Ahead of the pack: US M&A 2019

Biotech boosts US healthcare M&A in 2019

The healthcare sector (incorporating pharma, medical and biotech) has seen M&A valued at US$256.5 billion across 645 deals in 2019. This is a decrease of 9 percent by volume, but an increase of 121 percent by value.

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While 2019 has seen activity across the board in pharma and healthcare, it's clear that biotechnology assets continue to be highly attractive to acquirers. A significant proportion of the rise in deal value is attributable to the US$89.5 billion acquisition of biotech Celgene by BMS, one of the largest deals in the sector's history. The third-largest deal also involved a biotechnology business—Danaher Corporation's US$21.4 billion purchase of GE Healthcare Life Sciences.


Biotech and bulking up 

The rush for biotechnology acquisitions looks set to continue, as pharmaceuticals companies seek out ways of gaining an edge over generics manufacturers—biotech drugs are harder to replicate than more traditional pharma products—as well as finding products to fill their pipelines.

Building scale also continues to be an important driver for M&A in the sector. For companies opting to continue research and development work to create patented drugs, scale is vital given the substantial costs involved. For those focused more on generics, deals are being struck to create synergies, cut costs and build a global presence. Mylan's US$24.6 billion acquisition of Pfizer is one example, where the combined business will focus on generic and off-patent drugs.

Percentage increase in deal value compared to 2018


Out with the old, in with the new? Or both

There are also moves to reshape companies in the sector. Vertical integration deals are one aspect of this reshaping. In these transactions, companies are acquiring what currently appear to be non-core businesses that bring new capability. CVS's acquisition of health insurance provider Aetna in 2018 is a prime example of this type of transaction. On the other hand, the divestment of non-core units continues, with consumer health assets a particular target, although other assets are also changing hands, as pharma companies rebalance their portfolios. Examples of this are Johnson & Johnson's divestment of Advanced Sterilization Products for US$2.8 billion to Fortive Corporation in 2019 and its acquisition of Ci:z Holdings in Japan, a dermocosmetic, cosmetic and skincare product business.

Finally, the sector is also bracing itself for the upcoming presidential elections in the US. Depending on the outcome, there could be a material change in healthcare reimbursement systems and Boards of Directors will be considering how to respond to potential changes to the current reimbursement system.

Top healthcare deals 2019

1. Bristol-Myers Squibb acquired Celgene for US$89.5 billion

2. Mylan acquired Pfizer for US$24.6 billion

3. Danaher Corporation acquired GE Healthcare Life Sciences for US$21.4 billion


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Ahead of the pack: US M&A in 2019


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