Pharma industry M&A comes to the boil


Financier Worldwide Magazine

December 2016 Issue

December 2016 Issue

The pursuit of mergers & acquisitions (M&A) within the pharmaceutical and biotechnology industry in 2016 has been a fruitful endeavour for corporate entities prepared to take the plunge.

Even a cursory examination of the pharma/biotech stats for 2016 makes it abundantly clear that the size and scope of the transactions seen over the past 12 months has been considerable. The $32bn takeover of Baxalta by Shire and the $30bn deal which saw Abbott Laboratories acquire St Jude Medical both made a big splash.

In fact, in April alone, three deals totalled $45bn. These mega transactions made it clear that the high level of M&A activity seen in 2015 has continued into 2016, with comparable deal volumes, values and average multiples.

Furthermore, although mega-mergers have played a significant role, mid-market transactions have also featured prominently; 102 in this bracket totalled $7.23bn in the US in 1H 2016, according to Mergermarket.

Bumper activity

“Mega deals have dominated pharma M&A and mid-market M&A transactions have also been strong,” says Michael Jewell, a partner at Cavendish Corporate Finance LLP. “The main drivers fuelling this activity have been the hunt for strategic opportunities, the search for innovation, dwindling product pipelines, and attractive valuations of pharmaceutical companies.”

In addition to the Shire/Baxalta and Abbot/St Jude deals, other major 2016 transactions to have caught the eye include the acquisition of Allergan generics by Teva Pharmaceutical Industries Ltd, a $40.5bn acquisition that is expected to make Teva one of the largest drug manufacturers in the world. AbbVie bought Stemcentrix for $5.8bn. And two deals involved pharma giant Pfizer – its $14bn takeover of US biotech giant Medivation and its $5.2bn purchase of Anacor.

Current deal volumes are supported by economic growth across Europe, the US and Asia.

Another notable piece of activity, and one that could be pharma’s next big M&A trend, was the announcement that French drugmaker Sanofi and Germany’s Boehringer Ingelheim had entered into a global asset swap agreement worth $25.1bn. This was similar to the 2014 deal which saw Swiss drugmaker Novartis AG and the UK’s GlaxoSmithKline Plc trade $20bn worth of assets.

“The pace of the consolidation in the pharmaceutical industry has increased significantly,” observes Mr Jewell. “In the first half of 2016, pharmaceutical companies completed a record of 162 deals worth $83.2bn.”

Mid-market notability

Significant activity has taken place in the mid-market, with the hunt for strategic opportunities particularly strong. Among the notable mid-market transactions aimed at strengthening the buyer’s existing portfolio were Alliance Pharma’s acquisitions of Pharmapar Inc and Agence L.I.V., the $1.53bn acquisition of US biotech firm Relypsa by Swiss biotech company Galencia, and the deal which saw UK pharma company Martindale International acquire Viridian Pharma.

“The consolidation we have seen among the big players has meant that pharma companies in the mid-market are facing growing pressure to compete for a share of the market dominated by their bigger counterparts, and in turn are becoming increasingly acquisitive,” explains Mr Jewell. “As mega mergers continue to change the market environment, the industry dynamics for mid-market companies will be shaped by M&A transactions, which are increasingly seen as an efficient way of adapting to these changes.”


Although the uncertainty caused by the US election, the UK’s ‘Brexit’ referendum on membership of the European Union and ongoing global economic volatility have fostered an uncertain environment throughout 2016, the outlook for M&A in the pharma and biotech sectors remains positive.

According to Alex White, managing director and head of M&A and strategic advisory, Europe at Equiteq, there are persistent drivers of transactional activity. “Pharma deals will ebb and flow according to product pipeline and lifecycle and of course the relative strength of individual markets for their products. The ability to help pharma companies improve margins will be the key driver for M&A and companies in this area and will attract premium valuations,” he says.

For Mr Jewell, the economic fundamentals for M&A transactions, especially at the mid-market level, remain sound. Current deal volumes are supported by economic growth across Europe, the US and Asia. “Mid-market pharma companies remain attractive, with valuations perhaps less stretched than the bigger players, with many offering promising growth stories,” he suggests. “This backdrop, coupled with buyers that are cash rich and debt that is inexpensive, is likely to ensure that mid-market pharma deals continue to be a key feature of M&A activity in the sector.”

Expansion plans

As 2016 approaches its close, the global pharma and biotech industry appears healthy in terms of its M&A activity, with the past 12 months seeing a number of major players boost their offerings through strategic deals.

As many pharma and biotech companies press forward with fresh expansion plans, the expectation is that M&A will continue across the sectors into 2017 and beyond – all in all, an industry with dealmaking activity very much coming to the boil.

© Financier Worldwide


Fraser Tennant

©2001-2019 Financier Worldwide Ltd. All rights reserved.