Signs that 2018 will be a record year for pharma M&A

Michael Jewell, healthcare partner at sell-side mergers and acquisitions (M&A) advisory firm Cavendish Corporate Finance, writes an Expert View piece on the potentially busy year ahead for dealmaking in the pharma sector.

M&A activity in healthcare has been hectic in the past few months with big pharma a significant factor in this deal drive. There were some $11 billion of bids and deals in the biotech sector alone last month. What’s behind this renewed pharma M&A is blockbuster drugs coming off patent, competition from generics, weak new drug pipelines, faltering R&D and big pharma companies’ perennial search for the next generation of market-leading medicines. Also a factor has been US tax reform, which is prompting US corporates, including big pharma companies, to repatriate billions of dollars with some of it being spent on acquisitions. Though the sheer pace of dealflow has raised concerns of a valuation bubble, the fundamental forces behind this renewed deal activity are likely to see 2018 be a very strong year for pharma M&A.

There are already signs that 2018 might be a record breaking year for pharma M&A. Since the start of January, French healthcare group Sanofi (Euronext: SAN) bought US hemophilia specialist Bioverativ (Nasdaq: BIVV) for $11.6 billion, Belgian biotech company Ablynx (Nasdaq: ABLX) for $4.8 billion and Juno Therapeutics (Nasdaq: JUNO) for $9 billion. This comes alongside Celgene’s (Nasdaq: CELG) $7 billion agreed takeover of Impact Biomedicines and Novo Nordisk’s (NOV: N) $3.1 billion offer for Ablynx. In raw numbers, these deals, along with others that have been announced, have led to the sector’s strongest start for dealmaking in more than a decade.