Life science industry analysts at PricewaterhouseCoopers expect a strong environment for mergers and acquisitions this year, with the diagnostics and services sectors potentially seeing a resurgence of deals.
While the number of deals in the life sciences fell last year compared to 2012, those transactions were worth nearly $140 billion – 46 percent more than the previous years’ deals. Surprisingly, though, PwC says in its year-end Pharmaceutical and Life Sciences Deals Insights Quarterly report that the industry didn’t see any mega deals that were prevalent in years past.
Instead, in the medical device sector companies focused on middle-market transactions to acquire new products that would complement their existing portfolios. Last year, Boston Scientific snatched up Bard EP to boost its offerings in the electrophysiology market, and Medtronic’s bid for telecom company Cardiocom conveyed its desire to offer products across the continuum of care.
Meanwhile, large pharmaceutical companies worked on rebuilding their pipelines by acquiring relatively small biopharmaceutical companies. PwC notes that they saw increasing competition from biotech companies looking to diversify their portfolios.
But they’re also focusing their portfolios – PwC counted 11 divestitures in the fourth quarter alone, and that’s already carrying over into 2014. Johnson & Johnson just sold off its in vitro diagnostics unit, and Actavis is divesting some of its generics operations in Europe.
The diagnostics and healthcare services sectors were relatively quiet throughout 2013, but PwC thinks they may make a comeback in 2014. Quest Diagnostics, for one, got the year off to a good start, announcing in January it was offering up $570 million to acquire Solstas Lab Partners Group.
“Working with clients on their M&A strategies, we’re seeing a continued focus on successful execution and (pharmaceutical and life science) companies are continuing to use earn-outs and other deal tools to bridge value gaps, share risk, and complete deals,” said Dimitri Drone, the firm’s U.S. pharmaceutical and life science deals leader.