Generics deals drive increase in pharma M&A

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Pharma M&A activity is heating up, particularly among medium-sized companies, and shows signs of accelerating further, MarketWatch reports. As Tommy Erdei, a Jeffries International investment banker, tells the news service, generics deals are among the biggest drivers of recent deal activity.

"Generics is on fire now," Erdei said. "Out of the 10 international healthcare deals we did over the past 12 months, one third were generic drugmakers, and that trend is continuing and probably accelerating." What's more, Erdei added, "A number of such deals are in the pipeline" as well.

Generics makers are enjoying a surge as blockbuster drugs fall off the patent cliff, one after another. With tens of billions in branded drugs going generic, copycat companies stand to pick up lots of market share, albeit at lower prices. Plus, austerity-minded governments are driving more patients to generic drug use, leading IMS Health to predict that generics' share of overall drug spending will double from 2005 levels, to 40% by 2015.

Biotech equity financings are also up, Erdei said. But it's pharma's cash stores driving much of the M&A activity. With interest rates at extreme lows, cash holdings aren't earning much, giving pharma executives more reason to look for ways to invest that money. Plenty of targets, too, he said: "I could give you 30 to 40 names of companies that are probably worth $1 billion or more ... and either have appetites to build or could say: 'Hey, this is the right to time monetize our value and become part of a larger group.'"

- read the MarketWatch piece

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