Pharma M&A action so far this year has been intense--so intense that if it keeps up the pace it could match the uber years of 2008 and 2010, maybe even the record year of 2009.
According to an H1 report from the data gearheads at EvaluatePharma, $87 billion worth of mergers and acquisitions were transacted in the first 6 months, which is more than all of last year. That does not include the $55 billion AbbVie ($ABBV) pledged for Shire ($SHPG), a deal that was announced in July just after the first half closed.
The report says that so far, the stats suggest it will be a year of fewer and bigger deals, although 91 were announced in the first half. It could potentially match 2009, when there were only 170 deals but they added up to $152 billion. That was the year that Pfizer ($PFE) bought Wyeth for about $69 billion and Merck ($MRK) bought Schering-Plough for nearly $42 billion. In 2008, there were 185 deals amounting to $109 billion and in 2010 there were 192 deals, also adding up to $109 billion.
The biggest transaction in the first half was the $25 billion that Actavis ($ACT) put out for Forest Laboratories, followed by the complex asset swap between Novartis ($NVS) and GlaxoSmithKline ($GSK), which EvaluatePharma values at $23 billion. That does not include Novartis' side deal to sell its animal health operations to Eli Lilly ($LLY) for $5.4 billion.
Of course the deal that would have made 2014 the largest year in many didn't happen--or hasn't happened yet. That was Pfizer's effort to buy AstraZeneca ($AZN) for sums that finally reached about $119 billion, a figure that alone is bigger than everything that has gotten done so far this year.
There are rumors (there are always rumors) that Pfizer will renew its effort for AstraZeneca in November when a U.K.-required cooling-off period is over. There is also talk that Pfizer has a backup plan if that AstraZeneca thing doesn't go down. The U.S. drugmaker is anxious to not only get some revenue-growing assets but also nail down a European address and the tax benefits that accrue from that. Pfizer is said to be looking at an offer for Actavis, which got the so-called tax inversion incentives when it bought Ireland-based Warner Chilcott last year and changed its legal domicile to that address. Actavis' market cap is running at $59 billion, so any deal for it could put 2014 into record territory.
Those deals also illustrate one of the big motivating factors this year, which has been tax considerations, more than buying a single drug. The run-up in biotech values has made that kind of deal expensive and so more risky, EvaluatePharma says. The most notable in that category and one that illustrates the cost to risk factors in play this year was Merck's $4 billion deal for Idenix Pharmaceuticals to get ownership of its hepatitis C drug candidate, IDX21437. It needs a nucleotide inhibitor to pair up with its own promising hep C product to make the kind of cocktail it will need if it hopes to compete with the runaway success of Gilead Sciences' ($GILD) Sovaldi. While EvaluatePharma and other analysts said the target was well picked, the price puts the transaction in the gambling category, EvaluatePharma figures.
- access the EvaluatePharma report here