- January 16, 2018
In a new report, the financial news service found that biotech deals in 2017 “are on pace for almost half the yearly totals of the past two years,” with just $11.5 billion in takeovers made by August 2017, half the total over the 24 months prior. And Bloomberg adds that global biotech mergers and acquisitions “are headed for the lowest annual level in four years.” In 2016 and 2015, total M&A deal volume hit more than $30 billion, and more than $25 billion in 2014. Four (4) years ago, in 2013, deals were at the lowest ebb in recent times, at less than $10 billion.
Why the sluggish activity in 2017? Look no further than President Donald Trump’s promised tax reform, still to be clarified, which is seeing potential buyers hold fire, according to analysts. It also comes as Big Pharma CEOs have repeatedly stated in their last few quarterly financials that they are seeking smaller, bolt-on deals, and see valuations for many biotechs as too high. It also comes amid a small R&D sell-off in Q2, with a number of Big Pharmas, including GlaxoSmithKline and Lilly, licensing out or changing up their pipeline in a series of reconfigurations.
Potential pricing restrictions are still a specter haunting biopharma; however, the threat appears to be waning as the current administration deals with issues such as the Obamacare, immigration and reducing regulation. As EP Vantage noted in its recent “2017 Pharma and Biotech Half-Year Review” report: “After the first half of 2017 biopharma investors are in a position to be exuberant: the threat of U.S. price controls that have overshadowed the sector for a year have largely disappeared.”
It, too, notes that M&A deals have “disappointed,” saying: “One could point to the macro issues of a lack of corporate tax reform and big pharma’s inability to use overseas cash to fund domestic transactions as holding back M&A activity. “However, big pharma still is confronting high biotech valuations, making them reluctant to take big acquisition risks.”
REFERENCE: Fierce BioTech; 18 AUG 2017; Ben Adams