BioPharma, Pharma

Life sciences report: Cross-border M&A in, IPO out.

International M&A in the life sciences is picking up steam, according to a new Mergermarket report - with new focus on the fields of early stage drug discovery and precision medicine.

Life sciences M&A is alive and well – on a vastly global scale, according to a new report from Mergermarket and law firm Reed Smith. Indeed, 87 percent of the companies surveyed are on the lookout for cross-border deals – with tax-related strategy being a large reason. Going public, by contrast, looks to be losing favor in a big way.

Indeed, we’re looking at a rise of acquisitions and contracting out research, but a drop in IPOs and divestments. Deals are being done with cash on hand, and by debt capital markets – equity, loans and licensing are less popular among global life sciences companies.

Peer to peer research partnerships appear to be moderately popular – and in that vein, precision medicine is a hot field that’s attracting a lot of interest. However, the realities of scaling this portion of the industry remain a big question mark.

 

Highly acquisitive life sciences companies are looking to the Asia-Pacific region more earnestly now, with about 28 percent prioritizing this as an area to watch. The report says:

In some cases, these deals are likely to see life sciences companies taking their existing products to new markets. The chief executive officer (CEO) of an Asian-Pacific (APAC) business explains: “Products that were bestsellers are being pushed to the exit as other businesses are able to fill their pipeline faster – we now see potential in international markets where we can possibly lower the risk of losing out to the competition.”

Companies in the APAC region are increasingly welcoming international business – relaxing restrictions to encourage foreign investment. Precision medicine and drug discovery companies are attracting the most interest – with the emphasis on late stage companies dying down a little:

Similarly, marketing and distribution is the most important area of investment (79 percent of respondents prioritized this) these days for the life sciences companies surveyed – followed by drug discovery (70 percent), clinical trials (60 percent), technology acquisition (59 percent), patenting (50 percent) and late stage R&D (42 percent.)

Of course, M&A is just popular across the board these days – with the pharmaceutical industry, for instance, consistently on the verge of consolidation. Here’s a powerful graphic that outlines the rise of M&A in the past year or so:

The first six months of 2015 showed a 53 percent increase in deal value over the like period of 2014. Specifically, the first half of this year we saw $164.3 billion in deals, whereas last year it was $107.5 billion.

Some of the more noteworthy deals here were Teva Pharmaceuticals’ $40.5 billion buyout of Allergan’s generics unit – by far the largest deal of the year. The next most valued deal was Celgene’s purchase of Receptos, valued at some $6.7 billion.

Notably, the report calls out the relaxed monetary policy in Western markets – making capital less costly than before.

“The US Federal Reserve has now held the federal funds rate at close to zero for more than six years – and speculation that the Fed will soon begin to raise interest rates is putting pressure on life sciences companies to cash in on this window of opportunity,” the report says.

 

 

Shares0
Shares0