At the beginning of 2017, expectations were pretty high that the pharma and biotech sector would finally see lots of mergers and acquisitions (M&As). However, that did not happen. While a few high-value deals were announced, the focus was mostly on small bolt-on acquisitions and licensing deals and agreements.
According to Mergermarket’s Global Pharma, Medical & Biotech trend report for Q317, M&A in the global pharma, medical and biotechnology sector was in the range of $207.6 billion spanning 1,040 deals so far this year, declining 9.9% from the year-ago period. The dip was mostly attributable to the pharma and medical sectors.
Key deals announced this year include the Gilead (GILD – Free Report) -Kite and the Johnson & Johnson (JNJ – Free Report) -Actelion acquisitions, which boosted the value of M&A transactions in the biotech sector. Biotech stocks continue to command hefty premiums where M&A is concerned.
The key question now facing the sector is – will M&A activity remain sluggish in 2018 or will there be a surge in M&A deals?
With tax reform in the works, M&A activity is expected to increase in the upcoming quarters. Tax reform and cash repatriation are expected to lead to a boost in this area with biotech remaining a highly sought-after sector. Companies with innovative technologies and pipelines remain in demand with disease areas like nonalcoholic steatohepatitis (“NASH”), immuno-oncology, gastrointestinal and central nervous system diseases seeing quite a bit of activity. Treatments for orphan diseases and gene editing technology are also in demand.
There are several large drugmakers that are on the lookout for deals – while some of these companies are looking to replace sales of blockbuster products that are facing loss of patent exclusivity, others are looking to build their pipelines both through acquisitions as well as licensing agreements.
Expectations are high that big players like Sanofi (SNY – Free Report), Pfizer, Merck and Amgen (AMGN – Free Report) will announce M&A deals in 2018. Companies like J&J and Gilead are also expected to be on the lookout for additional acquisition targets. A major deterrent, however, could be high valuations and bidding wars which could keep some of the key players on the sidelines.
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