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Mergers and acquisitions in the pharmaceutical sector this year

Although 2022 was a relatively subdued year in terms of activity, M&A transactions have always played a key role in the pharmaceutical industry. This year has seen a noticeable increase in deal activity as companies look to leverage M&A to achieve their growth objectives. Major players such as Pfizer, AstraZeneca and Merck have unveiled ambitious acquisition strategies that have the potential to change the face of the industry.

As reported by the Financial Times, the pharmaceutical and biotechnology sector has seen a significant uptick in deals, with a staggering $85 billion spent on acquisitions in the first five months of this year. This surge in M&A activity comes as companies look to replenish their drug portfolios in the wake of impending patent expiries. By comparison, the same period in 2022 saw deals worth only US$35.6 billion, while 2021 saw US$49.1 billion, according to investment bank Stifel. The increased M&A activity is primarily driven by the significant cash reserves that big pharma companies accumulated during the COVID-19 pandemic and investor concerns about future growth prospects.

In recent months, the pharmaceutical and biopharmaceutical industry has seen several significant acquisitions. In January, AstraZeneca announced the acquisition of CinCor for $1.8 billion, primarily for its aldosterone-lowering drug baxdrostat. Then in March, Pfizer made headlines when it acquired Seagen for a whopping $43 billion. The deal marks the largest acquisition in the biopharma sector since June 2019, when AbbVie bought Allergan for $63 billion. Seagen boasts four commercial drugs and a portfolio of antibody-conjugated drug candidates (ADCs). In the same month, Sanofi announced a $2.9 billion takeover deal for Provention Bio Inc. and offered $25 per share, more than triple the stock price at the time. In April, Merck entered into a binding agreement to acquire biotech company Prometheus Biosciences for $10.8 billion to bolster its immunology program. In addition, GSK bought Canada's Bellus Health for USD 2 billion. In May, Japanese biopharmaceutical company Astellas acquired Iveric Bio, a pharmaceutical company specialising in eye treatments, for USD 5.9 billion. The last two major acquisitions have taken place in the last two weeks. Novartis agreed to acquire Chinook Therapeutics for $3.5 billion, strengthening its kidney disease treatment program, and Eli Lilly announced this week that it has agreed to acquire Dice, a specialty oral autoimmune disease treatment company, for $2.4 billion.

Among other things, Amgen is about to complete its $27.8 billion acquisition of Horizon Therapeutics. Horizon Therapeutics focuses on rare and rheumatic diseases and had revenues of $3.6 billion in 2022, primarily due to the success of Tepezza, a drug used to treat patients with chronic thyroid disease. Last month, however, the Federal Trade Commission took the unexpected step of blocking the takeover with a lawsuit. The FTC warned that "rampant" consolidation in the pharmaceutical sector was driving up prices for patients. Despite the lawsuit, Amgen and Horizon Therapeutics remain optimistic and expect to complete the acquisition later this year.

Given the factors described above, increased M&A activity in the pharmaceutical sector can be expected to continue. Well-capitalized strategic buyers will continue to seek transactions more aggressively and opportunistically, although the broader market environment remains uncertain.