The volume of deals in Q2 declined. Around 50 deals have been announced by the pharmaceutical industry out of a total of more than 90 within the health industry (pharma, medical devices, etc.). Recent events such as Brexit have affected the global markets and are likely to have had an impact on the volume of M&As. However, we have noted an increase in the volume of transactions worth more than one billion dollars. Major factors contributing to the success of M&A are acquisitions at clinical trial phase of new molecules with great potential, combined with the expiration of blockbuster patents (Gleevec, Crestor, Seroquel, Zetia…). The increase in value terms of M&A deals during Q2 is mainly thanks to 40 major transactions announced by Gilead, Abbvie, Pfizer, Jazz pharmaceutical, Mylan and Merck, the total value of which came to more than 55 billion dollars. The major pharmaceutical players are strategically aiming to increase their presence in promising markets. Generating 83 billion dollars in 2015, oncology is one of the growth markets of the industry. This should double by 2022 with a turnover of 187 billion dollars.
Jazz Pharmaceuticals plc and Celator Pharmaceuticals Inc. announced that they have entered into a definitive agreement for Jazz Pharmaceuticals to acquire Celator for $30.25 per share in cash, or approximately 1.5 billion dollars. The main active ingredient of Jazz Pharmaceuticals and Celator Pharmaceuticals, Inc. products is VYXEOSTM, a nano-scale liposomal formulation of cytarabine: daunorubicin, which has completed a Phase 3 trial for the treatment of acute myeloid leukemia.
AbbVie Inc. expanded its oncological activity through the acquisition of Stemcentrx Inc., a biotech company in Silicon Valley. Its key asset is the molecule Rova-T, lead late-stage asset rovalpituzumab tesirine (Rova-T) currently in registrational trials for small cell lung cancer (SCLC). Rova-T has also been submitted to the U.S. Food and Drug Administration for Breakthrough Therapy designation. Rova-T represents a multi-billion-dollar peak revenue opportunity with expected commercialization in 2018. AbbVie will acquire Stemcentrx for approximately 5.8 billion dollars in cash and stock. The acquisition of Pharmacyclics, and its innovative product Imbruvica, for 21 billion dollars in March 2015 was a strategic move to build a leading position in haematological oncology. The U.S. sales of Imbruvica reached 1 billion dollars in 2015 and by 2020, worldwide sales are forecast to reach 5.8 billion dollars, according to consensus analyst estimates compiled by Thomson Reuters Cortellis. This arthritis drug represents nearly 60% of AbbVie’s turnover but should start to see a decline in sales starting in 2017 or 2018. Abb- Vie’s dependence upon its blockbuster Humera has lessened on account of these two deals.
The second quarter has also seen the acquisition of Baxalta Inc by Shire PLC for 32 billion dollars. Initiated in January, this deal remains the biggest of the year thus far. This merger has created one of the largest global biotech companies and is projected to deliver double-digit turnover growth with over 20 billion dollars in annual revenues by 2020. Baxalta offers a growing oncological business and a broad platform to position the newly merged company at the leading-edge of discovery and development of innovative therapies in haematology and other cancers.
Novartis AG has emphasized the importance of focusing on oncology by dividing its pharmaceutical business into two separate units: one dealing with anti-cancer drugs and the other encompassing additional activities, for example neuroscience and ophthalmology. Novartis has become one of the leaders in the oncological market after acquiring GSK’s oncology business for 16 billion dollars in 2015.
Another market that has significant upside potential is dermatology. The size of this market should double by 2022 with expected turnover of 24 billion dollars.
Mylan N.V. bought into Renaissance Acquisition Holdings LLC’s dermatological business in the United States for 1 billion dollars in May 2016 as a means of strategic expansion. This is in addition to Mylan announcing the acquisition of Meda AB for 7.2 billion dollars in February 2016. Pfizer acquired Anacor Pharmaceuticals Inc. in May for 5.2 billion dollars. This acquisition will give Pfizer access to a non-steroidal topical gel, crisaborole, which is currently under review by the U.S. Food and Drug Administration for the treatment of mild to moderate eczema. The Prescription Drug User Fee Act (PDUFA)’s prospective deadline for the completion of the FDA’s review is January 7, 2017. If approved, Pfizer believes peak year sales for crisaborole have the potential to reach, or exceed 2 billion dollars.