“Big Pharmas” are ready to heat up the M&A market this second half

Business values ​​are down 58% and volume is down 33%, but fear not, the pharmaceutical and life sciences industry is poised for a “deal flurry” in the second half, according to PwC.

In a new report covering the first half of the year, the professional services firm acknowledges that there has been a slow start to business activity. But big pharma companies are flush with cash – especially those that have managed to exploit the COVID-19 market – biotech valuations are finally starting to normalize and many big companies face patent cliffs and need new assets to grow their pipeline. All this means a second semester that should be rich in business.

Of particular interest to large pharmaceutical companies looking for biotechnologies are early stage companies and immediate transactions. The US Federal Trade Commission has become increasingly demanding about large-scale business, meaning transactions in the $5 billion to $15 billion range can be more appetizing to those looking. This also gives big pharma companies the opportunity to “take a lot of shots at the goal” to offset future generic competition. However, there may still be some wildly successful deals, PwC noted.

For early-stage deals, the pharmaceutical industry is looking for assets that can start providing value from 2024 onwards, as patent cliffs have put about $180 billion in revenue for the biggest companies at risk over the period from 2023 to 2024. 2028. PwC expects companies to focus on smaller businesses that can unlock value quickly, such as digital strategies, rather than large transformational businesses that will take time to show their value.

If recent deals are any indication, ratings are still high. Pharmaceutical companies are paying 50% to 100% above current trading prices, but recent market trends suggest this could soon change. Deal values ​​are down 58% in the first half compared to the same period last year, with just $61.7 billion spent so far and just 137 deals in total. This compares to 204 for the same period last year.

There were some interesting deals in the half, particularly Pfizer’s $11.6 billion check for a stake in Biohaven Pharmaceuticals. Big Pharma of New York acquired Biohaven’s migraine brand, leaving some early-stage assets under the purview of biotechnology.

Bristol Myers Squibb’s $4 billion acquisition of Turning Point Therapeutics was the second-highest of the half in terms of deal value, followed by GSK’s $3.3 billion bet on Affinivax.

Overall, the biotech industry is struggling with mass layoffs and several companies have closed completely. PwC noted that there have only been 14 IPOs in the industry so far in 2022, raising less than $2 billion, while there have been 104 in all of 2021, with $15 billion raised. Without that access to capital, PwC says biotechs are considering other ideas – like M&A. The company looked at the Biohaven transaction and GSK’s Affinivax and Sierra Oncology agreements as examples.

Focusing on medical technology, PwC says the industry is facing similar headwinds as well as impacts from semiconductor shortages. The value of the semi-annual business in medical devices is down 85% from last year, but companies in the sector have yet to find alternative forms of revenue. The medical technology sector saw $76.4 billion invested in 2021 across 93 deals. But even with the challenges in 2022, PwC expects mergers and acquisitions to be a priority for medical technology companies.

Meanwhile, for CROs and CDMOs, macroeconomic and geopolitical tensions have created volatility, meaning these companies are more timid about deploying capital right now amid uncertainty, PwC said.