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Mergers and acquisitions by drug companies were off big time this year, down by 35% overall. Much of what is getting invested is targeted at emerging markets, with China not surprisingly leading the list.
A dissection of 2012 deals by law firm Freshfields Bruckhaus Deringer found that pharmaceutical companies laid out only $146 billion on M&A this year, compared to $225 billion last year, Reuters reports. There have been some notable deals, such as Watson Pharmaceuticals ($WPI) buying Actavis for about $5.9 billion; the $7 billion buyout of Amylin by Bristol-Myers Squibb ($BMY) and AstraZeneca ($AZN); and the ugly $3 billion acquisition of Human Genome Sciences by GlaxoSmithKline ($GSK). Still with all of the patent cliff troubles this year, CEOs have had less taste for them.
Citing its own data, Reuters says that pharma companies have invested $20 billion into emerging markets so far this year, a roughly 65% jump over last year. The report from Freshfields says $6.8 billion has gone into China, which IMS Health forecasts will be the second-largest drug market behind the U.S. by 2016. The fact that that market is projected to grow by 15% to 18% a year, compared to flat sales in Western markets, and hit between $155 billion and $165 billion in four years has been a huge draw to drugmakers.
Some consultants have warned that drug companies should proceed cautiously there, that politics and the chance of a recession could turn the now-growing market into a struggle. Some CEOs, such as Sanofi's ($SNY) Chris Viehbacher, are not looking only to opportunities in the so-called BRIC block countries such as China and India. He also likes places such as Indonesia, Vietnam and Colombia, where prices are more reasonable. In October, Sanofi agreed to buy Genfar, which it termed the second-largest generics maker in Colombia, for an undisclosed sum.
"While M&A is an expensive remedy, 'pharmerging' markets are obvious investment choices for cash-rich drug companies," Freshfields corporate partner Jennifer Bethlehem told Reuters.
- read the Reuters story
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Watson set to unveil $5.9B Actavis buy, FT reports
GSK closes the deal on Human Genome Sciences for $3B
Amylin buyout likely to spark more M&A
Sanofi buying Genfar as it rolls across Latin America
Emerging markets to dominate as drug sales hit $1.2T