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Pharmaceutical M&A deals in 2017


BioTaiwan Exhibition


Date: 2018/01/08

In 2017, deal volume in the healthcare sector overall was very active as far as mergers and acquisitions (M&A) were concerned. However, in the biotech and pharma space it was at the lowest levels in many years and a fraction of that of the boom years of 2014 and 2015. The actual number of pharma/biotech M&A transaction announcement tracked by The Pharma Letter for full-year 2017 was just 101, compared with 130 in 2016 and 166 in 2015, which was a record year. Moreover, in value terms, nothing has ever come close to the 1999 acquisition of Warner Lambert by Pfizer (NYSE: PFE), worth a massive $111.8 billion, but which, adjusted for inflation, would have been a staggering $160 billion.


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 as covered in The Pharma Letter’s annual review of activity in this sector.


At $30 billion, the Johnson & Johnson (NYSE: JNJ) 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.


Besides Gilead Sciences’ (Nasdaq: GILD) $11.9 billion purchase of Kite Pharma, and Thermo Fischer’s $7.2 billion takeover of Dutch group Patheon, 2017 was a rather quiet one on the M&A front in the pharmaceutical sector. 


As well at the Kite deal, which took anti-virals biotech giant Gilead into the field of cell therapy, the company made a smaller acquisition, that of USA-based Cell Design Labs for $175 million upfront plus $322 million contingent, thus gaining new technology platforms that it hopes will further enhance its research and development efforts in cellular therapy.


The other ‘billion-plus’ deals were:

  • Japan-based Takeda Pharmaceutical (TYO: 4502) $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’ (NOVN: VX) $3.9 billion takeover of French firm Advanced Accelerator Applications
  • Bristol-Myers Squibb’s (NYSE: BMY) $2.3 billion acquisition of IFM Therapeutics, though the upfront payment of this was just $300 million
  • Swiss giant Roche’s (ROG: SIX) $1.7 billion buy of USA-based Ignyta
  • Chinese firm Creat Group Corp $1.3 billion takeover of Germany’s Biotest
  • Mallinckrodt’s (NYSE: MNK) $1.2 billion buy of fellow USA-based Sucampo Pharmaceuticals
  • Japan-based Mitsubishi Tanabe Pharma (TYO: 4508) $1.1 billion takeover of Israeli firm NeuroDerm
  • Sawai Pharmaceutical’s (TYO: 4555), also of Japan, $1.05 billion acquisition of the generics business of US firm Upsher-Smith


Venture capitaists active

Activity in the pharma/biotech sector by venture capital groups was evident. Apart from the Stada Arzneimittel and Parexel deals mentioned above, these included :

  • Carlyle Group and Pacific Equity Partners' acquisition of the iNova unit from Canada’s Valeant Pharmaceuticals International for $930 million
  • Carlyle and GCTR’s buy of USA-based Albany Molecular Research for $922 million
  • A GL Capital led consortium of Chinese investors buy of SciClone Pharmaceutical of the USA for $605 million
  • Gurnet Point Capital acquiring Ireland’s Innocoll Holdings for $209 million
  • Haitong International Zhongua Finance buying another Valeant divestment, namely Obagi Medical for $190 million; and SK Capital’s acquisition of the Israel-based API business of Perrigo for $110 million


Many drug and biotech giants appeared to sit on their hands while US tax reform wound its ways through congress, noted Bret Jensen on the Seeking Alpha blog. He says there are several reasons to believe that M&A activity picks up markedly in the 2018, which will be a tailwind for the sector. However, now that clarity has been provided around repatriation and with the corporate tax rate dropping to 21% from 35% as well as R&D write off criteria being defined, the lay of the land is known.


Large industry concerns have hundreds of billions of dollars 'stashed' in their overseas operations. A significant portion of that could make its way home and provide fuel for M&A in the coming year.


- Barbara Obstoj-Cardwell - 


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