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Pharmaceutical Mergs Acquisitions in the US

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Pharmaceutical Mergs Acquisitions in the US

  1. 1. Pharmaceutical Mergers and Acquisitions in the U.S. Analyzing the correlation between new drug approvals and M&A activity 2015
  2. 2. 2 Copyright © Capgemini Consulting 2015. All Rights Reserved The pharmaceutical industry has seen increased merger & acquisition activity over the past few years Increase in Average Deal Size Increase in Total Number of Deals 2014 surpassed the combined total for deals from 2011-2013 and saw over $200bn in pharma mergers and acquisitions, a 300% increase from the previous year $70 $109 $152 $109 $56 $43 $79 $212 $151 $73 170 188 171 194 197 192 193 182 100 125 150 175 200 225 0 50 100 150 200 250 2007 2008 2009 2010 2011 2012 2013 2014 2015 DealCount DealValue($Bn) M&A Activity in Pharma and Biotech Deal Value Projected Deal Count Size and number of deals by U.S. pharmaceutical and biotech companies since 2007 Sources: FiercePharma, EvaluatePharma, Capgemini Analysis)
  3. 3. 3 Copyright © Capgemini Consulting 2015. All Rights Reserved The size of recent deals disguises the true characteristics of pharmaceutical mergers and acquisitions activity 89% 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Megadeals ($5 bn+) Other Deals (< $5 bn) Deal Value 6% 94% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Megadeals ($5 bn+) Other Deals (< $5 bn) # of Deals Although major acquisitions outweigh other deals by value, over 90% of deals were relatively small in size (less than $5bn) U.S. pharmaceutical and biotech deals by value and count since January 2014 Source: FiercePharma, CrunchBase, EvaluatePharma, Capgemini Analysis The smaller deals tend to be much more focused, with target companies offering different sources of value to the acquirer, such as research or portfolio expertise, a breakthrough pipeline drug, or a recent drug approval
  4. 4. 4 Copyright © Capgemini Consulting 2015. All Rights Reserved The small and mid-sized companies that have been acquired share several key characteristics New drug approval with promising peak sales Special FDA status for existing or pipeline products Proven R&D leadership in a specific technology or therapeutic area Relatively small market capitalization 42% 13% 45% Recent Drug Approvals (Since January 2014) Large Pharma (2014 Revenue > = $15bn) Mid-Sized Pharma Small Pharma companies (2014 Revenue < = $5bn) 26% of small to mid-sized pharmaceutical companies with new drug approvals were acquired in past 20 months Resonant themes across recent small to mid- pharma acquisitions
  5. 5. 5 Copyright © Capgemini Consulting 2015. All Rights Reserved There is a correlation between acquisitions of small and mid-sized companies and new drug approvals M&A activity within small- mid sized companies has largely been driven by product- focused acquisitions 2014 Jan Feb March April May June July Aug Sept Oct Nov Dec Jan Feb March April May June July Aug 2015 Time Elapsed Between New Product Approvals and Acquisitions Northera (Chelsea Thpts / Lundbeck) Sivextro (Cubist / Merck) Zerbaxa (Cubist / Merck) Cholmbam (Asklepion / Retrophin) Esbriet (InterMune / Roche) Natpara (NPS / Shire) Addyi (Sprout / Valeant) Kybella (Kythera Biopharma / Allergan) Dalvance (Durata Therpeutics / Actavis) (-)3 mths Soolantra (Galderma / Nestle) (-) 5 mths (+) 6 mths (+) 15 mths (-) 3 mths (+) 5 mths (-) 2 mths Namzaric (Forest Laboratories / Actavis) Imbruvica (Pharmacyclics / Abbvie) Xifaxan (Salix Pharmaceutical / Valeant) (-)2 mths (+) 6 mths (-)10 mths Relationship between new drug approval and acquisition for small and mid-sized pharmaceuticals since January 2014 (Source: Capgemini Analysis)
  6. 6. 6 Copyright © Capgemini Consulting 2015. All Rights Reserved For companies that have these characteristics, the market is eager and willing to pay rich multiples for the potential high payout 0 5 10 15 20 25 30 2007 2008 2009 2010 2011 2012 2013 2104 2015 MedianEBITDAMultiple(x) Pharmaceutical and Biotechnology Median Acquisition Multiples Median EBITDA multiple paid to acquire pharmaceutical and biotechnology companies, 2007-2015 Sources: Bloomberg, Capgemini Analysis Over the past decade, there has been an increase in acquisition prices for pharmaceutical and biotechnology companies
  7. 7. 7 Copyright © Capgemini Consulting 2015. All Rights Reserved Small to mid-sized companies that are in the process of developing and launching new drugs must be prepared to be acquisition targets In order to be better prepared for a merger / acquisition scenario, there are several steps a potential target company should take Estimate global valuation, including value of current & pipeline products Develop relationships with key investors to ensure their ongoing commitment and understand relevant motivations Get a better understanding of the corporate law of their home country as well as that of the U.S. Review their ownership structure and have a plan ready to respond to any unsolicited third-party interest While performing valuations, select partners carefully so as to ensure that all relevant information is appropriately captured Remain informed of current market focus and incentives for mergers and acquisitions, specifically related to types of products and portfolios Identify acquisition targets of their own to increase market capitalization and deter acquisition In the case that the company is open to a merger or acquisition, they should proactively identify potential companies that might be a good strategic fit
  8. 8. 8 Copyright © Capgemini Consulting 2015. All Rights Reserved Read the complete paper at… www.slideshare.net/capgemini/pharmaceutical-mergers-acquisitions- in-the-us OR ow.ly/VSsvv

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