The twenty largest drug manufacturers alone could spend an estimated $ 1,700 billion on acquisitions. So far, in addition to the pandemic, the high ratings of biotech companies have been an important obstacle. But now prices are falling.
In the pharmaceutical industry, there could also be very large acquisitions worth 50 billion dollars and more in 2022.
The most important rendezvous for the pharmaceutical and biotechnology industry, the health care conference of the US bank J. P. Morgan, will only take place virtually this year. Similar to the case of the Davos World Economic Forum, it was originally planned to physically hold the event in San Francisco. But in view of the Omikron wave, the concern was too great in the end that the four-day conference with hundreds of participants could turn into a super-spreading event with devastating consequences for the entire industry.
California Dating Exchange
As of Monday, the managers will only be able to exchange information with one another and with investors on the screen, as in the previous year. This is a challenge, especially for smaller biotech companies, because it is well known that a virtual event does away with the many spontaneous encounters that often make physical meetings so fruitful.
Because the entire industry comes together in one place, the Health Care Conference is which will take place for the 40th time in 2022, for years as the most important contact exchange. Nowhere else is it so easy to get into conversation with potential partners and donors for the development and marketing of new drugs, participants rave again and again.
Nevertheless, the expectations are high this year that companies will conclude a large number of deals during or after the conference. After almost two years of pandemic, the pharmaceutical and biotechnology industries have also learned to negotiate transactions in a virtual framework. But even more important: Large drug manufacturers in particular are literally swimming in money. They are under increasing pressure to invest the large amount of funds, also because, as in the case of Novartis and Pfizer, they are heading for years in which older products will increasingly lose patent protection.
According to calculations by the American securities house SVB Leerink, the 18 largest pharmaceutical companies from the USA and Europe alone should have investable funds of 1,720 billion dollars by the end of this year. This huge sum is made up of existing liquidity, income from planned further divestments and borrowed funds, which the groups, according to market observers, could raise if necessary.
The past year saw a significant recovery in the pharmaceutical and biotechnology sector in terms of mergers and acquisitions compared to the rather weak period 2020. As the latest market figures, which the market research company Dealogic compiled at the request of the NZZ, show that the total value of the transactions rose by 18 percent to around 300 billion euros. It is still around a quarter below the peak value of over 400 billion euros that was reached in 2019.
According to the expectation of the auditor PricewaterhouseCoopers (PwC), a further increase in the total volume to 350 to 400 billion dollars is to be expected in 2022. Most transactions are likely to be in the range of $ 5 to $ 15 billion, as they have been up to now. The sale of the Swiss pharmaceutical company Vifor to the Australian competitor CSL was the largest transaction in prospect in 2021 with a volume of 11.7 billion dollars.
New owner for Biogen?
But industry observers from PwC also believe that several transactions worth 50 billion dollars and more are likely in the current year. Since 2010, four acquisitions have met this criterion, half of them in 2019 alone (sale of Celgene to Bristol-Myers Squibb and acquisition of Allergan by Abbvie).
If PwC’s forecasts are confirmed, larger biotechnology companies such as Biogen and Alnylam could also change hands in 2022. Both American companies have been considered takeover candidates for some time.
However, there are currently arguments in favor of more cautious activities with a view to mergers and acquisitions in the pharmaceutical sector. In addition to persistent difficulties for managers to meet each other personally, analysts cite antitrust reservations and concerns about the high ratings. Since the change of government in the USA and the appointment of a new head to the Federal Trade Commission, transactions worth over 10 billion dollars have become strikingly rare, not only in the pharmaceutical industry. Apparently the American authorities want to take a closer look and increasingly prevent market concentrations.
New year starts in deep red
After years of stock market boom, there are hardly any bargains among health companies either. “Many companies are overvalued today,” stated Novartis CEO Vas Narasimhan in December. in an interview with “Finanz und Wirtschaft”. However, it moved Nasdaq Biotechnology Index After all, no longer from the spot in 2021. And the new year even started deep red for the industry in the face of a weekly loss of 6.5 percent because investors were switching to defensive investments. If this development continues, pharmaceutical companies could quickly find cheaper buying opportunities.