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Mergers and Acquisitions in the Pharma Industry

Posted on February 8th, 2017 by in Pharma R&D

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It seems we cannot go a month without seeing in the news another acquisition by a big pharmaceutical company.

In 2015, it was AbbVie that led the way with its acquisition of cancer and immune-disease focused Pharmacylics for $21 billion (1). In addition, Valeant made a splash with its acquisition of Salix Pharmaceuticals, a gastrointestinal specialty company, for $10.1 billion (2).And last year, in 2016, we’ve already seen Shire acquire Baxalta—a company focused on bleeding disorders—for a whopping $32 billion (3).

This big trend in pharma mergers and acquisitions doesn’t seem to be slowing down. After all, pharmaceutical companies need to do what is necessary to meet the needs of their investors. With expiring patents and high costs of research and development, acquiring or being acquired may sometimes be the best or only option to bring in adequate revenue. According to Graham Robinson, a partner at Skadden, mergers and acquisitions in big pharma is “largely driven by the availability of attractive targets…many buyers have significant amounts of cash – and in some cases, a need to refill their sales force’s bags with new therapies” (4). Clearly, the common trend here is that large companies who are losing the revenues from soon to be off-patent drugs will become motivated to buy companies with great revenue potential, if they have the cash to do so.

What sometimes gets lost in the frenzy of acquiring another company is the “due diligence” and “strategic research” that must first be conducted prior to any company acquisition. According to Bain and Company, setting clear guidelines for integration is particularly important for a successful acquisition (5). From 1999 to 2002, I personally was involved in the integration of two of the biggest pharmaceutical M&As in history: Pfizer’s acquisitions of Warner-Lambert and Pharmacia. During the process leading up to the acquisitions, I witnessed so many internal changes within Pfizer. Following those mega-mergers, Pfizer decided in 2009 to acquire Wyeth, which had an attractive portfolio of biologics/ large molecules in the R&D pipeline.

In recent times, even within CMO/CDMO fields, we saw acquisitions of smaller technology-rich companies such as Bend Research by Capsugel, the acquisition of Agere Pharma by Patheon, as well as the acquisition of Pharmatek & Micron Technologies by Catalent. This trend does tend to show that in order to obtain a strategic hook, for any CMO/CDMO business, having an internal enabling technology available for licensing helps gain long-term product R&D projects from pharma/ biotech companies. Lonza’s acquisition of Capsugel shows that CMOs are expanding to get their hands on small molecules as well as large molecule development.

I am sure that in 2017 the M&A trend will continue. We will hopefully see more strategic M&A activities, which will shape up a new trend in metamorphosis of CMO/CDMO and CRO companies.


 

All opinions shared in this post are the author’s own.

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