The Evolving Pharma M&A Landscape: emerging trends and predicted post-blockbuster targets

Pharmaceutical market growth rates have halved inside the past five years, and will remain modest into the next decade. At the same time, new drug approval rates have slowed. With costs continuing to rise, the drug industry's margins are already being squeezed, but will come under growing pressure as payers adopt more stringent pharmaceutical cost-containment policies and as patents on a slew of blockbusting brands expire, according to a new study from Business Insights which has been added to Reportlinker's catalog.

The world's 10 biggest pharmaceutical companies have committed almost $230 billion to mergers and acquisition deals since the beginning of 2007. The size of their assets and the cash-generating capabilities of their existing businesses have rendered them largely immune from the effects of the global economic downturn, during which big pharma M&A spending has actually accelerated. Key M&A announcements will continue to be made on a regular basis into 2010 and beyond, the report's authors believe.

Key findings of this report

' The pharmaceutical industry's 10 biggest players face the expiry of patents on brands that generate annual revenues of more than $130 billion within the next five years. This 'patent cliff' is driving the acquisition of biotechnology assets designed to strengthen Big Pharma pipelines.

' Biotech/biopharma companies were the subject of nearly half the M&A transactions completed or announced by leading pharmaceutical companies between January 2007 and July 2009, and accounted for four of the 10 biggest M&A deals witnessed in that period.

' The world's 10 biggest pharmaceutical companies generated prescription drug sales totaling $308 billion in 2008. Their operations generated aggregate net cash of more than $106 billion and pretax profits of $81 billion. At the end of 2008 they were sitting on collective net assets worth $354 billion.

' The 10 leading companies have completed or reached definitive agreements on 64 M&A deals since January 2007. Together, they have committed almost $230 billion to health care M&A transactions in the past two-and-a-half years.

' Biotech companies aside, consumer health care and generic businesses are among the most popular acquisition targets, reflecting a desire on the part of Big Pharma to reduce levels of exposure to conditions in the global market for

' Two of the world's five biggest generics businesses are active candidates for disposal. Sandoz and Teva aside, all of the world's other leading generic companies are potential acquisition targets, the report concludes.