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Pharma industry braces for more M&A deals
Improved sales whet appetite for strategic expansion amid patent expirations
Jayde Cheung 9 Feb 2024

As drug revenue continues to improve even after the pandemic, hopes are high that the pharmaceutical industry will see more mergers and acquisitions (M&A) activity, with pending deals having piled up since late 2022 amid the high interest rate environment.

The industry saw M&A deals surge 79% to US$152 billion in 2023 from the previous year, with the average deal size up at US$5.6 billion, according to IQVIA, a multinational healthcare and clinical research provider based in Durham, North Carolina. The sector, however, remained cautious about risky deals involving products in the early stages of development.

Well-established in the research and development (R&D) area, mature pharma companies will eye M&A deals “to secure a more stable future”, Standard Chartered says in a report.

Despite the cash-burning nature of R&D, leading pharma firms continue to see healthy revenue growth, which in turn will fuel more M&A activity in 2024, according to S&P Global.

Goldman Sachs estimates that global pharma companies have been sitting on US$700 billion in cash since last July, bracing for more M&A deals.

“There’s tremendous interest in M&A driven by the fact that pharmaceutical companies are facing big cliffs towards the end of the decade, with roughly US$200 billion in revenue,” Goldman Sachs reports. “That will erode as a result of patent expirations that will allow for competition from generic drugs.”

Japanese deals

The United States accounted for most of the top deals in 2023, but Asia is increasingly making its presence felt in the M&A space, with China and Japan as the second and third largest pharma markets respectively becoming active acquirers last year.

China saw a sluggish recovery from Covid lockdowns, but Japan started to pick up in M&A activities after seeing a deep shrinkage in deal size in late 2022, data from analytics firm GlobalData show.

Sosei Heptares, the corporate brand of Japanese drug maker Sosei Group, acquired Basel, Switzerland-based Idorsia’s Japan and Korea branches last July. Idorsia laid off 300 employees, mainly from the R&D departments, as part of a cost reduction initiative following the Sosei deal.

In another sizable deal in Japan in 2023, healthcare chain Qol Holding agreed in May to acquire Daiichi Sankyo Espha, a subsidiary of one of Japan’s largest pharmaceutical companies Daiichi Sankyo, for 25 billion yen (US$167 million).

India acquisitions

India’s pharma industry saw massive funding activities last year. In May Mankind Pharma raised 43.26 billion rupees (US$521 million) in the country’s biggest initial public offering for 2023, with the shares gaining 31.7% on their trading debut.

Several Indian conglomerates also branched out to the pharmaceutical business. Following the failed attempt of billionaire Mukesh Ambani’s Reliance Industries to acquire Nasdaq-listed healthcare chain Walgreens Boots Alliance, Nirma Group, which specializes in personal care products, took over Bengaluru-based eye drops manufacturer Stericon Pharma in March. Nirma also snapped up a 75% stake in Glenmark Life Sciences, a unit of Glenmark Pharma, in September for 56.5 billion rupees.

The US unit of Natco Pharma, an Indian pharmaceutical company focused on R&D, had earlier acquired Dash Pharmaceuticals, a New Jersey-based distributor of generic drugs, for US$18 million. Dash was officially integrated into Natco Pharma USA in January 2024.

Singapore is also building a reputation in the global drug industry with 60 pharmaceutical manufacturing facilities, supported by friendly government policies, according to BMI Research.

In June, Singapore-headquartered iNova Pharmaceuticals acquired a portfolio of consumer healthcare brands from Mundipharma International, a British multinational pharmaceutical company owned by the Sackler family, for US$540 million. The portfolio contributed 80% of Mundipharma’s total sales, led by iodine disinfectant solution Betadine.

The deal was approved by Singapore’s Competition and Consumer Commission in late 2023.

“With massive cash volumes on hand, pharma companies will look for innovative assets to acquire in traditional areas, such as oncology and rare diseases, as well as emerging areas, such as weight loss, cell and gene therapies, and precision medicine,” says Bain & Company.

“While there may be continued demand for biotech targets… many other sellers may retain their stance and avoid selling at low valuations despite macroeconomic pressure and lower funding levels.”

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