The state of pharma mergers and acquisitions in 2018

In the age of spiralling research and development costs and the pressure to minimize risk and maximize reward in bringing new drugs to market, the pharmaceutical industry’s biggest players increasingly look to smaller companies with innovative pipelines to bolster their own portfolios and maximize profits.

The cost of developing a new drug, factoring in pipeline failures and operational costs over the years spent doing so, has recently been quoted in excess of $2.5 billion and it can take as long as ten years from synthesis to approval. No wonder the large companies look to ways to cut this time and cost, boosting mid to late-stage pipelines.

With competition fierce, and many large companies cash-rich from high drug prices, they are still willing to consider mega-mergers where they believe a rival can fit in well with their existing structure and therapeutic priorities. The long-drawn-out collapse of Pfizer’s (NYSE: PFE) $160 billion merger with Allergan (NYSE: AGN) in April 2016 put paid to what would have been the industry’s largest ever acquisition in terms of money. Yet Pfizer seems unwilling to abandon the deal completely, sensing profitability in Allergan’s portfolio and may yet return to do business.