Why The Appetite For M&A In Healthcare Stays Strong

Think healthcare M&A is on its way out in 2016? Think again.

Following the surprising failure in April of the deal between Pfizer and Allergan, many analysts have raised concerns that a similar pattern will ensue within healthcare deal making. While the collapse of the $160bn deal was unexpected, and brought total value of abandoned deals this year to its highest since the eve of the financial crisis at $376bn, industry experts have assured critics that the death of this deal does not spell distress for the healthcare sector.

Coupled with last year’s strong M&A activity in the sector, big pharma companies looking to diversify and innovate are fuelling this appetite for deal making.

Innovative Biotechs

A growing number of large pharma companies are now avoiding M&A activity with similar companies, and instead are targeting smaller biotechs developing innovative drugs. Among these deals there is a particularly strong appetite for companies producing drugs to fight illnesses such as cancer and Alzheimer’s, which we will undoubtedly see more cases of with the rising age of the global population.

Many of these companies are in the early stages of development or regulation, while others are more established and have already gained industry regulatory standards. Regardless, these smaller bioetechs continue to be an attractive option for companies looking to expand their market share and go in new directions. Some recent deals include the $5.8bn purchase of Stemcentrx, a developer of a drug to target cancer stem cells, by AbbVie, and the $10bn acquisition of Medivation, involved in blood and breast cancers, by Sanofi.

Pfizer

Pfizer is a key example of this approach, and, despite the collapse of the company’s megadeals with AstraZeneca in 2014 and Allergan in 2016, the global pharma group has not retreated from deal making. Shortly after the Allergan deal collapsed, Pfizer moved straight on to its next, albeit smaller, acquisition opportunity, purchasing Silicon Valley biotech group, Anacor, for $5.2bn. As Anacor are specialist developers of a drug for eczema, the deal was the ideal opportunity for Pfizer to continue the trend of giant pharma groups snapping up smaller, specialised drug companies.

Despite a recent dip in activity the appetite for healthcare M&A remains strong and 2016 is set to match the record figures of last year. With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.

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