Market Study Pharma Becomes Third-Leading Sector Globally
Pharma, Medical & Biotech (PMB) became the third-leading sector globally, and accounted for 12.3 % of global M&A value.
The sector recorded a total deal value of US$ 163.8bn across 631 deals. The industry's relatively strong performance in the first half of the year is all the more noteworthy considering recent clampdowns and regulatory measures.
Following the introduction of additional rules by the US Treasury Department in early April 2016, the largest pharmaceutical and de-facto inversion in history – US-based Pfizer’s US$ 183.7bn bid for Ireland-based Allergan – collapsed, and has potentially discouraged other deals of similar size and nature. US-based PMB activity, which accounted for 66.8 % of global PMB value with 241 deals worth US$ 109.3 bn, experienced a noticeable slowdown in H1 2016, falling 23.6 % compared to H1 2015 (US$ 143 bn, 287 deals).
The US BMP Sector
The US PMB trend was driven mainly by its top two transactions: the US$ 35.2 bn cross-border transaction between Ireland-based Shire Plc and US-based Baxalta, the largest US PMB transaction of the period, which accounted for 32.2 % of US market share and 21.5 % of global sector market share. The second-largest PMB transaction, US-based Abbott Laboratories’ US$ 29.9bn bid for US-based St. Jude Medical, accounted for 27.4 % of US market share, and 18.2 % of global sector market share.
Europe, meanwhile, experienced a significant increase within its own PMB sector. With 215 transactions worth US$ 35.2 bn, Europe’s total PMB value increased by 92.8 % compared to H1 2015, with 235 deals worth US$ 8.3 bn. Consequently, Europe contributed 21.5 % to global PMB value in the first half of 2016. The driving force behind such an increase was the third-largest PMB transaction between Germany-based Boehringer Ingelheim and Francebased pharmaceutical company Merial, worth US$ 12.6 bn, which accounted for 35.7 % of Europe’s total PMB value, and 7.7 % of global sector value.
BMP in the Asia-Pacific Region
The Asia-Pacific region, currently undergoing a high volume of domestic market volatility, had no significant contributions within the PMB sector for H1 2016, accounting for only 6.5 % of total PMB value globally with 110 deals worth US$ 10.6 bn. The US$ 1.2 bn acquisition of 12 China-based pharmaceutical companies by Shanghai Shyndec Pharmaceutical was the largest transaction in Asia (excluding Japan), accounting for 11.2 % of total regional market share.
Pharmaceuticals was the leading sub-sector in the first half of 2016 with 162 deals worth US$ 83.2 bn, which declined by 34.4 % compared to H1 2015 (US$ 126.8 bn, 185 deals) and accounted for 50.8 % of global sector market share. Shire’s acquisition of Baxalta was the key deal for the sub-sector, accounting for 42.3 % of total Pharmaceutical market share. Medical ranked behind Pharmaceuticals, with a total value of US$ 74.5 bn across 394 deals in H1, up 45.5 % compared to the same period last year (US$ 51.2, 461 deals), and accounting for 45.4 % of global PMB value.
The Abbott Laboratories/St. Jude Medical deal has been the primary reason behind the subsector’s deal value increase, accounting for 40.1 % of total Medical market share. Biotechnology contributed only 3.7 % to total PMB market share with 75 deals worth US$ 6.1 bn, up 36.7 % compared to H1 2015 (US$ 4.5 bn, 70 deals). With the global market uncertainty over Brexit and increased regulations from government authorities, the days of high valuations and transactions based largely on tax incentive schemes within the PMB sector may be numbered. However, where one door closes, usually another one opens.