Company Analysis - Mergers & Acquisitions
Death of the megadeal - the changing face of the pharmaceutical industry
The merger and acquisition (M&A) landscape of the pharma industry has always been a vital indicator of growth for business, and is often punctuated by huge ‘megadeals’ which can affect the entire industry.
However, a change in this trend appears to be underway and, looking at the industry as a whole, it seems to be a symptom of a major upheaval taking place in the industry at the moment, in which the original megadeal is no longer a viable path to growth.
Looking back at the M&A trends in 2007, there was a significant increase in the value of activity that took place. The total value of M&A deals was US$79.5bn, a massive 43% increase from 2006’s total of US$55.7bn, and yet there were at most only three that could be considered large and none whatsoever that could qualify as a megadeal. This apparent discrepancy is a reflection of the new way of doing business – big companies making strategic yet still relatively small-scale M&A to bolster their pipelines in key cutting-edge areas.
The first quarter of 2007 saw biotechnology firms signing the highest number of deals, measured by dollar value, ever recorded. The deals being established nowadays are broader and more varied than simple acquisitions, encompassing joint-ventures, codevelopment and co-promotion agreements. This more collaborative model shares the risks and costs between firms as well bringing a wider experience base to the development of drugs – further supporting future innovation.
