approved” program, which includes a review process where teachers and experts vetted apps not just for safety and security elements, but for educational quality and other factors. The newly revamped policies will now impact how apps qualify for this program, which allows apps to gain entry to the Play Store’s “Kids” tab.

Before, Google Play ran two (sometimes overlapping) programs around apps aimed at kids.

App developers were required to participate in Google’s “Designed for Families” program if their app was aimed at children, and could optionally choose to participate in the program if their app targeted both kids and older users. The Designed for Families program included a number of requirements around the app’s content, its functionality, use of ads, data practices, use of warning labels, feature set, underlying technology components, and more. Any apps in this program were also eligible to be rated for the Teacher Approved program, which had stricter guidelines, but entry was not guaranteed.

Now, the additional policy requirements for the Designed for Families program are being rolled into the Play Store’s broader Families Policy. This simplifies the rules for developers building apps for kids and opens up a broader selection of apps to be eligible to be rated for the stricter Teacher Approved program, as well.

The changes aren’t just about serving developers or consumers — they also help Google to meet stricter regulations being considered, drafted, and enacted worldwide around how software is permitted to handle kids’ data — such as the EU’s GDPR and the U.K.’s Age Appropriate Design Code. Failure to meet these requirements can result in significant penalties, as Meta recently learned when it was fined roughly $400 million for how it treated children’s data on Instagram, for instance.

More on TechCrunch here

Weekly News

Platforms: Apple

Apple Emergency SOS displayed on smartphone screen

Image Credits: Apple

  • Apple launched Emergency SOS via Satellite, the iPhone 14 and 14 Pro’s new feature that uses satellite to route calls in the event of an emergency when cellular access isn’t available. The feature is first becoming available in the U.S. and Canada, and will expand to France, Germany, Ireland, and the U.K. next month.
  • Apple released iOS 16.2 beta 3, iPadOS 16.2 beta 3 tvOS 16.2, watchOS 9.2 beta 3, and macOS Ventura 13.1 beta 3.
  • Apple’s iOS 16.2 beta added new watchlist sorting options for the Stocks app, which are reflected in an updated Home Screen widget. Now, users will be able to sort manually, by price change, percent change, market cap, symbol, or name.
  • The newest beta also introduced new toggles for the Always On Display that let users turn off the Wallpaper and Notifications when the Always On Display is enabled.
  • A new report by The Information seemingly refutes an earlier Bloomberg report which claimed Apple was targeting to 3x the revenue from its ad business. Instead, the new report claims Apple isn’t planning to introduce more ads on iPhone and is satisfied with the current revenue growth. It notes also that Apple killed a plan in 2018 to run ads in Spotlight Search on iPhone.
  • Craig Federighi reportedly responded to a customer’s email complaint about how Apple’s software beta program isn’t effective in listening to user feedback, saying “I agree that the current approach isn’t giving many in the community what they’d like in terms of interaction and influence,” and “We haven’t yet figured out how to achieve that in a practical and constructive way. We’ll keep thinking.”

Platforms: Google

  • Google wrapped up its Android Dev Summit on Monday, Nov. 14, with a track that included nearly 20 talks focused on developer features and guidance around Android 13, like how to migrate apps to Android 13, how to build user trust with privacy-respecting workflows, how to improve a social app’s quality with the Android camera and much more. This was the last of three tracks for this year’s Summit, following the two prior tracks: Modern Android Development and Form Factors. The keynote, recaps and full sessions playlists can be found on YouTube.
  • Google released its Android Health Connect app into public beta. The new app helps to centralize access to health and fitness data from various eligible apps, starting with a launch group of 10, including MyFitnessPal, Oura and Peloton.
  • Google Play added support for UPI (Unified Payments Interface) subscriptions in India. UPI is the most popular mobile payments technology for p2p and merchants in the region but had not yet been available as a payment option for subscriptions on the Play Store until now. It has been available since 2019 for app sales and in-app purchases, however.
  • A new Google Play test that involved a discovery feature for finding new apps and games with ongoing events and updates was mistaken for a new ad unit by 9to5Google. The test appears to actually involve the merchandising units previously called LiveOps, now rebranded to “Promotional Content,” which Google had recently said would begin to appear more deeply integrated in the Play Store going forward.

E-commerce/Marketplaces

  • YouTube launched Shorts shopping features that let select creators tag items in their videos to diversify their revenue streams. The feature is being piloted with U.S. creators, while viewers in the U.S., India, Brazil, Canada and Australia can view and interact with these tags for the time being. The shopping functionality will expand to more creators next year. The move follows last week’s launch of a TikTok Shop test in the U.S. YouTube is also testing an affiliate program in the U.S. where creators could earn commissions when viewers purchase recommended products.
  • Shopify’s Shop app is testing a universal search feature with some users. The feature offers a “Search for anything” box that lets consumers search across their purchases, merchants matching the search term and products sold by Shopify merchants.
  • Mobile marketplace OfferUp is laying off about 19% of its staff, noting it had grown headcount at a rate that had outpaced revenue growth over the past few years. The company had just under 500 employees on LinkedIn at the time of the announcement.
  • 3D scanning app NetVirta announced a partnership with Victoria’s Secret that will allow the retailer to use its tech to help customers find the perfect-fitting bra.

Augmented Reality

  • Just in time for the COP27 climate conference, Meta released a climate card game using Meta AR Filters, built by creator Okhule Fallet, which displays question prompts around key climate issues designed to get people talking.
  • Snapchat added a set of new features to celebrate the upcoming FIFA World Cup, including new AR experiences that let fans virtually try on official team jerseys and show their team pride.

Snapchat world cup fans with painted faces

Image Credits: Snap

Social

  • Instagram’s Marketing API has been updated to allow for ads on the Instagram Explore home page, through the existing Marketing API endpoint where a new INSTAGRAM_EXPLORE_HOME placement option has been added. Instagram recently announced its plans to increase its ad load, as Meta fights a revenue decline. This included the addition of ads on the Explore home page and in the profile feed.
  • Twitter appointed an “acting” data protection officer (DPO) after a series of resignations of senior Twitter privacy and security staffers late last week which included the abrupt departures of Twitter’s CISO Lea Kissner; chief privacy officer (and DPO) Damien Kieran; and chief compliance officer Marianne Fogarty. Now, an existing employee, Renato Monteiro, will serve as Twitter’s “acting DPO.”
  • In addition to layoffs and voluntary departures, Twitter’s new owner Elon Musk has also now fired around 20 employees who criticized him in the company Slack.
  • When he’s not destroying Twitter’s workforce (or morale) or asking remaining workers to commit to “hardcore” hours, the company seemingly began work on a long abandoned project to encrypt Twitter DMs, code in the Android app revealed.
  • TikTok is said to be approaching laid-off Twitter and Meta engineers to join its Silicon Valley office. The video app aims to roughly double its staff in Mountain View, Calif., to about 2,000, The Information reported.
  • Social livestreaming app Yubo, popular with Gen Z, is expanding its audio moderation technology to the U.K., Australia and Canada. The tech works by recording and transcribing 10-second snippets of audio in livestreams of 10 or more people. The text is then scanned using AI to detect problematic content. If found, Yubo sends users alerts to warn them. Text that contains policy violations are also flagged for human review.

Messaging

  • WhatsApp’s head of India Abhijit Bose and Meta’s public policy head for the country Rajiv Aggarwal have both left the company, just days after Meta’s India chief Ajit Mohan quit to join Snap. The departures are not related to Meta’s layoffs of 11,000 — the execs left of their own accord.
  • WhatsApp introduced new Yellow Pages-like features to help its users find businesses from within the instant messaging app. This includes “Directory,” a feature launching in Brazil to help users discover small businesses nearby, as well as another feature, “Business Search,” for finding larger businesses by category. This latter feature launches select markets, including Brazil, Colombia, Indonesia, Mexico and the U.K.

You can now search for businesses on WhatsApp

You can now search for businesses on WhatsApp

Streaming & Entertainment

  • Apple is launching another original podcast, “After the Whistle” from “Ted Lasso” co-creator Brendan Hunt and NBC Sports host Rebecca Lowe. The show, launching Nov. 17, will see the hosts reacting to all the World Cup action and will be featured within Apple News in the U.S. and in Apple Podcasts in 103 markets.
  • Netflix added a new feature that lets subscribers remotely log out of devices they don’t recognize or don’t want to be logged into — like those where friends, family members or an ex is mooching off your account. The feature could push more freeloaders into paid accounts, the company likely hopes.
  • YouTube addressed one of YouTube Shorts creators’ chief complaints: to date, the music and sounds added to videos could only be 15 seconds in length, even though Shorts themselves can be as long as 60 seconds. Thanks to revised licensing deals, YouTube now says the majority of music on Shorts will be available in durations of up to 60 seconds. In addition, creators can “remix,” or sample, up to 60 seconds of sounds from other videos, instead of only 15 seconds, as before.
  • Spotify expanded its video podcasting capabilities to Anchor creators in more than 180 markets worldwide, after initial launches in select markets, including the U.S. and parts of Europe. The company is working to offer video in competition with YouTube, but won’t share metrics about video podcasts’ adoption to date.

Gaming

Image Credits: Newzoo

  • For the first time since it began reporting, Newzoo is expecting games market revenues to decline year-over-year. The firm estimates the games market will generate $184.4 billion in 2022, down -4.3% year-over-year — a corrective year after two years of lockdown-fueled growth. The PC segment is expected to generate $40.5 billion in 2022, up +0.5% YoY, but mobile and console will decline. The mobile games market is forecast to generate $92.2 billion in 2022, down -6.4% YoY, while console gaming will drop -4.2% YoY to $51.8 billion.
  • Mobile gaming accessory maker Backbone launched an Android version of its gaming controller which swaps in USB-C in place of Lightning connectivity.

Dating

  • Match-owned dating app Hinge added a new feature that caters to those looking for non-monogamy. The app will add an option for adding a “Relationship Type” to the user’s profile, including “monogamous,” “non-monogamous” or “figuring out my relationship type.” Historically, Hinge had catered to those seeking a “serious” relationship, as opposed to casual hookups on Tinder, but it hadn’t well-served those with different ideas of what serious relationships look like.

Travel & Transportation

  • Indian gig workers, like Uber drivers and those who work for apps like Ola, Zomato and Swiggy, are trying to reverse engineer how the apps’ algorithms and technologies work, reports Rest of World. They then share their findings in Telegram groups to help each other out with issues around why they sometimes don’t get orders, how much they’re being paid, how they’re being matched to orders, and more.

Security & Privacy

  • A Reuters investigation discovered thousands of iOS and Android apps were using technology from Russian company Pushwoosh for their notifications, including apps by the CDC, U.S. Army, NRA, and Unilever.
  • Google paid $70,000 to Hungary-based security researcher David Schütz, who had privately reported a bug that had allowed anyone to unlock Google Pixel phones without knowing the user’s passcode. However, the exploit required physical access to the device to work. Google took five months to fix the bug, Schütz said.
  • DuckDuckGo announced App Tracking Protection is open for all Android users, in beta. The feature helps to block 3rd-party trackers in apps, even when you’re not using them.

Image Credits: DuckDuckGo

Funding and M&A

Dubai-based investment app baraka raised $20 million in Series A funding led by Valar Ventures. The app offers commission-free investments in U.S. stocks and ETFs.

Mobile chat app Geneva raised $21 million in a Series A extension led by cryptofund Multicoin Capital. The app, which focuses on having users join interest groups, is popular with Gen Z and creators who use it to talk to fans.

Note-taking app Evernote agreed to be acquired by Milan-based app developer Bending Spoons, for an undisclosed sum. The deal is expected to close in early 2023. Evernote had raised $290 million to date.

Downloads

Vimcal

Vimcal app

Image Credits: Vimcal

The Y Combinator-backed company Vimcal launched the iOS counterpart to its existing web and desktop calendar applications, available for Windows, Mac and Chrome. Similar to apps like Fantastical, users can type in meeting information in natural language, like “lunch with Lisa at 1 pm tomorrow.” It also offers a more customizable solution for finding timeslots for meetings, compared with existing players like Calendly.  The iOS app, in beta since this April, has also optimized the software’s keyboard shortcuts for the touchscreen interface and adds other features. You can read a full review from TechCrunch’s Ivan Mehta here.

 

This Week in Apps: Apple-Epic antitrust battle resumes, Apple sued over tracking, Google’s new rules for kids’ apps by Sarah Perez originally published on TechCrunch

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EY Eyes Comeback for Biopharma M&A

EY noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021. The $88 billion accounted for most of the…

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A recent trickle of mergers and acquisitions (M&A) announcements in the billion-dollar-and-up range suggests that biopharma may be ready to resume dealmaking this year—although the value and number of deals isn’t expected to return to the highs seen just before the pandemic.

2022 ended with a handful of 10- and 11-figure M&A deals, led by Amgen’s $27.8 billion buyout of Horizon Therapeutics, announced December 13. The dealmaking continued into January with three buyouts announced on the first day of the recent J.P. Morgan Healthcare Conference: AstraZeneca agreed to acquire CinCor Pharma for up to $1.8 billion, while Chiesi Farmaceutici agreed to shell out up to $1.48 billion cash for Amryt, and Ipsen Group said it will purchase Albireo Pharma for $952 million-plus.

Biopharmas generated about $88 billion in M&A deals in 2022, down 15% from $104 billion in 2021. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. The number of biopharma deals fell 17%, to 75 deals from 90. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine. [EY]
EY—the professional services firm originally known as Ernst & Young—recently noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021 [See Chart]. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. That $135 billion figure is less than half the record-high $313 billion recorded in 2019, including $261 billion in 70 biopharma deals.

The number of biopharma deals fell 17% to 75 deals from 90. EY’s numbers include only deals greater than $100 million. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine.

We expect this to be a more active year as the sentiment starts to normalize a little bit,” Subin Baral, EY Global Life Sciences Deals Leader, told GEN Edge.

Baral is not alone in foreseeing a comeback for biopharma M&A.

John Newman, PhD, an analyst with Canaccord Genuity, predicted last week in a research note that biopharma companies will pursue a growing number of smaller cash deals in the range of $1 billion to $10 billion this year. He said rising interest rates are discouraging companies from taking on larger blockbuster deals that require buyers to take on larger sums of debt.

“We look for narrowing credit spreads and lower interest rates to encourage larger M&A ($50 billion and more) deals. We do not anticipate many $50B+ deals that could move the XBI +5%,” Newman said. (XBI is the SPDR S&P Biotech Electronic Transfer Fund, one of several large ETFs whose fluctuations reflect investor enthusiasm for biopharma stock.)

Newman added: “We continue to expect a biotech swell in 2023 that may become an M&A wave if credit conditions improve.”

Foreseeing larger deals than Newman and Canaccord Genuity is PwC, which in a commentary this month predicted: “Biotech deals in the $5–15 billion range will be prevalent and will require a different set of strategies and market-leading capabilities across the M&A cycle.”

Those capabilities include leadership within a specific therapeutic category, for which companies will have to buy and sell assets: “Prepared management teams that divest businesses that are subscale while doubling down on areas where leadership position and the right to win is tangible, may be positioned to deliver superior returns,” Glenn Hunzinger, PwC’s U.S. Pharma & Life Science Leader, and colleagues asserted.

The Right deals

Rising interest and narrowing credit partially explain the drop-off in deals during 2022, EY’s Baral said. Another reason was sellers adjusting to the drop in deal valuations that resulted from the decline of the markets which started late in 2021.

Subin Baral, EY Global Life Sciences Deals Leader

“It took a little bit longer to realize the reality of the market conditions on the seller side. But on the buyer side, the deals that they were looking at were not just simply a valuation issue. They were looking at the quality of the assets. And you can see that the quality deals—the right deals, as we call them—are still getting done,” Baral said.

The right deals, according to Baral, are those in which buyers have found takeover targets with a strong, credible management team, solid clinical data, and a clear therapeutic focus.

“Rare disease and oncology assets are still dominating the deal making, particularly oncology because your addressable market continues to grow,” Baral said. “Unfortunately, what that means is the patient population is growing too, so there’s this increased unmet need for that portfolio of assets.”

Several of 2022’s largest M&A deals fit into that “right” category, Baral said—including Amgen-Horizon, Pfizer’s $11.6-billion purchase of Biohaven Pharmaceuticals and the $6.7-billion purchase of Arena Pharmaceuticals (completed in March 2022); and Bristol-Myers Squibb’s $4.1-billion buyout of Turning Point Therapeutics.

“Quality companies are still getting funded one way or the other. So, while the valuation dropped, people were all expecting a flurry of deals because they are still companies with a shorter runway of cash that will be running to do deals. But that really didn’t happen from a buyer perspective,” Baral said. “The market moved a little bit from what was a seller’s market for a long time, to what we would like to think of as the pendulum swinging towards a buyers’ market.”

Most biopharma M&A deals, he said, will be “bolt-on” acquisitions in which a buyer aims to fill a gap in its clinical pipeline or portfolio of marketed drugs through purchases that account for less than 25% of a buyer’s market capitalization.

Baral noted that a growing number of biopharma buyers are acquiring companies with which they have partnered for several years on drug discovery and/or development collaborations. Pfizer acquired BioHaven six months after agreeing to pay the company up to $1.24 billion to commercialize rimegepant outside the U.S., where the migraine drug is marketed as Nurtec® ODT.

“There were already some kind of relationships there before these deals actually happened. But that also gives an indication that there are some insights to these targets ahead of time for these companies to feel increasingly comfortable, and pay the valuation that they’re paying for them,” Baral said.

$1.4 Trillion available

Baral sees several reasons for increased M&A activity in 2023. First, the 25 biopharma giants analyzed by EY had $1.427 trillion available as of November 30, 2022, for M&A in “firepower”—which EY defines as a company’s capacity to carry out M&A deals based on the strength of its balance sheet, specifically the amount of capital available for M&A deals from sources that include cash and equivalents, existing debt, and market cap.

That firepower is up 11% from 2021, and surpasses the previous record of $1.22 trillion in 2014, the first year that EY measured the available M&A capital of large biopharmas.

Unlike recent years, Baral said, biopharma giants are more likely to deploy that capital on M&A this year to close the “growth gap” expected to occur over the next five years as numerous blockbuster drugs lose patent exclusivity and face new competition from lower-cost generic drugs and biosimilars.

“There is not enough R&D in their pipeline to replenish a lot of their revenue. And this growth gap is coming between 2024 and 2026. So, they don’t have a long runway to watch and stay on the sidelines,” Baral said.

This explains buyers’ interest in replenishing pipelines with new and innovative treatments from smaller biopharmas, he continued. Many smaller biopharmas are open to being acquired because declining valuations and limited cash runways have increased investor pressure on them to exit via M&A. The decline of the capital markets has touched off dramatic slowdowns in two avenues through which biopharmas have gone public in recent years—initial public offerings (IPOs) and special purpose acquisition companies (SPACs).

EY recorded just 17 IPOs being priced in the U.S. and Europe, down 89% from 158 a year earlier. The largest IPO of 2022 was Prime Medicine’s initial offering, which raised $180.3 million in net proceeds for the developer of a “search and replace” gene editing platform.

Another 12 biopharmas agreed to SPAC mergers with blank-check companies, according to EY, with the largest announced transaction (yet to close at deadline) being the planned $899 million merger of cancer drug developer Apollomics with Maxpro Capital Acquisition.

“For the smaller players, the target biotech companies, their alternate source of access to capital pathways such as IPOs and SPACs is shutting down on them. So how would the biotech companies continue to fund themselves? Those with quality assets are still getting funded through venture capital or other forms of capital,” Baral said. “But in general, there is not a lot of appetite for the biotech that is taking that risk.

Figures from EY show a 37% year-to-year decline in the total value of U.S. and European VC deals, to $16.88 billion in 2022 from $26.62 billion in 2021. Late-stage financing rounds accounted for just 31% of last year’s VC deals, down from 34% in 2021 and 58% in 2012. The number of VC deals in the U.S. and Europe fell 18%, to 761 last year from 930 in 2021.

The decline in VC financing helps explain why many smaller biopharmas are operating with cash “runways” of less than 12 months. “Depending on the robustness of their data, their therapeutic area, and their management, there will be a natural attrition. Some of these companies will just have to wind down,” Baral added.

M&A headwinds

Baral also acknowledged some headwinds that are likely to dampen the pace of M&A activity. In addition to rising interest rates and inflation increasing the cost of capital, valuations remain high for the most sought-after drugs, platforms, and other assets—a result of growing and continuing innovation.

Another headwind is growing regulatory scrutiny of the largest deals. Illumina’s $8 billion purchase of cancer blood test developer Grail has faced more than two years of challenges from the U.S. Federal Trade Commission and especially the European Commission—while Congress acted last year to begin curbing the price of prescription drugs and insulin through the “Inflation Reduction Act.”

Those headwinds may prompt many companies to place greater strategic priority on collaborations and partnerships instead of M&A, Baral predicted, since they offer buyers early access to newer technologies before deciding whether to invest more capital through a merger or acquisition.

“Early-stage collaboration, early minority-stake investment becomes increasingly important, and it has been a cornerstone for early access to these technologies for the industry for a long, long time, and that is not changing any time soon,” Baral said. “On the other hand, even on the therapeutic area side, early-stage development is still expensive to do in-house for the large biopharma companies because of their cost structure.

“So, it is efficient cost-wise and speed-wise to buy these assets when they reach a certain point, which is probably at Phase II onward, and then you can pull the trigger on acquisitions if needed,” he added.

The post EY Eyes Comeback for Biopharma M&A appeared first on GEN - Genetic Engineering and Biotechnology News.

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Pfizer’s Albert Bourla spells out ‘transition year’ for Covid products, with sales expected to reach a low point

On the heels of a record sales year, Pfizer is bracing for impact as it expects Covid-19 revenue to bottom out in 2023.
That’s due to lower compliance…

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On the heels of a record sales year, Pfizer is bracing for impact as it expects Covid-19 revenue to bottom out in 2023.

That’s due to lower compliance with vaccine recommendations, fewer primary vaccines being administered, and a “significant” government supply that’s expected to last throughout early this year, execs said Tuesday on the company’s Q4 earnings call.

CEO Albert Bourla anticipates $13.5 billion in Comirnaty sales this year, down 64% from 2022, and just $8 billion in Paxlovid revenue, down 58% from 2022.

“We expect 2023 to be a transition year in the US,” he said on the call, adding that the company sold more vaccine and treatment doses this year than were actually used. “This resulted in a government inventory build that we expect to be absorbed sometime in 2023 — probably the second half of the year. Around that time, we expect to start selling Comirnaty through commercial channels at commercial prices.”

Just 15.5% of eligible Americans have received bivalent booster doses, compared to 69.2% who completed their primary series, according to the CDC’s latest data. Last week, the FDA’s vaccines advisory committee voted unanimously in favor of “harmonizing” Covid vaccine compositions, meaning all new vaccine recipients would receive a bivalent shot, regardless of whether they’ve received the primary series.

Even so, only 31% of people in the US received a Covid vaccine this year, and Pfizer expects that number to dip to about 24% in 2023.

David Denton

Bourla’s expecting a similar slump in Paxlovid sales, due to existing unused government supply. According to data from ASPR updated last week, states have about 4 million unused Paxlovid courses.

The antiviral significantly underperformed this year, missing Bourla’s prior full-year projections by just over $3 billion. Comirnaty seemed to pick up the slack, however, raking in roughly $37.8 billion in global sales, or about $3.8 billion more than Bourla predicted at the end of the third quarter.

“While patient demand for our Covid products is expected to remain strong throughout 2023, much of that demand is expected to be fulfilled by products that were delivered to governments in 2022 and recorded as revenues last year,” CFO David Denton said on the call.

Angela Hwang

Commercial pricing for both Comirnaty and Paxlovid will likely kick in around the second half of this year, according to Bourla. While the pharma giant previously said it expects to charge between $110 and $130 for the BioNTech-partnered shot (almost quadrupling the price), chief commercial officer Angela Hwang said the team is still “preparing what those pricing scenarios could look like” for Paxlovid and will “share more at the right time.”

The Pfizer team is expecting Covid sales to pick back up in the next couple years — and if all goes according to plan, a successful combination shot for flu and Covid-19 would “bring the percentage of Americans receiving the Covid-19 vaccine closer to the portion of people getting flu shots, which is currently about 50%,” Bourla said. The company launched a Phase I study for an mRNA-based combo vaccine back in November.

Lower projected Covid sales led Bourla to set his full-year sales expectations in 2023 at $67 billion to $71 billion, down roughly 30% from 2022, which let down some analysts.

“PFE guidance for 2023 provided with 4Q22 results was disappointing despite the company talking down financial prospects in recent weeks,” SVB Securities analysts wrote in a note to investors on Tuesday.

However, when it comes to R&D investment, Bourla’s keeping his foot on the gas. As the CEO said back in November, “It’s all about what’s next.”

That’s why he’s earmarking around $12.4 billion to $13.4 billion for R&D this year, up nearly 9% from last year. It’s all part of his effort to make up for an expected $17 billion loss due to patent expiries between 2025 and 2030.

Last quarter, he spelled out ambitious plans to bring 19 new products or indications to market over the next year and a half. The chief executive highlighted a few of those programs on Tuesday, including potential combo shots for flu, Covid-19 and RSV, an oral GLP-1 candidate for diabetes and obesity, and potential vaccines for Lyme disease and shingles.

Other programs, however, didn’t make the cut. Pfizer also disclosed on Tuesday that it cut eight programs, including recifercept, an achondroplasia drug that was the centerpiece of Pfizer’s Therachon buyout in 2019, and two Paxlovid indications that failed their respective Phase III trials.

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IMF Upgrades Global Growth Forecast As Inflation Cools

IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday,…

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IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.

But, as Statista's Felix Richter notes, that’s not to say the outlook is rosy, as the global economy still faces major headwinds.

However, the IMF predicts the slowdown to be less pronounced than previously anticipated.

Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.

The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.

Infographic: IMF Upgrades Global Growth Forecast as Inflation Cools | Statista

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One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.

The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.

“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”

The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.

In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.

“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”

However, just because the 'trend' has shifted doesn't mean it's mission accomplished...

That looks an awful lot like Central Bankers' nemesis remains - global stagflation curb stomps the dovish hopes.

Tyler Durden Tue, 01/31/2023 - 14:45

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