Mergermarket, a part of 'The Mergermarket Group', has reported that Global Pharma, Medical & Biotech (PMB) market total deal value declined sharply by 27.8 per cent during 2016 to $283.4 billion in 1,439 deals from $392.4 billion in 1,491 deals in the previous year. The M&A felt the heat for the first time since 2014 from US regulations targeting tax inversion deals for the third year in a row.
The government regulations also appeared to have an effect on cross-border activity. The US was once again the most targeted region for PMB M&A activity, with 528 deals worth US$ 176.6 billion. This figure is a 40.8 per cent decrease with 74 fewer deals compared to the 2015 value of US$ 298 billion in 602 deals. The US's global market share decrease from 76 per cent to 62.4 per in 2016. 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 US$ 1.5 billion 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 US$ 56.6 billion, a 71.8 per cent increase with 23 fewer deals compared to 2015 $33 billion in 484 deals. The two largest transactions, Boehringer Ingelheim GmbH's $12.6 billion acquisition of Merial SAS and Mylan NV's $9.9 billion acquisition of Meda AB, both had bidders and targets based in Europe. Both were also pharmaceuticals transactions.
Although the pharmaceutical 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 $127.7 billion and the largest decrease in value 40.5 per cent with 40 fewer deals from 2015's 388 deals worth a total $214 billion.
Medical was the largest sub-sector in 2016, with 926 deals worth a total $133.6 billion down 16.9 per cent with 29 fewer deals from 2015's $160.7 billion in 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 billion in value which is 43.8 per cent of total Medical deal value for the year. 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.
Biotechnology saw 165 deals worth $22 billion, up 24.5 per cent with 17 more deals that 2015 of $17.7 per cent in 148 deals.
Despite regulatory issues resulting in the collapse of high profile deals such as Pfizer's $183.7 billion 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.
In terms of the Affordable Care Act (ACA), a repeal of which is currently being debated in the US Congress, some companies are cautiously optimistic about what exactly “Repeal-and-replace” would l look like with president-elect Donald Trump in the White House and a Republican-controlled Congress. Rural hospitals in the US, for example in areas that supported Trump, believe that he would not turn his back on such regions and that he will recognize that healthcare expansion and exchanges have greatly helped those communities. Some companies in the healthcare management business, on the other hand, are less optimistic, especially in light of Trump's support for tax credits in an effort to encourage health savings.
Healthcare IT, particularly in the US market, has seen a trend toward pubic companies being bought by private equity firms, which have been willing to pay high prices for such assets relative to valuations in the public market-- with debt still relatively cheap, many PE firms are in better positions to win auctions.
The biosimilars market, in which biological products that are quite similar to generic drugs but which are not exact replicas are made, could lead to lower prices in the future for drugs whose patents are near expiration. Biosimilars are currently more common in Europe, which has been regulating such products since 2005, whereas the US has been doing so only since 2015.
Dental M&A in general in the US and Europe is expected to pick up in the next few months after seeing a record number of dental clinic acquisitions in 2016. In particular, much of the trends expected to be driven by private equity –the highly fragmented space has proven be fertile ground for buyers, particularly financial sponsors with roll-up strategies.