There was a downshift in mergers and acquisitions for life sciences companies in 2005, at least in dollar terms, as companies face a more uncertain operating environment, according to a study by banking firm Young & Partners.
In the pharmaceutical sector there were 49 completed transactions, down from 52 in 2004. But in dollar terms the difference is more marked with 2005’s crop valued at $36.1 billion, less than half the $77.5 billion-worth of deals in 2004.
Young notes that there were no mega-deals, but a flood of mid-sized deals focused on the addition of marketed products, drug pipelines, or overall scale. The year was also marked by a dramatic shift from Europe to the USA as the main location for M&A activity.
“Globally, the pressure to consolidate will continue for all but selected niche and specialty companies. This is particularly true for generic and regional players,” according to the report.
In the biotechnology sector, the M&A volume in 2005 was 27 transactions totalling $7.2 billion, a significant slowdown from the 32 transactions completed in 2004 collectively worth $13.1 billion. Only one deal greater than $1 billion in value closed, namely Pfizer's acquisition of Vicuron.
The general acquisition themes have been consolidation efforts aimed at combining product portfolios and development activities, and bolstering later stage R&D pipelines, according to Young & Partners.
Finally, in the medical device/diagnostics sector M&A activity plunged, from 47 deals worth $8.7 billion to 57 deals worth $24.1 billion in 2004. However, the Boston Scientific/Guidant deal will cause 2006 deal volume to soar.
"Although the number of deals in the pharma industry was strong in 2005, there has been an overall slowdown in the M&A dollar volume in pharma, biotech and medical devices/diagnostics, driven by strategic uncertainties," said Peter Young, President of Young & Partners.