Pharma M&A in decline as biotech rises

A new study from PharmaVentures notes that merger and acquisition activity among pharmaceutical firms worldwide has declined radically over the past seven years, while biotech-biotech alliances have risen dramatically.

In 1996, there were over 100 reported M&As among drugmakers but, since then, this has dropped to about 20 a year. Over the following years, this number has declined steadily to about 20 per year. The trend between biotechnology companies has been the opposite, rising from around 20 in 1996 to 91 this year as the sector undergoes major consolidation.

The report says that opportunities for consolidation among large pharmaceutical companies have declined as their options have become restricted. This is due to a falling number of suitable targets and other factors, such as increased regulatory scrutiny, while equity markets, and a need to achieve critical mass have driven biotechnology M&As.

And PharmaVentures​ says its survey of executives within the industry has suggested that this trend is likely to continue.

"What we are witnessing is the aftermath of the technology boom of 2000, where some biotech companies have faced the dual difficulty of both depleted cash balances as well as reduced market value,"​ said Dr Fintan Walton, chief executive of PharmaVentures.

"This has created an opportunity for larger and more healthy biotechs to swallow up less healthy but still promising biotech companies,"​ he continued. On the other hand, larger pharmaceutical companies have found that mergers and acquisition strategies can have mixed benefits, he suggested. Achieving a larger size provides for improved efficiencies along the value chain and greater market presence, but the consolidation process itself can have detrimental effects including the slowing down of product development.

For further information on this report, contact PharmaVentures' Rupert Winckler​ or call +44 (0) 1865 784 177.