Shire and Pfizer aside, pharma took an M&A break last year to await U.S. election results: report

While many around the world waited anxiously in November for the U.S. presidential election, so too did pharma execs. In fact, drugmakers essentially pressed pause on dealmaking as 2016 came to a close.

M&A took a dive in the fourth quarter of 2016, a period when biopharma announced just 36 deals for a total value of $5.4 billion, according to a new report from life science commercial intelligence firm Evaluate. That compares with 49 deals worth $26.7 billion for the third quarter and 65 deals worth $29.5 billion during the final quarter of 2015.

Last year's biggest deal was announced early on, when Shire said in January it'd pick up Baxalta for $32 billion. Following that was Pfizer's $14 billion buyout of Medivation, an acquisition struck after several months of behind-the-scenes activity between Medivation and several would-be buyers.

That deal, inked in August, was the last gasp for hefty-sized M&A last year. The fourth quarter of 2016 was the slowest M&A period since the period around the 2012 presidential election, perhaps not coincidentally. This time round, the reasons for the slowdown were different; pharma companies were “biding their time and exercising caution,” the report notes, as critical issues including drug pricing, insurance and tax rates would hinge on the election results.

And when Republican Donald Trump pulled off the upset, those discussions became dramatically different. For pharma and its investors, it’s been a wild ride since then.

Trump’s election initially sent shares skyward, but he has since said the industry is “getting away with murder,” dampening investor enthusiasm. He toned down that message during a meeting with pharma execs to talk prices, regulation and taxes, and industry leaders largely came away happy from that discussion.

As Evaluate notes of Trump, at this point, it’s “impossible to judge whether his impact will be positive or negative.” There have been “few firm proposals to emerge” that could affect pharma, according to the report titled Pharma & Biotech 2016 in Review.

However, the analysts are certain that Trump’s perception of the pharma industry and his “rhetoric around drug pricing” will continue to be a “big influence on investor sentiment.”

Shortly after Trump’s election, some deal experts predicted that pharma could break out of its M&A lull. If share values climb under the new administration, targets that have held off would-be purchasers could be more open to talks, analysts and bankers said back in November.

The president’s plans to work with Congress on a tax repatriation holiday could offer a cash injection—and an immediate jolt to dealmaking activity once pharma's coffers are filled with financial firepower now trapped overseas, industry watchers have noted.

And then there's the financing angle. During a fourth-quarter conference call, Pfizer CEO Ian Read recently pointed out that corporate tax changes could make it cheaper for his company to access debt. “Some deals that previously would not have been affordable, may now be affordable,” he said.

At least for the time being, a recent PwC report concluded that deal volumes will stay “depressed” until “uncertainty around general economic factors and industry conditions” becomes more clear.

Other top deals announced last year include:

  • AbbVie's $9.8 billion Stemcentrx purchase;
  • Mylan's $7.2 billion Meda buy;
  • Lonza's Capsugel pickup worth $5.5 billion;
  • Pfizer's acquisition of Anacor for $4.5 billion; 
  • Allergan's $1.7 billion purchase of Tobira; and 
  • Pfizer's $1.5 agreement to buy some AstraZeneca antibiotics.