Think we've seen the last of pharma's M&A tidal wave? Think again

If you think 2015 was a big year in pharma M&A, just wait. That train won't be slowing down any time soon, industry watchers say. On the contrary, they're expecting even more deal activity next year.

Allergan CEO Brent Saunders

According to a recent report from PwC's Health Research Institute, 2016 will be "the year of merger mania." And with the 2015 the sector has already had, that's saying something.

Over the first three quarters of this year, global M&A activity in the pharma, medical and biotech spheres hit its largest-to-date value since at least 2001, Mergermarket said in October. Over that period, the industries turned out 954 transactions worth $367.6 billion. And that was before Pfizer ($PFE) and Allergan ($AGN) agreed on a tie-up worth $160 billion, taking the crown for the biggest pharma deal of all time.

What, then, is in the cards for next year? Expect the "high-profile" deals to continue, PwC says--though that doesn't necessarily mean more record-breaking buyouts.

Instead, look for asset swaps, popularized this year by GlaxoSmithKline ($GSK) and Novartis ($NVS). They could keep on coming, perhaps even becoming "more prevalent across the industry as business lines are realigned to focus on organizational strengths," Mizuho's Eric Criscuolo wrote in a note seen by Barron's. Sanofi ($SNY) and Boehringer Ingelheim, already in exclusive talks to trade their respective animal health and OTC divisions, could be the first to go that route in 2016.

PwC, for its part, expects to see drugmakers foray into "beyond-the-pill" acquisitions for products and services that can boost their pipelines and portfolios. Teva Pharmaceutical Industries ($TEVA) has ventured into that territory, recently nabbing Massachusetts' Gecko Health Innovations, a "smart inhaler" company whose product is designed to improve patient adherence.

Companies may also keep getting creative to realize tax advantages; while U.S.-based pharmas were once buying foreign drugmakers to move their tax domiciles overseas, these days, it's the already-inverted companies luring their U.S. based counterparts with low tax rates. The latest to take advantage of that strategy? Pfizer, which structured its Allergan deal as a reverse merger. The U.S. Treasury Department may not be done cracking down on the trans-Atlantic inversion deals--some experts suggest new guidance aimed at thwarting the Pfizer-Allergan deal--but without congressional action, there's not much the government can do.

One thing is clear: No matter how they go about it--and who they choose to pursue--plenty of drugmakers are still out there looking for deals. Sanofi says it's up for a buyout the size of its 2011 Genzyme purchase, or about $20 billion. Bayer is reportedly scouting for decent-sized buys. Amgen ($AMGN) and Gilead ($GILD) have both said they'd like to make a splash in the M&A arena, with the latter company sitting on $25 billion in cash at the end of Q3, Barron's notes. Pretty much every Big Pharma is scouting for bolt-on deals. And those hostile pursuers from 2015 that saw their targets get away--Mylan ($MYL) and Horizon ($HZNP)--may be looking for replacement buys, too.

Special Report: Pharma's top 10 M&A deals of 2014