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

Published by: Business Insights

Published: Sep. 1, 2009 - 242 Pages

Table of Contents

Executive summary

Pharmaceutical industry pressure points

Can mega-mergers solve the industry's problems?

Big pharma M&A

Generic industry M&A

Biotech industry M&A

Chapter 1 Pharmaceutical industry pressure points

Summary

Introduction

Diminishing returns

Stock market reaction

Key factors behind the squeeze on big pharma

Patent expiries

Pharmaceutical cost-containment

Deteriorating R&D risk/return ratios

Adapting to the new market environment

Cost-cutting and efficiency increases

Enhancing pipelines

Corporate restructuring

Chapter 2 Can mega-mergers solve the industry's problems?

Summary

Introduction

The last wave of mega-mergers

Mega-merger legacies

Pfizer - transformed or transfixed?

The changing face of Pfizer

Measuring Pfizer's financial performance

Stock market judgments

Pfizer tries again

Transaction details

Impact of the Wyeth acquisition

Portfolio

Geographical presence

Pipeline

Exposure to patent expiries

Finances

Verdict on the Pfizer/Wyeth deal

Merck seeks M&A shelter

Transaction details

Impact of the Schering-Plough acquisition

Portfolio

Geographical presence

Pipeline

Exposure to patent expiries

Finances

Verdict on the Merck/Schering-Plough deal

Looking beyond the mega-merger

Chapter 3 Big Pharma M&A

Summary

Introduction

Big Pharma's financial muscle

Recent M&A activity

M&A targets

Future M&A trends

The shrinking pharmaceutical village

Pfizer

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Bolstering the pipeline

Pfizer's latest mega-merger

Future M&A potential

Merck & Co

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

The move into biosimilars

A mega-merger designed to transform Merck's fortunes

Future M&A potential

Sanofi-Aventis

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Bolstering the pipeline

Building a generics business

Investing in animal health

Future M&A potential

GlaxoSmithKline

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Diversification

Supporting a push into emerging markets

Feeding the pipeline

Future M&A potential

Novartis

Company background

Portfolio and geographic reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Focused diversification

Strengthening the pharma business

Future M&A potential

Roche

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Gaining full control of Genentech

Accessing novel products and technologies

Strengthening the diagnostics business

Future M&A potential

AstraZeneca

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

The push into biologics

Future M&A potential

Johnson & Johnson

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Targeting 'convergence'

Strengthening the pipeline

Future M&A potential

Eli Lilly

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Strengthening the pipeline

Bringing alliances in-house

Future M&A potential

Bristol-Myers Squibb

Company background

Portfolio and geographical reach

Pipeline status

Exposure to patent expiries

Strategic direction

Recent M&A activity

Future M&A potential

Building a cash pile

Predator or prey?

Chapter 4 Generic industry M&A

Summary

Introduction

The generics market

Consolidation of the generics market

Big pharma involvement in generics

Generic M&A targets

Global targets

Teva

Mylan

Ratiopharm

Watson

Actavis

Stada

National/regional targets

CEE and Russia

India

Japan

Australia

Brazil

Mexico

Chapter 5 Biotech Industry M&A

Summary

Introduction

The biotech market

Leading biotech products

Leading biotech companies

Big pharma's recent biotech buying spree

Competition for biotech purchases

Biotech M&A targets

Leading revenue generators

Amgen

Gilead

UCB

Genzyme

Biogen Idec

CSL

Celgene

Other potential biotech acquisition candidates

Crucell (Netherlands)

Amylin Pharmaceuticals (US)

Vertex (US)

Regeneron Pharmaceuticals (US)

Human Genome Sciences (US)

Onyx Pharmaceuticals (US)

ThromboGenics (Belgium)

Spectrum Pharmaceuticals (US)

Proteolix (US)

Enzon (US)

Appendix

Primary research methodology

Index

List of Figures

Figure 1.1: Global pharmaceutical sales and growth rates, 2001-2008

Figure 1.2: US NME Approvals vs. R&D Spend, 1990 - 2008

Figure 2.3: Performance of Pfizer stock, 2003-2008

Figure 2.4: Structure of the expanded Merck & Co pharma portfolio

Figure 3.5: Cash generated and held by leading pharma companies, 2008

Figure 3.6: M&A spending and volume by company Jan 2007 - H109

Figure 3.7: Pfizer’s therapeutic focus, 2008

Figure 3.8: Merck & Co's blockbuster products, 2008

Figure 3.9: Sanofi-Aventis's leading products, 2008

Figure 3.10: Sanofi-Aventis pharmaceutical sales by region, 2008

Figure 3.11: Sanofi-Aventis pro-forma generic sales, 2008, US$m

Figure 3.12: Sanofi-Aventis net debt levels

Figure 3.13: GSK pharmaceutical sales by region

Figure 3.14: Novartis pharma sales by therapy area

Figure 3.15: Novartis pharmaceutical sales by region

Figure 3.16: Roche pharmaceutical sales by therapy area, 2008

Figure 3.17: Roche pharmaceutical sales by region, 2008

Figure 3.18: AstraZeneca pharmaceutical sales by therapy area, 2008

Figure 3.19: AstraZeneca sales by region, 2008

Figure 3.20: Insert figuretitlehere, with date where appropriate

Figure 3.21: BMS pharma sales by therapy area, 2008

Figure 4.22: Top 5 players in the 'core' generics market, 2008

Figure 5.23: Leading biopharmaceutical company product sales, 2008

Figure 5.24: Biotech and pharma industry stock performances

List of Tables

Table 1.1: Global pharmaceutical sales and growth rates, 2001-2008

Table 1.2: Leading brands facing patent expiry by 2014

Table 1.3: Big pharma exposure to patent expiries

Table 1.4: New drug approvals in the US, 1999-2008

Table 1.5: Costs as a percentage of big pharma revenues, 2004 and 2008

Table 2.6: Pfizer financials, 1997-99 and 2006-08

Table 2.7: Performance of Pfizer stock, 2003-2008

Table 2.8: Impact of the Wyeth acquisition on Pfizer's portfolio

Table 2.9: Anticipated change in Pfizer's US/international sales split

Table 2.10: Pfizer/Wyeth financial indicators

Table 2.11: Structure of the expanded Merck & Co pharma portfolio

Table 2.12: Merck & Co's expanded list of blockbuster products

Table 2.13: Change in the geography of the Merck & Co business

Table 2.14: New entities in SP's late-stage development pipeline

Table 2.15: Merck & Co/Schering-Plough financial indicators

Table 3.16: Pharmaceutical company sales rankings

Table 3.17: Cash generated and held by leading pharma companies, 2008

Table 3.18: Net assets of leading pharma companies at Dec 2008

Table 3.19: M&A spending by company since Jan 2007

Table 3.20: M&A deal volumes since Jan 2007

Table 3.21: Biggest M&A deals completed by the pharma top ten since January 2007

Table 3.22: Big Pharma M&A targets

Table 3.23: Pfizer company overview

Table 3.24: Pfizer pharmaceutical sales by therapy area

Table 3.25: Novel products in Pfizer's late-stage development pipeline

Table 3.26: Pfizer exposure to major patent expiries

Table 3.27: Pfizer acquisition activity

Table 3.28: Merck & Co company overview

Table 3.29: Merck & Co's blockbuster products

Table 3.30: Novel products in Merck & Co's late-stage pipeline

Table 3.31: Merck & Co's exposure to major patent expiries

Table 3.32: Merck & Co acquisition activity

Table 3.33: Sanofi-Aventis company overview

Table 3.34: Sanofi-Aventis's leading products

Table 3.35: Sanofi-Aventis pharmaceutical sales by region

Table 3.36: Novel products in Sanofi-Aventis's

Table 3.37: Sanofi-Aventis exposure to major patent expiries

Table 3.38: Sanofi-Aventis acquisition activity

Table 3.39: GlaxoSmithKline company overview

Table 3.40: GSK pharma sales by therapy area

Table 3.41: Novel products in GSK's late-stage development pipeline

Table 3.42: GSK's exposure to major patent expiries

Table 3.43: GSK acquisition activity

Table 3.44: Novartis company overview

Table 3.45: Novartis pharma sales by therapy area

Table 3.46: Novel products in Novartis's late-stage development pipeline

Table 3.47: Novartis's exposure to major patent expiries

Table 3.48: Novartis acquisition activity

Table 3.49: Roche company overview

Table 3.50: Roche pharmaceutical sales by therapy area

Table 3.51: Roche pharmaceutical sales by region, 2008

Table 3.52: Novel products in Roche's late-stage development pipeline

Table 3.53: Roche's exposure to major patent expiries

Table 3.54: Genentech's contribution to the Roche pipeline

Table 3.55: Roche acquisition activity

Table 3.56: AstraZeneca company overview

Table 3.57: AstraZeneca pharmaceutical sales by therapy area

Table 3.58: AstraZeneca sales by region

Table 3.59: Novel products in AstraZeneca's late-stage development pipeline

Table 3.60: AstraZeneca's exposure to major patent expiries

Table 3.61: AstraZeneca acquisition activity

Table 3.62: Johnson & Johnson company overview

Table 3.63: J&J's leading pharmaceutical products

Table 3.64: J&J's US/international sales split

Table 3.65: Novel products in J&J's late-stage development pipeline

Table 3.66: J&J's exposure to major patent expiries

Table 3.67: J&J merger and acquisition spending

Table 3.68: Lilly company overview

Table 3.69: Lilly pharma sales by therapy area

Table 3.70: Novel products in Lilly's late-stage development pipeline

Table 3.71: Lilly's exposure to major patent expiries

Table 3.72: Lilly acquisition activity

Table 3.73: ImClone's development pipeline

Table 3.74: BMS company overview

Table 3.75: BMS pharma sales by therapy area

Table 3.76: Novel products in BMS's late-stage development pipeline

Table 3.77: BMS exposure to major patent expiries

Table 3.78: BMS acquisition activity

Table 3.79: BMS proceeds from disposals

Table 4.80: Top 5 players in the 'core' generics market, 2008

Table 4.81: The ten biggest generic acquisitions completed since 2004

Table 4.82: Major CEE pharmaceutical acquisitions

Table 5.83: Development, commercialization and sales of leading biotech brands

Table 5.84: Leading biopharmaceutical company product sales and revenues

Table 5.85: Biotech M&A by top ten pharma majors, 2007 to date

Table 5.86: Biggest recent biotech M&A deals

Table 5.87: Biotech and pharma industry stock performances

Abstract

• Pharmaceutical industry pressure points: Pharmaceutical industry revenues and margins will come under growing pressure as payers impose more stringent cost-containment policies, and as patent expiries erode sales generated by existing major brands.
• M&A drivers: Multinational M&A activity will be driven by efforts to bolster pipelines, expand businesses beyond traditional core geographic boundaries, cash in on the generics boom and broaden the scope of existing activities.
• M&A funding capabilities: Big pharma’s huge financial assets and the cash-generating capabilities of multinational prescription drug businesses will allow companies to continue accessing funds to support M&A investment at substantial levels.
• Mega-mergers: While history shows that few mega-mergers have delivered real long-term benefits for buyers or their shareholders, the ‘quick fix’ that such transactions offer is clearly still difficult for some to resist. The deals unveiled by Pfizer and Merck in 2009 will not be the last global-scale transactions witnessed in the sector, but a more strategic approach to M&A activity will begin to prevail.
• The rush into biotech: Multinationals will continue to raise their stakes in the biotech industry as they attempt to shore up in-house pipelines. Competition for the most attractive biotech targets is increasingly fierce, however, and buyers will be forced to pay substantial premiums in order to secure quality biotech assets.
• Cashing in on the generics boom: More multinationals will invest in the acquisition of generic businesses. Targets will include global commodity-type manufacturers, emerging biosimilar specialists and national or regional producers of the branded generics that dominate drug sales in many developing markets.

• The pharmaceutical industry’s ten biggest players face the expiry of patents on brands that generate annual revenues of more than $130bn within the next five years. This ‘patent cliff’ is driving the acquisition of biotech 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 ten biggest M&A deals witnessed in that period.
• The world’s ten biggest pharmaceutical companies generated prescription drug sales totaling $308bn in 2008. Their operations generated aggregate net cash of more than $106bn and pre-tax profits of $81bn. At the end of 2008 they were sitting on collective net assets worth $354bn.
• The ten leading companies have completed or reached definitive agreements on 64 M&A deals since January 2007. Together, they have committed almost $230bn to healthcare M&A transactions in the past two-and-a-half years.
• Biotech companies aside, consumer healthcare 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 prescription drugs.
• 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.

• Analysis of key pressure points affecting the global pharmaceutical industry and of the sector’s efforts to adjust to these unprecedented challenges.
• Comparative analysis of leading pharmaceutical finances, development pipelines and exposure to major patent expiries.
• Comprehensive tracking of individual company M&A activity since January 2007.
• Insights into individual company M&A strategies and the likely nature of future M&A activity.
• Critical appraisal of previous pharmaceutical mega-mergers, and of the pending Pfizer/Wyeth and Merck/Schering-Plough transactions.
• Analysis of conditions in the global biotech and generics markets, factors driving consolidation and identification fo key M&A targets in each of these two sectors.

• Quantify individual pharmaceutical company exposure to major patent expiries in the next five years.
• Compare the strengths and weaknesses of big pharma pipelines and identify the gaps that biotech acquisitions will be used to plug.
• Track recent M&A activity by the world’s ten biggest pharmaceutical companies in terms of both deal values and strategic intent.
• Gain valuable insights into the strategic approaches to M&A activity being pursued by individual big pharma CEOs.
• Understand why most previous pharmaceutical mega-mergers failed to deliver long-term benefits, and how Pfizer and Merck hope to avoid repeating the industry’s past mistakes.
• Identify prime biotech/biopharma acquisition targets and the global, regional or national generic businesses most likely to attract acquisition bids.

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