Pharma’s Appetite for Biotech Deals Bodes Well

Can the acquisition of a small biotech company help turn around a disappointing year for the entire sector?

The question is worth asking after Pfizer announced a buyout of Trillium Therapeutics , a developer of cancer drugs, for $2.26 billion in cash. That price is more than three times Trillium’s market value as of last Friday. A broad index of small and midsize biotech companies rallied more than 4% on Monday.

That burst of euphoria was badly needed for a sector that has struggled even as most growth stocks are thriving. The biotech index is still down about 9% so far this year and has shed nearly 30% from February’s record.

There are clear reasons for that soggy performance. The lingering Covid-19 pandemic has been a bonanza for vaccine developers, but delays in routine care for most patients have resulted in fewer new prescriptions and a slower pace of clinical-trial enrollment.

Regulatory concerns aren’t helping matters. Budgetary negotiations in Congress could potentially lead to tougher regulations on prescription-drug prices. Meanwhile, the Biden administration has yet to nominate a full-time commissioner for the Food and Drug Administration.