Mergers and acquisitions
Notwithstanding a fair degree of economic and political uncertainty, M&A activity in the global life sciences industry remains buoyant. The year got off to a strong start with over $30bn of deals in Q1 and $80bn in Q2. Deals worth over $45bn were closed in the month of April alone.
Highlights of the year included:
- The $32bn takeover of Baxalta by Shire.
- Abbott Laboratories’ $30bn agreement to acquire coronary medical devices company St Jude Medical.
- The acquisition of Allergan’s generics division for $40.5bn, a move that will make Israeli generics company Teva one of the largest pharma companies in the world.
The strong level of M&A activity was not limited to the top-end of the market, as Michael Jewell, a partner at Cavendish Corporate Finance LLP, explained:
…mid-market M&A transactions have also been strong. The main drivers fueling this activity have been the hunt for strategic opportunities, the search for innovation, dwindling product pipelines, and attractive valuations of pharmaceutical companies.
Other noteworthy deals in 2016 included AbbVie’s acquisition of Stemcentrix for $5.8bn and two purchases by Pfizer: Anacor ($5.2bn) and Medivation ($14bn).
The number of new FDA drug approvals in 2016 appears woefully low, at just 19 to date. While this number may increase slightly in the coming weeks, it will not compare favorably with totals for last year (45) and the year before (41).
It should be pointed out that drug approvals last year were at a record high, and strong pipelines from a number of the top pharma companies suggest that a lower number this year won’t indicate the start of a declining trend.
Crucially, the decline is not due to any changes in the way the agency operates. Speaking in November, FDA Director John Jenkins commented that “There are fewer applications in front of us to act upon” and provided reassurance that the volume of recent applications makes an uptick of approvals in 2017 likely.
This view is bolstered by a more positive outlook in Europe, where the EMA has now issued a positive verdict on over 70 therapies. By the end of the year, this is likely to leave us slightly off from 2015’s total of 93, but in line with 2013 (81) and 2014 (82).
Drug launches and pipeline
Looking at some of the key drug launches and pipeline developments of 2016, one thing that’s evident is the increasing level of collaboration in the industry, as companies attempt to drive synergies and leverage each other’s competencies.
- Gilead — Combo HIV-1 medications Genvoya, Odefsey and Descovy.
- Roche / Genentech — Anti-PD-L1 cancer agent Tecentriq
- Merck — Zepatier (HCV)
- Lilly — Taltz (plaque psoriasis)
- Regeneron/Sanofi — Dupilumab (eczema / asthma / sinusitis
- Bristol-Myers Squibb / AbbVie — Empliciti (multiple myeloma)
- AbbVie/Roche — Venclexta (chronic lymphocytic leukemia)
Against an unusually tumultuous economic and political background, pharma and biotech companies continued to add value throughout 2016.
The resiliency of the global life sciences industry is demonstrated by rising share prices in the face of uncertain events, including the UK’s shock determination to exit the EU, an American election full of surprise, and ongoing doubts over the strength of the Chinese powerhouse.
One of the largest news stories of the year was the monster merger that never was. Pfizer’s record-breaking $160bn acquisition of Allergan in late 2015 did not survive legislative changes aimed at making the deal less fiscally advantageous.
After Pfizer walked away from the deal in April (and paid a $150m termination fee to Allergan), it was widely expected that the company would be split into two parts, with one focusing on the development of new products and the other marketing old brands, generics and biosimilars.
But the economic argument for such a move no longer stacks up, and the split will not go ahead. CEO Ian Read commented:
We believe that by operating two separate and autonomous units within Pfizer we are already accessing many of the potential benefits of a split…while also retaining the operational strength, efficiency and financial flexibility of operating as a single company.
Our 2017 life sciences industry outlook will be released in January.