Next big thing drives healthcare M&A
Although deal volume and value in the pharma, medical and biotech sector fell in 2018, down by 3 percent to 580 deals and 27 percent to US$111.8 billion respectively, pharma companies have invested aggressively in strategic deals throughout the year
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Companies are under pressure to renew pipelines as drugs go off patent and to keep pace with new treatment technologies. Companies in the sector have also encountered a squeeze on pricing, with the Trump administration pressuring the industry to keep prices down. In May, the President put forward proposals obliging firms to list prices in advertisements and took a tough stance against companies trying to delay drugs coming off patent.
Percentage decrease in deal value compared to 2017
Buying drug pipelines
In response to these challenges, pharma groups continue to use M&A to add new drugs and technology to their portfolios and stay on top of costs.
For the pharma industry, it is imperative to continuously regenerate product pipelines, as a way for companies to protect themselves against competition and generics. Specialty drugs, gene-based drugs and interventional medicines are especially difficult to develop, and therefore make attractive M&A targets.
French group Sanofi, for example, paid US$10.9 billion for Bioverativ, a haemophilia specialist, to increase its presence in the rare diseases market. Novartis added AveXis, a gene therapy business focused on rare and life-threatening neurological genetic diseases, to its portfolio in a US$7.4 billion deal, and GlaxoSmithKline announced it would acquire oncology-focused biotech Tesaro for US$5.1 billion.
This appetite for gene-based and specialty therapeutics is continuing. In the first few weeks of 2019, Eli Lilly announced the US$7.1 billion acquisition of Loxo Oncology, which develops drugs for genetically defined cancers.
Nor was this the only significant healthcare deal so far in 2019. On the third day of the year, Bristol-Myers announced it would acquire biopharmaceutical company Celgene for US$89.5 billion. The two companies have complementary portfolios and the deal would expand a number of Bristol-Myers’s assets and ensure another healthy year for healthcare M&A.
Contract research organizations consolidate
The contract research organization (CRO) provider space has also performed strongly, as pharma companies increasingly outsource complex protocols for drug development and approval to third-party experts. This has encouraged consolidation, as CROs seek scale to serve a global customer base across a range of treatment areas. Charles River Laboratories, for example, has moved to strengthen its offering with the acquisition of MPI Research for US$800 million.
Healthcare companies are streamlining processes as much as possible and looking to refocus on their core businesses and products.
Top healthcare deals
1: Sanofi acquires Bioverativ for US$10.9 billion
2: Kohlberg Kravis Roberts acquires Envision Healthcare for US$9.4 billion
3: Celgene acquires Juno Therapeutics, Inc. (90.37 percent Stake) for US$8.8 billion
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