The tide of mergers and acquisitions is coming? The potential...

The tide of mergers and acquisitions is coming? The potential transaction value of multinational pharmaceutical companies in 2022 may reach 1.7 trillion US dollars

Source: Sina Pharmaceutical News　2021-12-07A-A+


So far this year, M&A activity in the biopharmaceutical industry has been quite slow. However, according to the calculations of a group of analysts, large pharmaceutical companies may have a large number of mergers and acquisitions in 2022, and the total transaction is expected to exceed 1.7 trillion US dollars.
SVB Leerink analyst Geoffrey Porges and his team wrote in a report on Wednesday that by the end of 2022, 18 US and European multinational pharmaceutical companies will have more than US$500 billion in cash on hand. Analysts said these companies can use the money to close deals, repay debts, or provide returns to shareholders through dividends or stock repurchases.
The purposes of continuous mergers and acquisitions of large pharmaceutical companies include enhancing R&D pipelines, investing in blockbuster drugs under research or about to be launched, complementary product portfolios and synergistic economies of scale, etc. Analysts believe that because these companies can use their assets to introduce additional funds, the theoretical transaction value of the 18 drugmakers may exceed $1.7 trillion. Among the 18 companies investigated by the Porges team, if existing debt is not included, 12 companies are expected to have more than $20 billion in cash by the end of 2022.
Even taking into account the debt factor, Porges predicts that Pfizer, Moderna, Johnson & Johnson, Novartis and BioNTech will have net cash of more than US$20 billion. At the same time, the team also predicts that Regeneron, Vertex, Novo Nordisk and GlaxoSmithKline will have between 11 billion and 18 billion US dollars in cash on hand, including debt.
Porges said that, based on the company's cash position and potential space for new debt, the 18 biopharmaceutical giants will have an ability to initiate mergers and acquisitions of US$1.72 trillion. In this M&A firepower list, Johnson & Johnson tops the list, with the company's potential transaction value exceeding US$200 billion. Pfizer and Novartis followed closely behind with US$175 billion and US$154 billion respectively. The team stated that AbbVie, GlaxoSmithKline, Bristol-Myers Squibb and Merck will each have a transaction value of more than US$100 billion.
On the basis of Wall Street consensus, Porges and the team calculated the cash flow of each company by the end of next year, and some companies are benefiting from one-time major events in the process. For example, Novartis received US$20.7 billion through the sale of its 20-year investment in Roche. As early as 2001, Novartis spent US$2.8 billion in cash to acquire 32 million shares of the company at US$87 per share. According to the agreement, Novartis will sell its shares at a price of US$388.99 per share, and the company's shares have increased to 53.3 million shares. According to Novartis, this will bring about $14 billion in revenue.
GlaxoSmithKline and Pfizer are expected to receive US$27.7 billion and US$16.3 billion in capital inflows through the spin-off of the Consumer Health Joint Venture. The joint venture is planned to be carried out in mid-2022. As far as Pfizer, BioNTech and Moderna are concerned, they have gained huge windfalls from the sales of COVID-19 vaccines and treatments. According to the Wall Street consensus estimate cited by Porges, the total sales of the COVID-19 vaccine Comirnaty that Pfizer and BioNTech have cooperated with and its unlicensed oral antiviral drug Paxlovid between 2021 and 2023 may reach 84 billion U.S. dollars.
However, it should be noted that even if the pharmaceutical giant has a huge amount of cash on hand, this does not mean that it will eventually be transformed into a huge amount of M&A activities. Take 2021 as an example. At the end of 2020, PricewaterhouseCoopers estimates that the biopharmaceutical industry has $1.47 trillion in potential funds available for mergers and acquisitions. In order to speed up the development of vaccines or therapies to combat the epidemic, pharmaceutical companies have accelerated their cooperation, but at the same time, the epidemic has also caused certain obstacles to transactions.
The largest acquisition announced this year is Merck’s $11.5 billion acquisition of Acceleron. Its sotatercept, which is currently in Phase III of the clinical trial, has the potential of multi-billion-dollar peak sales. Another transaction of more than US$5 billion is the acquisition of GW Pharma by Jazz Pharmaceuticals for US$7.2 billion. The company’s main product is the epilepsy drug Epidiolex. Last year’s sales exceeded US$500 million and may become a blockbuster drug.
Taken together, last year there were three mergers and acquisitions with a total value of more than 10 billion U.S. dollars. In contrast, the biggest deal in 2020 is AstraZeneca's acquisition of Alexion for US$39 billion. AstraZeneca hopes to improve its position in immunology by acquiring Alexion's innovative complement technology platform and rare disease research and development capabilities. This is another time for multinational pharmaceutical companies to bet heavily on rare diseases following Takeda's $62.4 billion acquisition of orphan drug company Shire.

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