2014: A Year of Deals for Big Pharma, Biotech and Healthcare

Given the rebounding deal market, it may come as no surprise that there is an uptick in life sciences M&A in the United States.

16 September 2014


Given the rebounding deal market, it may come as no surprise that there is a current uptick in pharmaceutical, healthcare, and biotech mergers and acquisitions in the United States. Indeed, overall, this is a good time for M&A, with the economy showing signs of recovery.

We expect sustained momentum in M&A activity through the end of this year. The life sciences and pharmaceuticals sectors in particular have seen growth. In 2014, life sciences M&A “exploded,” as the Q2 Intralinks Deal Flow Indicator (DFI) report states. “Fundraising is also a smoother ride than it has been for the past two years, thanks to easing credit conditions, a rise in investor confidence and buoyant credit markets,” says the report.

A Ripe Market for Healthcare M&A

In the same way, the healthcare field at large is “ripe” for M&A, after a year of decline, says a report from research firm Mergermarket. It attributes the coming boom largely to the “recovering economy, demand for capital and IT improvements, and the implications of the Affordable Care Act (ACA).”

So, “many entities will look to mergers and acquisitions as a means to bolster their resources and further their integrated delivery models.”

This predicted bump follows a decline in healthcare and biotech M&A activity, as Mergermarket notes:

  • In 2012 there were 463 deals worth $124 billion
  • But in 2013, that number dropped to 394 transactions, totaling $97 billion

The report suggests that the drop was because of “regulatory uncertainty” around the ACA’s implementation. Now, a bounce back in these sectors is coming. As Mergermarket says:

  • Eighty-six percent of respondents expect M&A to increase in life sciences and healthcare
  • For the healthcare sector, 84 percent of respondents expect private equity activity to increase in connection to strategic M&A

Increase in Pharmaceuticals M&A  

Another area showing a jump is pharmaceuticals. As the Intralinks DFI report notes, the sector stood out in Q2 2014 because of a spate of big deals. Driving consolidation is a coming wave of patent cliffs — these will make some key drugs available for generic manufacture. This has been a challenge to pharmaceutical firms for years, and many companies have only a “handful of drugs in their arsenals.” So, these firms are turning to inorganic growth.

Interestingly, it was a failed $100 billion bid by Pfizer for AstraZeneca that helped spur the activity. Pfizer’s move “reinforced the notion that pharma companies feel the need to make big plays in order to remain viable,” as the Intralinks DFI states.

Trends come and go, but people will always be interested in prolonging their lives. This current uptick just reinforces the fact that there will be companies using M&A to grow and meet those needs.