Dive Brief:
- The volume of pharma and biotech deals fell in the first quarter year-over-year, but values spiked 141% from the fourth quarter, driven by high-value deals, according to the quarterly Global Pharma & Life Sciences Deals Insights from PricewaterhouseCoopers.
- Big pharma deal value fell by 79% between the first quarter 2017 and the first quarter 2018, whereas biotech activity remained flat.
- PwC expects increased overall pharmaceutical and life science deal activity in the second quarter of 2018, driven by pharma and biotech activity.
Dive Insight:
Deal-making, mergers and acquisitions are the lifeblood of the pharma and biotech industry, supporting collaboration, helping small companies move products forwards, and giving larger companies the opportunity to build out their pipelines. However, according to the PwC quarterly analysis, both the value and the numbers of deals fell comparing the first quarter 2018 with the first quarter 2017.
Compared to the fourth quarter 2017, while deal numbers remain down deal values were up by 141%, driven by four high-value deals.
Almost 90% of the deal value has come from biotech. The list includes Celgene Corp's deals to acquire Juno Therapeutics, Inc., worth $9.3 billion, and an acquisition of Impact Biomedicines that could hit $7 billion; Sanofi SA's $11.6 billion buyout of Bioverativ Inc.; and Roche AG picking up Flatiron Health, Inc. for $1.9 billion. The push behind biotech dealmaking for the rest of 2018 may include consolidation of some of the larger biotechs, as well as demand for innovation if Food and Drug Administration approval levels remain high.
PwC expects increases in overall pharmaceutical and life science deal activity in the second quarter of 2018 driven by "pent up demand and surplus cash" in big pharma and biotech. This step, however, may need a big deal as a 'jump-start' to get things moving, in big pharma at least.
"While Q1 2018 continued to show declines in volume, we believe the fundamentals for deals have never been better and continue to believe that this is the calm before the storm," said Glenn Hunzinger, U.S. deals leader at PwC in the report.
"While the last year has seen companies remaining disciplined in their investing, there will likely be deals that act as a catalyst to facilitate further consolidation, and more importantly, divestitures. We see divestitures playing an important role in 2018 for PLS [pharmaceutical and life science] companies to extract value and reshape their business."