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.
