As the age of the blockbuster drug is waning and generic substitution is on the rise, pharmaceutical companies continue to aggressively pursue mergers and acquisitions as a means of reversing the tide.
While global M&A activity is still not quite up to pre-recession levels, transactions among drugmakers made a strong showing during 2010. Deals struck in the health care industry at large (including drug, device, and health service companies) reached a total value of more than $233 billion, or slightly higher than 2009, according to Dealogic data reported through the The Wall Street Journal. And as companies continue the struggle to protect themselves against upcoming patent losses, conditions are prime for the pace to increase in 2011.
While 2010 lacked the volume of high-figure deals found in 2009 (such as the Pfizer/Wyeth, Roche/Genentech, and Merck/Schering-Plough mergers), a good number of impressive deals made headlines as companies looked to spend some surplus funds and carry out year-end strategic goals. Many purchasers were looking to shore up lagging development pipelines, while others sought acquisitions outside of their normal realm of operations to explore new profit possibilities.
Examples of deals that closed in 2010 include:
- Novartis’ $28 billion deal to gain majority ownership of Alcon
- Merck KGaA’s $7 billion purchase of Millipore
- Abbott Laboratories’ $6.2 billion purchase of Solvay’s pharma division
- Teva Pharmaceutical’s $5 billion purchase of ratiopharm
- Astellas Pharma’s $4 billion acquisition of OSI Pharmaceuticals
- The $3.3 billion merger of Biovail with Valeant Pharmaceuticals
- Celgene’s $3 billion buy of Abraxis BioScience
- Bristol-Myers Squibb’s $2.4 billion deal for Medarex
Mergers announced in 2010 that are still awaiting completion in 2011 include:
- Novartis’ $13 billion deal to buy up the rest of Alcon
- Grifols’ planned $4 billion purchase of Talecris
- Pfizer’s $3.6 billion deal to buy King Pharmaceuticals
- J&J’s $2.3 billion agreement to acquire Crucell
Several smaller deals have been completed or announced so far in 2011, including the $255 million investor buyout of Cypress Bioscience and Teva Pharmaceutical’s $350 million buy of Merck KGaA’s Theramex unit. And while Sanofi-Aventis’ efforts to cement an $18.5 billion buy of troubled Genzyme in 2010 were foiled due to resistance from Genzyme’s board, the deal is not yet dead and most likely will be consummated sometime this year.
Rumors are already flying over which companies will be the next to take the plunge. Recently Actelion has been in the news as a possible takeover target or merger candidate. Speculations have also been made about companies in the growing biotech industry, such as Gilead Sciences and Vertex Pharmaceuticals.
While pharma companies are enacting a number of strategies to ward off the ill effects of generic competition for as long as possible – including partnerships, licensing deals, program cuts, layoffs, consolidations, and other efficiency-boosting measures – M&A will continue to be a major factor in the drug industry’s competitive positioning both in 2011 and beyond.