Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.
Nov. 9 — Ninety percent of life sciences companies plan to make an acquisition over the next year, most likely in personalized medicine, according to a survey report released Nov. 9.
The majority of the executives surveyed indicated that they are looking for cross-border deals to drive their companies' growth and give them international reach and new drug pipelines, with preferred acquisition targets being in the Asia-Pacific (APAC), North America or Western Europe.
They also said that they will finance the deal with cash at hand.
“[M]any pharmaceutical companies are already sitting on large cash piles. In the U.S. alone, one analysis published by Moody’s earlier this year suggested that businesses in the pharmaceutical sector had combined cash reserves of $136 billion,” the report said, adding that investors are pressuring the companies to put the money to good use or return it to them.
Another criteria of the ideal acquisition for these executives is that the target company is working in personalized medicine rather than with broad indication drugs.
The report, titled “Life Lines: Life sciences M&A and the rise of personalised medicine,” was published by the global law firm Reed Smith and was based on interviews with 100 biopharma senior executives. The location of their companies was evenly split among the U.S., Europe and Asia.
For many life sciences companies, the report said, mergers and acquisitions (M&As) are now the preferred way to deliver the growth to which their investors have become accustomed. The costs and risks of developing new products in-house invariably is far higher than buying a business that already is far along in the development of a breakthrough drug.
Reed Smith quoted a European biopharma executive as saying, “It makes sense to acquire companies involved in late-stage R&D as the failure rate of early-stage R&D is so high and the mistakes are only realized when resources and time have already been utilized.”
• 71 percent of companies see M&A as their most likely route to recovery of investment costs and mitigation of deal risks;
• 28 percent reported they are targeting the APAC region due to its large population base combined with developing markets, where demographic changes and increasing personal incomes are combining to create ever larger customer bases for pharmaceutical businesses, with 19 percent favoring North America and 19 percent Western Europe;
• 74 percent hope to buy companies with products that have early-stage R&D potential, while almost as many—69 percent—are targeting companies active in late-stage R&D;
• 79 percent intend to increase their investment in marketing/distribution and 70 percent in drug discovery/early-stage R&D;
• 87 percent will finance their acquisition with cash at hand while only 50 percent will utilize the cash/debt market; and
• in addition to M&A, biopharmas are taking on initiatives involving partnerships and tie-ups with contract research organizations.
“It would seem from these findings that life sciences companies currently favour deals over organic growth,” the report said.
The report said that there may be some falling off of M&A in the last half of 2015. But globally, the interviews with biopharma executives indicated that the M&A trend is expected to continue.
Mao Rong, Reed Smith counsel in Beijing, said in the report, “Despite the slowdown, life sciences companies are still actively exploring opportunities in China. Corporates are doing deals to access new markets, expand their distribution as well as targeting local R&D capabilities. Corporates need to be aware of challenges such as limited assets with the right synergies and the Chinese government’s support for local businesses.”
A report released Nov. 4 on U.S. biopharmas that was developed from filings with the Securities and Exchange Commission concluded that the appetite for M&A remains strong but concern about drug prices has made industry investors skittish.
To contact the reporter on this story: John T. Aquino in Washington at email@example.com
To contact the editor responsible for this story: Lee Barnes at firstname.lastname@example.org
The report is available at http://s3-eu-west-1.amazonaws.com/papillon-local/uploads/6/8/ReedSmith_Lifesciences_FINAL_LR.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)