Deal Capsule - Transactions in Pharmaceuticals January 2016

Deal Capsule - Transactions in Pharmaceuticals Jan 2016

Big Pharma continues to acquire biotechs to replenish its R&D pipeline, as transactions are done increasingly in the earlier R&D stages. KPMG’s Deal Thermometer indicates that the environment for M&A activity will remain ‘Hot’ in pharmaceuticals.


Deal focus areas

Pharmaceutical deal activity continued at a frenzied pace during 2015 with the value of the top 10 completed deals doubling to $ 179 billion. Strategic repositioning is a key driver for pharmaceutical M&A and competition for assets has increased further. US remains the most active country.

Top pharmaceutical players engaged in focused deal making to move into leading market positions by strengthening their pipelines in their designated core therapy areas.

In Q2 2015, Actavis PLC acquired Allergan Inc. for $ 70.5 billion, creating one of the world’s top 10 pharmaceutical companies. Actavis took the Allergan name and announced the divestment of its generics business to Teva Pharmaceutical Industries Ltd. for $ 40.5 billion, advancing its transformation into a branded drugs specialist with a market cap of $ 110 billion.

Through its acquisition of Allergan’s generics business, Teva Pharmaceutical Industries Ltd. would reach top three positioning in over 40 markets and solidify its global leadership in generics with a market share of 20%.

In Q4 2015, C.H. Boehringer Sohn AG & Co. KG (BI), announced negotiations with Sanofi. BI would swap its consumer healthcare business (excluding China), worth € 6.7 bn., for Sanofi’s animal health business, worth € 11.4 bn.; and pay € 4.7 bn. Sanofi would become number one in consumer health care with estimated 2015 proforma sales of € 5.6 billion. At the same time, through complementing its companion animals, poultry and swine portfolios, BI would become the number two animal health player with estimated 2015 proforma sales of € 4.2 billion.

Growing public debate over drug pricing

Prescription drug hikes by companies such as Turing Pharmaceuticals LLC and Rodelis Therapeutcal caused political outrage with US presidential candidate Hillary Clinton presenting a Plan for Lowering Prescription Drug Costs in Q3 2015. Uncertainty among investors negatively impacted share prices.

Pfizer takes deal frenzy to new level

In Q4 2015, Pfizer Inc. and Allergan announced talks on a potential $ 160 billion merger – the largest-ever pharmaceutical and third-largest deal across all industries.

With a market value over $ 300 billion, the new entity would overtake Johnson&Johnson Services Inc. as the world’s largest life sciences company.The aligned portfolio including Botox, Viagra, the Prevnar pneumonia vaccine and treatments for Alzheimer’s and rheumatoid arthritis, could initially generate annual sales of over $ 65 billion. The transaction would further result in a domiciliation of Pfizer to Ireland.

Pfizer has a reputation for large -scale transactions with three other deals among the top five in pharma M&A history: the acquisitions of Warner -Lambert Co. for $ 89 billion and Pharmacia Corp. for $ 60 billion in the early 2000s and that of Wyeth for $ 67 billion in 2009.

Market outlook

(Based on a survey conducted by KPMG in collaboration with Mergers & Acquisitions magazine)     

  • Technology and pharmaceuticals/biotechnology are expected to be the most active industries for M&A in 2016.
  • Pharmaceuticals/biotechnology M&A activity will be driven by the need to access clinical research and by patent expirations for many leading drugs.
  • Most active markets will be North America and Western Europe.

Capital index

All pharma indices outperformed the market in 2015. Both, the European (+11.6%) as well as the Asian Pacific index (+23.8%), rose strongly while the US index recorded only moderate growth of 3.3%.


Big pharma is rapidly buying Biotech’s rare disease portfolios. For instance, Alexion Pharmaceuticals Inc. acquired Synageva BioPharma Corp. for $ 8.4 billion in Q2 2015. With eight clinical trial candidates (several are designated breakthrough therapies with FDA priority review status) and over 30 preclinical programs across diverse therapy areas, Alexion will have one of biotech’s most robust rare disease pipelines.

In Q4 2015, Shire PLC announced the acquisition of rare disease specialist Dyax Corp. for $ 6.5 billion, securing Shire’s hereditary angioedema portfolio. Its lead fast track, breakthrough therapy and orphan drug-designated phase three-ready product, DX- 290, is considered to have blockbuster potential. At the time of publication, Shire had increased its bid for Baxalta to $ 32 billion. This would further strengthen Shire’s rare disease portfolio.

AstraZeneca PLC (AZ) has also been replenishing its pipeline through acquisitions. AZ acquired ZS Pharma Inc. for $ 2.7 billion to bolster its cardiovascular and metabolic disease portfolio through accessing ZS-9, a possible best-in-class specialty treatment for hyperkalaemia. AZ is also pursuing a deal with Acerta Pharma BV for $ 4 billion, adding an experimental drug for leukaemia, lymphomas and other cancers to its portfolio.

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