The efforts by government and private insurers to reign in drug increases is one of the reasons that this could be a banner merger and acquisition (M&A) year for biopharma companies, according to the consulting company EY’s M&A Outlook and Firepower Report 2017. The companies see M&A as a way to make up for shortfalls in revenue that the payers’ push for lower prices have caused. Also fueling this trend is how biopharma companies’ valuations leveled off last year, according to StreetInsider.com. The expected M&A scramble is a switch from 2014 and 2015 when biopharma companies entered the stock market via initial public offerings (IPA).
There’s also expectations that business-friendlier policies of the Trump administration will drive M&A activity, especially his proposal to repatriate overseas profits back to the United States. That will mean at least $100 billion more for biopharma M&A, according to Genetic Engineering & Biotechnology News.
Also, finding opportunities in traditional growth areas has become more difficult. Once breakthrough drugs for autoimmune disease and cancer now occupy crowded therapeutic battlefields, forcing companies to tackle financially high-risk conditions such as Alzheimer’s disease.
Jeffrey Greene, EY Global Life Sciences Transaction Advisory Services Leader, says:
“Over the next 12 months, biopharma dealmaking could reach unprecedented heights with big pharma possessing both the firepower and the growth imperative to take it there,” Jeffrey Greene, EY global life sciences transaction advisory services leader tells StreetInsider. “In this potentially frenetic deal environment, companies will need to be prepared to move quickly to make the right strategic acquisition on the right terms.”