The Pharmaceutical and Healthcare Industry Recorded A Decline

Tuesday 13 March 2012, Amsterdam

The “Pharmaceutical & Healthcare Annual Deals Analysis 2012” report is an essential source of data and trend analysis on partnerships, licensing, mergers and acquisitions (M&A) and financing in the pharmaceutical and healthcare market. The report provides detailed information on Partnerships, Licensing Agreements, M&As, Equity/Debt Offerings, Private Equity and Venture Financing transactions registered in the pharmaceutical and healthcare industry in Q4 2011. The report presents detailed comparative data on the number of deals and their value in the past five quarters categorized into deal types, segments, and geographies. Additionally, the report provides information on the top venture capital and advisory firms in the pharmaceutical and healthcare industry.


Deals And Value Of Deals Decline 19% And 14% In The Pharmaceutical and Healthcare Industry In 2011

The pharmaceutical and healthcare industry recorded a decline of 19% in deals and 14% in deal values, respectively in 2011 with the companies in the industry reducing their investments in R&D activities, decline in revenues from sales of drugs due to patent expiries, and growth in major market stalling. The industry recorded 4,032 deals worth $298.7 billion in 2011, as compared to 5,011 deals worth $346.9 billion in 2010. The oncology market recoded 848 deals and stood at the top in the pharmaceutical and healthcare industry in 2011.

Some of the high value deals in 2011 include, Medco Health Solutions, Inc., a provider of healthcare services, announcing acquisition of Express Scripts, a provider of pharmacy benefit management services, for a consideration of $29.1 billion; Takeda Pharmaceutical’s acquisition of Nycomed International, a pharmaceutical company, for a purchase consideration of €9,600m ($13,681m) on a cash-free, debt-free basis; and Gilead Sciences’ acquisition of Pharmasset, a clinical-stage pharmaceutical company, for a purchase consideration of $11,200m.


M&A Activity Slow Down In 2011

Mergers and acquisitions (M&As), including asset transactions, reported a decline in deal making activity in 2011, with companies reducing their investments fearing of declining economic growth rate and stagnant stock markets. In 2011, 1,041 deals worth $141.4 billion were reported, as compared to 1,179 deals worth $167.9 billion 2010.

Out of 1,041 deals reported in 2011, 618 were acquisitions worth $130.8 billion, 381 asset transactions worth $9.3 billion, and 42 were mergers worth $1.3 billion. Central nervous system therapeutics market accounted for the highest number of M&A deals, followed by oncology therapeutics market during 2011. Central nervous system therapeutics market registered 94 deals worth $33.3 billion and oncology therapeutics market reported 78 deals worth $30.4 billion during 2011.

Some of the top acquirers in 2011 include, Valeant Pharmaceuticals International, Inc., Global Pharm Holdings Group, Inc., PerkinElmer, Inc. and Teva Pharmaceutical Industries Limited. Valeant Pharmaceuticals made four acquisitions in North America, two in Europe and one Asia-Pacific, while Global Pharm Holdings was focused on acquiring companies based in Asia-Pacific. PerkinElmer acquired four North America-based companies and one Europe-based company and Teva Pharmaceutical made acquisitions in all the regions except in Europe. Teva made two acquisitions in Asia-Pacific, one in North America, one in Middle East and Africa and one in South and Central America.

According to Khaleeq Zakariya, Analyst at GlobalData, “The M&A activity within the pharmaceutical and healthcare industry has witnessed a decline in 2011. This trend was primarily driven by continued Eurozone crisis and other macroeconomic factors in the US. However, M&A activity seems to increase in near future, as the governments in many countries are initiating steps to stem the crisis. ”


Major Pharmaceutical Companies Raised Funds Through Debt Financing In 2011

Debt offerings, including public debt offerings and private debt placements, reported an increase in deal values with $80.2 in 2011, as compared to $69.7 billion in 2010. However, the number of deals decreased from 428 in 2010 to 196 in 2011.

Some of the major pharmaceutical companies like Sanofi, Amgen, HCA Holdings, Teva Pharmaceutical and Johnson & Johnson have successfully raised funds through debt financing in 2011.

Equity offerings, including initial public offerings (IPO), secondary offerings, and private investment in public equities (PIPEs) recorded a decline in the number of deals and deal values with 591 deals worth $22.7 billion in 2011, as compared to 682 deals worth $27.3 billion in 2010. Of the 591 deals reported in 2011, there were 48 IPOs worth $6.4 billion, 216 secondary offerings worth $11.6 billion and 327 PIPE deals worth $4.7 billion.

IPO market was affected by volatile market conditions in 2011. The market recorded a decrease in the number of deals and deal values with 48 deals worth $6.4 billion in 2011, as compared to 63 deals worth $12.2 billion in 2010.


Licensing Agreements Decrease 23% In 2011

With companies in the industry narrowing their therapeutic focus and reducing their expenditure, the licensing activity recorded a decrease in deal values and the number of deals in 2011. The segment recorded 530 deals worth $18.7 billion in 2011, as compared to 685 deals worth $29.1 billion in 2010.

Oncology therapeutics market recorded maximum number of licensing deals in 2011. The market reported 139 licensing deals worth $7.4 billion during 2011. The market was also top in receiving receipts for upfront and milestone payments during 2011. The market received receipts for $6.5 billion in milestone payments and $710.5m upfront payments.

In licensing by phase, products in Phase III recorded 78 deals, accounting for 26% of the total deals in 2011. In second place, products in Phase II accounted for 20% of the deals. In deal values also, Phase III products stood at top accounting for 28% of the total deal value.

Furthermore, Partnerships, including joint ventures, co-marketing and co-development agreements recorded a decrease in number with 869 deals in 2011, as compared to 1,064 deals in 2010. The deal values also decreased to $17.5 billion in 2011 from $18.3 billion in 2010. Out of 869 deals reported in 2011, 521 were co-development deals, 140 co-marketing deals, 133 joint venture deals and 75 other category deals.


Private Equity And Venture Capital Investors Reduce Their Investments In 2011

Private equity (PE) and venture capital (VC) investments declined in 2011, with the investors shifting their focus on other industries aiming for a faster return on their investment, as the pharmaceutical companies are facing challenges in the regulatory environment. In 2011, there were 105 PE deals worth $11.8 billion and 700 VC deals worth $6.6 billion.

Out of 105 private equity deals reported in 2011, 48 were direct investments, followed by 23 institutional buy-outs (IBO), 17 secondary buy-outs, nine management buy-outs (MBO), five leveraged buy-outs (LBO) and three private transactions.

In the VC market, deals in start-up stage constituted 54% of the total deals in 2011 and stood at the top. In second place, growth/expansion stage financing recorded 61 deals, accounting for 28% of the total VC deals.

In 2011, the oncology therapeutics market recorded the highest number of VC deals with 160 deals worth $2.2 billion. The central nervous system therapeutics market followed with 119 deals worth $1.3 billion during the same period.


Deals In All The Regions Decrease In 2011

Deal making activity decrease in North America in 2011 with the investors shying away from making investments feeling the heat of uncertainty in global economic market. The region recoded 2,686 deals worth $215 billion in 2011, as compared to 3,297 deals worth $221.5 billion in 2010.

The sovereign debt crisis impacts the deals and their values in Europe in 2011. The region recorded 1,088 deals in 2011, as compared to 1,409 deals in 2010. Deal values in the region also decreased from $118.4 billion in 2010 to $80 billion in 2011.

The Asia Pacific region recorded a decrease in the number of deals and deal values with 915 deals worth $46.5 billion in 2011, as compared to 1,054 deals worth $59.2 billion in 2010.