Regulation is hampering M&A activity in emerging markets
Cost synergies, access to innovation and break-ups to improve efficiency will drive future deals
Although future growth in the pharma industry is expected to come mainly from emerging markets, acquisitions in these regions remain difficult for Big Pharma owing to a lack of suitable targets and government and regulatory constraints, a report by IMAP has revealed.
The Global Pharma and Biotech M&A Report 2012 from the Turkey-based global partnership of leading merger and acquisition firms has found that there were 504 transactions last year, representing US$90bn in value.
There were significantly more transactions in the US$100m to US$1bn size range than in 2010. There were 182 transactions involving targets located in North America, 115 in Western Europe, and 104 in China, with 16 in Latin America. Inter‐regional deal flow was most pronounced between Europe and North America; in contrast, only six of the numerous transactions in China involved foreign buyers, the report says.
Going forward, IMAP advisors foresee a number of cross-border deals in India and an increase of inbound M&A activity in Latin America.
Of the 15 largest transactions in 2011 – contributing approximately 70% to the sum of disclosed transaction values – six were r&d-driven, i.e. the target has few or no sales but owns promising research assets, such as a drug candidate (e.g. Gilead’s acquisition of Pharmasset).
Heading the top 15 deals was Sanofi’s US$17.5bn acquisition of Genzyme, followed by Takeda’s $12bn takeover of Nycomed.
Pharma was clearly also in consolidation mode in 2011, the report says. There were again massive lay-offs, partially the results of mergers in previous years (Pfizer, Merck); but IMAP believes these lay-offs are also part of a strategy to become ‘lean and mean’ to face a tougher future.
The top 10 lay-offs, says the report, totalled a loss of nearly 25,000 jobs, while Pfizer’s announced job cuts in the past five years exceeded 40,000 staff.
Many generic companies expect additional growth in the next five years to come from biosimilars following more clarity in the regulatory process in 2011, which led to what on the surface appear to be unexpected alliances such as Amgen/Watson’s $400m deal in December (not targeting Amgen’s biotech drugs) and Biogen/Samsung’s $300m partnership (also not targeting Biogen’s biotech drugs).
IMAP predicts that there will be four drivers for dealmaking over the next five years: cost synergies; access to innovation and new drug candidates; entry into new geographic markets; and break-ups and spin-offs to improve efficiency.
