The popular saying ‘United we stand, divided we fall’ is a popular phrase which signifies various aspects of coming together for a common goal or a purpose. This has been a recurring feature for the global pharmaceutical industry as well. As pressures on drug manufacturing, research and development and regulatory aspects have been on the rise because of the competitive business environment the pharmaceutical industry worldwide growth has reached a saturation point.

Today, there is a global trend towards consolidation and going forward, as pressures on the pharmaceutical industry increase, this trend will continue. The lack of research and development (R&D) productivity, expiring patents, generic competition and high profile product recalls are driving the mergers and acquisition (M&A) activity in the global pharmaceutical and biotech sector.

The decrease in M&A activity occurred across all sub-sectors, hitting in particular (bio)pharma – which experienced a 56% decline in value from 2016 to 2017.

Moreover, in value terms, nothing has ever come close to the 1999 acquisition of Warner Lambert by Pfizer, worth a massive $111.8 billion, but which, adjusted for inflation, would have been a staggering $160 billion.

Deal making will continue be a key growth strategy for pharma companies looking to acquire new drugs and technology, and improve their market position by expanding into new markets. Pent up demand, surplus cash, and tax reform are expected to drive greater activity within the sector in 2018. The factors favoring the M&A activity in 2018 includes:

· Demand for innovative new medicines is rising rapidly across developing and developed markets – fuelled by aging demographics and global population increases: Instead of developing new pharma products internally (a path requiring significant investment and time), pharma companies are increasingly reviving their drug development pipeline by acquiring smaller peers’ pioneering innovative drugs or technology in new markets.

These companies excel in the discovery and development of new drugs, but they struggle when it comes to building sales force to commercialize their products.

· Growing competition will continue to make companies acquisitive: As competition from big pharma is increasing, the companies in mid-market are seeking M&A to allow them to keep up with consolidating rivals and respond to the changing dynamics of the market.

· Divestment and restructuring are making pharma companies cash rich for acquisitions: Challenging market conditions are forcing companies to divest non-core assets and restructure business operations to give themselves more purchasing power to continue the dealmaking route.· Trump’s decision to lower corporate tax rate to 21% and in the ability to more easily access offshore earnings. In fact, the mandatory repatriation at a reduced rate of 15.5% on cash earnings and 8% on non-cash earnings will likely result in companies bringing back billions of dollars, which are expected to be used, at least in part, for external growth strategies. The tax reform includes a huge cut in the overall tax rate, down to less than 20% for most companies, leaving large pharmaceutical giants with an influx of excess cash. This has the potential to significantly alter the market as companies allocate the excess to various strategies, including opening new plants, rewarding stakeholders, and most interestingly, looking for mergers and acquisitions (M&A).

In January 2018, Celgene completed buyouts of Juno Therapeutics ($9B) and Impact Biomedicines ($7B) to expand its oncology pipeline. On the merger front, Impax Laboratories and Amneal are looking to close their merger in H1 2018, propelling the newly formed company to become the fifth largest generics maker in the US.

Of the total deals tracked in 2017, just 15 had a potential value of over $1 billion to the sellers, compared with 23 in 2016 and 30 in 2015. The combined value of these 15 deals was $149.51 billion.

The $69 billion merger of CVS Health and Aetna was by far the biggest healthcare M&A deal announced in 2017, but given it is the combination of a US drugstore chain and a healthcare insurer, it was not strictly speaking a “pharmaceutical” deal. At $30 billion, the Johnson & Johnson acquisition of Swiss biotech Actelion, which was first mooted in 2016 but only formerly pursued in 2017, was by far the biggest pure biotech/pharma transaction of the year.

The other ‘billion-plus’ deals were:

Japan-based Takeda Pharmaceutical $5.2 billion purchase of US firm Ariad Pharmaceuticals

Pamplona Capital Management’s $5.0 billion acquisition of US firm Parexel

Venture capital firms Bain Capital and Cinven $4.36 billion buy of German generics and OTC drugs maker Stada Arzneimittel

Fresenius Kabi’s $4.3 billion acquisition of US firm Akorn

Swiss pharma giant Novartis’ $3.9 billion takeover of French firm Advanced Accelerator Applications

Bristol-Myers Squibb’s $2.3 billion acquisition of IFM Therapeutics, though the upfront payment of this was just $300 million

Swiss giant Roche’s $1.7 billion buy of USA-based Ignyta

Chinese firm Creat Group Corp $1.3 billion takeover of Germany’s Biotest

Mallinckrodt’s $1.2 billion buy of fellow USA-based Sucampo Pharmaceuticals

Japan-based Mitsubishi Tanabe Pharma $1.1 billion takeover of Israeli firm NeuroDerm

Sawai Pharmaceutical’s, also of Japan, $1.05 billion acquisition of the generics business of US firm Upsher-Smith



