Billions of dollars are being spent on mergers & acquisitions (M&A) by bio/pharma companies, with average deal value increasing significantly over 2018 and 2019. This year despite the Covid-19 pandemic, M&A activity was boosted by the closing of the $85B acquisition of Allergan by AbbVie in May 2020 to an aggregate deal value almost twice that of 2017, which had the lowest deal value over the last five years. Similarly, mega M&A deals such as the $89.5B 2019 acquisition of Celgene by Bristol-Myers Squibb resulted in higher total deal value, as found by GlobalData’s Pharmaceutical Intelligence Center Deals Database. In fact, the two biggest acquisitions of 2019 alone accounted for almost 60% of the year’s total deal value, emphasising this trend of fewer deals of higher value.
Figure 1: Total Deal Value and Total Deal Volume for Completed Mergers & Acquisitions From 2016 to 2020.
Source: GlobalData, Pharmaceutical intelligence Center Deals Database (Accessed 11 December 2020).
Note: Total Deal Volume and Total Deal Value are for completed M&A deals with deal values only. Only companies with drugs are included.
M&A deal value was the highest of recent years in 2019, yet this was also the year of the fewest deals, with an aggregate deal value of more than $262B across 177 deals, as shown in Figure 1. This year (up to 1 December) M&A deal value was down only 13% compared with last year, making it the second-highest year for M&A deal value of the last five years. It seems that Bio/Pharma companies continue to utilise M&A as a source of innovation and development, with large cap Bio/Pharma especially preferring to acquire innovative biotech rather than risk the staggering and ever-growing cost of internal R&D investment.
The occurrence of multiple record-breaking mega deals in the pharmaceutical industry in recent years highlights this trend, with large cap Bio/Pharma spending billions on acquisitions. Bristol-Myers Squibb’s November 2019 acquisition of Celgene, which expanded its portfolio into oncology and immunology, was valued at $89.5B, and Takeda’s acquisition of Shire in January of the same year, also for portfolio diversification purposes, was valued at $62.2B. The $85.7B acquisition of Allergan by AbbVie completed this year, and AstraZeneca’s December 14, 2020, announcement that it will acquire rare disease company Alexion Pharma for $39B, with the deal expected to complete in Q3 2021, suggests 2021 will be another year of high deal value despite lower deal volume. It is likely that this trend of mega-deals will continue, as Big Pharma continue to favour M&A over internal R&D as a means of innovation and portfolio diversification.
M&A deals are a core driver of growth in the Bio/Pharma industry, and it seems that the impact of Covid-19 has not hindered deal-making as much as may have been expected in 2020. In fact, it may have boosted M&A activity as Big Pharma market caps have risen while R&D and sales activities are hindered. The last five years have seen M&A deal values sky-rocket, but deal volume decrease, and it is likely that this trend, as well as the presence of mega-deals between large corporations, will continue in the next few years.