Express Pharma

US regulations hit global PMB M&As

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Mergermarket in the global Pharma, Medical & Biotech (PMB) sector report for Q1 –Q4 2016, highlights that total deal values for the sector fell 27.8 per cent in 2016 to their third highest values on Mergermarket record (since 2001), $283.4 bn, from 2015’s record-breaking $392.4 bn

Global Pharma, Medical & Biotech (PMB) M&A felt the heat for the first time since 2014 from US regulations targeting tax inversion deals for the third year in a row, though still managed to take advantage of the need for consolidation in an environment of cheap financing. Total deal values for the sector fell 27.8 per cent in 2016 to their third highest values on Mergermarket record (since 2001), $283.4 bn, from 2015’s record-breaking $392.4 bn. Volume, despite dropping by 52, finished the year with 1,439 deals, the second highest number of transactions on record after the previous year’s 1,491. Government regulations also appeared to have an effect on cross-border activity. 2016 saw 468 such deals worth $126.5 bn, a 21.8 per cent decrease in value with 38 fewer deals compared to 2015’s 506 deals worth a total of $161.7 bn. 2016 also saw a 51.5 per cent decrease in value with 26 more deals compared to 2014 (442 deals, $260.9 bn). Mergermarket highlights the last two years, as 2014 hit highs for deal values and then saw a drop off that paralleled regulation roll-outs.

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The US was once again the most targeted region for PMB M&A activity, with 528 deals worth $176.7 bn. This figure is a 40.8 per cent decrease with 74 fewer deals compared to the 2015 values ($298.4 bn, 602 deals). 2016 also saw the US’s global market share decrease from 76 to 62.4 per cent. Chinese inbound activity for the US reached all-time highs in 2016, a trend that can also be seen in the PMB sector. The year saw China’s highest investment values in US PMB assets ever with $1.5 bn and eight deals, also notable as the first time that Chinese inbound deals into the US’s PMB sector surpassed a billion dollars. With Chinese regulatory bodies looking to significantly reduce the outflow of capital from its borders, such a trend may not continue in 2017.

Europe’s share in global PMB M&A values jumped the most this year, rising from 8.4 per cent in 2015 to 20 per cent, recording 461 deals worth a total of $56.6 bn, a 71.8 per cent increase with 23 fewer deals compared to 2015 ($33 bn, 484 deals). The two largest transactions, Boehringer Ingelheim’s $12.6 bn acquisition of Merial SAS. and Mylan NV’s $9.9 bn acquisition of Meda, both had bidders and targets based in Europe. Both were also pharmaceuticals transactions.

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Although the pharma sub-sector had four of five of the largest valued deals, it was not the top sub-sector for 2016, seeing 348 deals worth a total of $127.7 bn and the largest decrease in value (40.3 per cent) with 40 fewer deals from 2015’s 388 deals worth a total of $214 bn. Medical was the largest sub-sector in 2016, with 926 deals worth a total of $133.6 bn, down 16.9 per cent with 29 fewer deals from 2015’s $160.7 bn, 955 deals. The medical sub-sector was highlighted by medical device transactions seeing a large increase in activity. In 2016, medical device transactions saw 94 deals worth $58.5 bn in value, which is 43.8 per cent of total medical deal value for the year. 2016’s medical device performance is even more impressive considering it was a 198.5 per cent and 143.8 per cent increase from 2015 and 2014 figures, respectively, which were not only record years for M&A, but also for PMB M&A. Lastly, biotechnology saw 165 deals worth $22 bn, up 24.5 per cent with 17 more deals than 2015 ($17.7 bn, 148 deals).

Despite regulatory issues resulting in the collapse of high profile deals such as Pfizer’s $183.7 bn bid for Allergan in 2016, global PMB deal activity still managed to finish the year strongly. Anticipation over president-elect Donald Trump’s proposed tax holiday for companies to repatriate cash could also lead to more activity next year.

However, other Trump proposals such as trade and immigration restrictions could also cause problems for companies’ growth strategies, leaving 2017 a difficult year to predict.

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