M&A lawyer says FDA funding cuts likely to spur biotech deal surge

The Trump administration's moves to reduce government funding for the US Food and Drug Administration (FDA) and other agencies, such as the National Institutes of Health, will impact the biotech sector in several important ways, making it likely that companies will seek to combine with peers or be acquired by large pharma players, according to Andrew Goodman, a partner in the M&A practice at law firm Paul Hastings, in a client alert.

"While it is easy to anticipate that funding cuts across government agencies will impact the work that gets done, there also will be indirect consequences that may be significant," says Mr Goodman. "The reduction of FDA funding and its profound impact on biotech companies, including on M&A activity within the industry, is just one example," he noted.

With companies constantly developing new therapies and technologies, the biotech industry is a hotbed of innovation. This dynamic environment often leads to mergers and acquisitions (M&A) as a vehicle for larger companies to acquire promising technologies and product candidates to bolster their development pipeline. However, changes in funding for the US FDA have the potential to affect new product development and significantly impact biotech M&A activity.