03 January 2020 - Authored by:Matthew Appleton
At a time of heightened regulatory and market uncertainty, it’s perhaps surprising to see life sciences and healthcare sector M&A continuing to grow so strongly. Indeed, with deal value up by more than 19%, it was one of only two sectors to record growth in transaction value.
Not surprisingly, given the scale of the U.S. market, powerful R&D capabilities, private medicine and relatively lax price regulation, domestic deals have dominated, accounting for all but three of this year’s top 10 global transactions in the sector.
Some have been highly strategic and have followed the trend of consolidation around key therapies, notably the giant Bristol Myers Squibb/Celgene merger combining two of the world’s biggest oncology groups. Others have centred on the need to address a looming patent cliff, as we saw with the more opportunistic AbbVie/Allergan tie-up.
Pressures on M&A are coming from a number of angles – and in Europe, for example, German life sciences reforms, tighter controls on medical devices, privacy regulation and Brexit-related worries about research and supply ought to have unsettled the sector more than they have.
But issues specific to the life sciences sector – notably the patent threat from generics forcing pharma groups to invest in biotech, price pressures and a boom in medical technology – are pushing players to look for growth through acquisitions and collaborations. Chinese investors are also actively hunting across the globe, although substantially less so in the U.S. given ongoing trade tensions.
PE funds are increasingly interested in the sector, either in the medtech area or in niche pharma companies, which may be cash constrained but offer a valuable platform. And non-traditional tie-ups are proliferating elsewhere, with providers looking to team up with pharmacies, insurers or tech companies. Overall, that suggests that deal flows will continue to be strong in the months ahead as disruption continues.
This article was co-authored by Harmut Krause, Jim Ford, Paul Burns and Christiaan de Brauw.