Rebound For Pharma M&A

The pharmaceutical sector is consolidating.

Dealmaking in the pharmaceutical industry will reach new heights this year as companies pursue innovative therapies and data-driven platforms, analysts predict.

PricewaterhouseCoopers estimates that the value of transactions in pharma and life sciences will reach $250 billion to $275 billion in 2021 after falling 61% last year to about $141 billion. Bolstering that projection, activity rebounded in the second half as markets recovered. AstraZeneca announced the takeover of Alexion Pharmaceuticals for $38.8 billion, while Gilead Sciences acquired Immunomedics for $21 billion as well as three other companies.

In a recent report, McKinsey & Company notes that the top 12 global pharma groups have more than $170 billion in dry powder for acquisitions. Fitch Ratings expects them to use that war chest to reposition their portfolios toward innovation.

“We should expect a flurry of interest not just in companies involved in offering treatments or vaccines to limit the impact of Covid-19,” says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “Those in diagnostics or in medical device production are also likely to be in demand as countries ramp up their preparedness for future pandemics.” Innovative cell and gene therapy and therapies for rare diseases will also draw interest, she says.

Technology will continue to be a cross-sector driver of acquisitions, says Streeter. Large tech companies will look at the healthcare market, while Big Pharma will chase smaller tech players with big-data expertise to augment their own R&D.

Another influence on M&A will be the urge to secure supply chains while reducing manufacturing dependence on China and India, says Rahul Saikia, head of Global Strategy at Rising Pharmaceuticals. “The most impactful global biopharma M&A will happen in the United States and Europe, where innovation resides and securing supply and transaction markets is most fluid and smooth,” he says.