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Uptake in M+A in pharma sector

Posted on about 8 years ago by Gerry Kennedy


There has been a significant uptake in mergers and acquisitions activity in the pharmaceutical and life sciences industry in recent years, as a range of factors prompt companies to invest and consolidate. This is significantly important to Ireland, given the number of indigenous and multinational companies that operate in the sector here, and it could see the landscape shift dramatically in the coming years.

Benjamin Perkins, head of US Life Sciences M&A at EY, said that one of the leading factors behind this rise in activity is the change in the types of medicines being developed by firms. "There's been a real increase in the amount of drugs that are developed around targetted therapies, so the ability to treat a specific patient given their immune system, and using the immune system to target the disease," he said. "We've seen real specialised medicines that have driven higher prices and an ability for pharma companies to treat patients one at a time," he said,

Of course big pharmaceutical companies generate big revenues - and a lot of that money is pumped back in to research and development as they seek to keep on the cutting edge of medicine. However that does not seem to be enough as they are also increasingly active acquirers of smaller firms, which is a very easy way for them to buy up expertise and intellectual property for use in their own business.

"I don't think they'd admit that they can't [innovate] internally, but the smaller companies have an easier time changing course," he said. "So as a science changes course and leads one towards diabetes or cardiovascular, it's easier for a smaller company to make that shift, versus a larger company that's entrenched in a specific disease area and wants to marshall their forces towards that disease outcome," he explained.

Regulation plays a big part in all of this - both in terms of getting approval for new treatments and paving the way for - or blocking off - mergers and acquisitions within the field. One of the most recent, high-profile examples of that was the US Treasury Department's rule change in relation to inversions. This move killed off the planned tie-up between Pfizer and Allergan and put many other deals in the balance. "In the US we still struggle with the ability to leverage every asset you have in an M&A transaction. It's a hyper-competitive market and you want to put your best foot forward," Mr Perkins said. "We don't have the right tax system today to maximise American-based companies' ability to compete in a global M&A market. That's something that we're struggling with and it's something that we'll continue to struggle with," he added.

How willing big firms are to doing business will be of interest to many in Ireland, which boasts a strong life sciences and med-tech industry. Mr Perkins said it was probably a bad idea for a firm to set-up with a view to being acquired by a bigger player down the line - but that being said there's no harm in them ensuring they're correctly positioned to take advantage of any acquisitive interest should it come their way. 

According to Mr Perkins some smaller companies make big mistakes in this regard - either by being ill-prepared or by focusing on the wrong things as they develop. "It's very important to have the data to justify the outcome with whatever disease you're trying to treat," he said. "I wouldn't spend as much time building out the infrastructure, because ultimately your acquirer will have that infrastructure and the ability to market your products globally.