2015 continues to see record-setting activity in both the frequency and value of M&A deals involving pharmaceutical companies, and generally in the life-sciences sector. According to a report published by PricewaterhouseCoopers, the combined value of closed M&A deals in the life-sciences and pharmaceutical sector surpassed USD $320Bn in the first three quarters of 2015. Further, a recently announced inversion deal between two major players in the pharmaceutical space has been valued at USD $155Bn. If successful, this will be the largest inversion deal in any sector, and the largest M&A deal in the history of the life-sciences sector.

Against this backdrop, Biopharm Insight and Mergermarket recently issued a report entitled “Life lines: Life-sciences M&A and the rise of personalised medicine.”

The report surveyed 100 senior executives (CEO, CIO, Director of Strategy) in biotechnology and pharmaceutical companies across the US, Europe, and Asia. Some of the more interesting survey results include:

  • Focus on Asia. 28% of those surveyed indicated that their next acquisition was most likely to target an Asian company, in 19% of respondents indicated intentions to acquire companies based in North America and Western Europe.
  • Drug discovery/R&D and diagnostics in demand. Over 70% of respondents indicated drug discovery, early stage R&D, and a focus on diagnostics as the factors major pharmaceutical producers will most likely look for when selecting candidates for acquisition.
  • Personalized medicines on the rise. 26% of respondents indicated that they saw an opportunity to charge higher prices for more targeted drugs, and 24% suggested that personalized medicines allowed them to make more convincing cost-benefit cases to buyers than conventional pharmaceuticals.
  • Brain drain. 69% of respondents cited the monetary costs of retaining high-level scientific/R&D expertise as a major challenge in sustaining a broad drug portfolio, and 56% indicated their ability to maintain and support multiple specialist sales teams as a chief concern.

The report concludes that, partially due to the favourable financial climate, the M&A boom in life-sciences is likely to continue, and that the volume of deals in 2015 is on track to surpass last year’s results. However, the report’s authors also advise caution. The shape of the life-sciences sector of tomorrow remains unclear, regulatory regimes in key markets are likely to see change, and many survey respondents indicated that they were anxious about economic and political uncertainty.

The author would like to thank Bert Riviere, articling student, for his assistance in preparing this legal update.

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