As pressures on the pharmaceutical industry increase, global consolidation will continue, according to predictions in the latest Pharma Insights report from PricewaterhouseCoopers.
The lack of research and development (R&D) productivity, patent expiries, generic competition and high profile product recalls are driving the current level of mergers and acquisition (M&A) activity in the sector. The PwC report predicts the following impact of these pressures: further big pharma companies divesting non-core divisions; continuing consolidation in the Asia Pacific region and the creation, by consolidation, of new, larger biotech companies.
In contrast to the pharma sector, the biotech sector is going through a period of relative calm from an M&A perspective. This is, in part, due to the number of biotech companies that have set their sights on an IPO.
There is still a small window of opportunity for pharmaceutical and biotechnology flotations, although investors are undoubtedly more cautious than they were when the IPO window was last open in 2000. PwC predicts investors are now looking for companies with diversified product portfolios and established revenue streams.
There are rumoured to be in excess of 200 biotech companies working towards IPOs in the near future, although the number that succeed will be considerably less, according to the report.
It is unusual to have a private equity-backed deal in the top ten pharmaceutical deals. Warner Chilcott came fourth in the list at $2,948m. The specialty pharmaceutical company focused on female healthcare and dermatology was acquired by a US financial consortium led by Bain Capital. The deal followed the collapse of earlier talks with Barr Laboratories of the US. One of the exit options open to Warner Chilcott’s new owners may be to re-list the company in the US (Warner Chilcott was formerly quoted in the UK) where healthcare companies are generally more highly rated.
There was also private equity interest in Roche’s divestment of its OTC business. However, in this case private equity investors were outbid by the German group Bayer. Bayer hopes to be able to achieve synergies and economies of scale that would not have been available to a private equity purchaser.