Dive Brief:
- The number of mergers and acquisitions in the life sciences sector declined by 27% in 2017 versus the prior year, with just 273 deals worldwide, according to an analysis by PricewaterhouseCoopers. Deal value dropped 23% to $181 billion. The fourth quarter was especially slow, with no major deals across all sub-sectors.
- Pharma took the biggest hit, with deal value down 56% to just $26 billion for the year.
- Things weren’t much better in biotech, where high valuations for smaller biotech firms drove deal value down 22% to $64.8 billion for the year. The brightest spots of the year were Johnson & Johnson’s acquisition of Actelion for $30 billion in the first quarter of 2017 and Gilead’s purchase of Kite Pharma for $11 billion in the third quarter.
Dive Insight:
The weak trend should turn around in 2018, as demand, surplus cash and U.S. tax cuts combine to create fertile ground for U.S. deals and foreign companies’ expansion of U.S. operations.
"We believe the Pharmaceutical and Biotech sub-sectors will be exceptionally active due to potential transformational deals combined with smaller, bolt-on acquisitions by larger companies," the report says.
Pharma could see a flurry of activity this year as companies move to repatriate overseas cash and look to acquire innovative products or companies that complement or round out their portfolio. In specialty pharma and generics, companies will focus on opportunities to create scale and dominate therapeutic categories over acquisitions of mid-level players.
Future biotech M&A will be driven by developments in areas like CRISPR, CAR-T and gene therapy, the report says.
The U.S. led other geographic regions in the fourth quarter with 49% of deals valued at $9.2 billion. It also accounted for seven of the ten largest deals.
The top deal during the period was Novartis AG’s $3.9 billion acquisition of French nuclear medicine manufacturer Advanced Accelerator Applications S.A., followed by Roche Holdings, Inc.’s $2 billion purchase of U.S.-based Ignyta, Inc., and Mallinckrodt Public Limited Company’s $1.2 billion purchase of Sucampo Pharmaceuticals, Inc.