Deal junkies, rejoice. Moody's Investors Service figures pharma M&A will pick up in 2013, after a not-so-exciting 2012. But even if the pace picks up, deal size probably won't increase much; we're looking at another year of small- to medium-sized buyouts, rather than megamergers.
There are plenty of reasons why drugmakers might amp up their dealmaking this year. Big Pharma is still reeling from the patent cliff, and though some promising new drugs are in the offing, most top drugmakers still need some pipeline TLC. Plus, the supply of promising buys is increasing, Moody's says. "The number of potential acquisition targets is rising because of the higher quality of drug pipelines and advances in areas like oncology and immunology," the ratings service said (as quoted by Bloomberg).
And while they may not have lots of new products ready to burst onto the market, they do have lots of cash--and as Moody's notes, debt is cheap. Even companies that engaged in big buyouts a few years ago--namely Roche ($RHHBY), Pfizer ($PFE) and Novartis ($NVS)--have paid down debt and built up their cash stores, Moody's says. Earlier this year, Pfizer boasted $23 billion in cash, for instance, and Merck ($MRK) was sitting on $19.8 billion.
This isn't the first time analysts have predicted more and bigger dealmaking for 2013. In January, industry watchers said they figured pharma was ready to move past bite-sized deals. Costs are cut, debt is repaid, and money is at hand. Whether predictions for $10 billion-plus deals actually bear out remains to be seen. And whether the dealmaking pays off down the line? That's another story entirely.
Special Report: Top Biopharma M&A Deals - 2012