Expert View: Research by acquisition: big pharma's new business model

In our weekly expert view piece, Joe Stelzer, managing partner at Cavendish Corporate Finance LLP, examines the emerging ‘research by acquisition’ model in big pharma.

Shaken by record M&A activity reaching an unprecedented $575 billion last year, up from $380 billion in 2014[1], the pharmaceutical, medical and biotech sector is undergoing seismic changes. Giant conglomerates routinely emerge out of multi-billion dollar transactions, with names often changing with the next deal as another acquirer enters a bid.

Nor is this frenzy likely to abate: a recent MergerMarket survey finding that senior executives unanimously anticipated that M&A would continue to increase into first-half 2016. While some of this is to be expected in light of the new highs reached by global M&A, the central role of pharma M&A can also in large part be attributed to a shift away from the traditional in-house research model which traditionally defined the industry, and towards a lower risk, ‘research by acquisition’ model.