Pharma spends big on M&A in Q1 as Teva pulls trigger on Mylan
The pharma and biotech buying spree showed no sign of abating in the opening months of 2015, with $69bn committed across 62 deals in the first quarter, EvaluatePharma data show. And with Teva confirming its interest in Mylan today with an approach worth around $40bn, it looks like the action is unlikely to grind to a halt anytime soon.
To put the first quarter in context, more money was pledged in this period than was spent in either 2012 or 2011. This is perhaps not surprising considering the “buy or be bought” prospect facing many a management team – Mylan providing the latest example – while cheap debt and buoyant stock markets continue to add fuel to the fire (see tables below).
The strength of 2015’s opener is illustrated by a look at the deals struck over the last few quarters. Only the closing three months of 2014 comes in higher, largely thanks to Actavis’s $70bn takeover of Allergan.
The following analyses exclude the medtech sector, and deals were analysed by announcement date.
Rather than being dominated by a single huge deal, a number of big-ticket transactions were announced in the first quarter.
Three takeovers between $10bn and $25bn were launched: AbbVie’s move on Pharmacyclics, Pfizer’s bid for Hospira and the swallowing of Salix by Valeant. It is a fairly rare occurrence for any one year to include this many deals in this value bracket, let alone one quarter, as a previous analysis conducted by EP Vantage shows (M&A values soar as big pharma shows signs of re-entering the game, January 16, 2015)
The first quarter also saw nine transactions over the $1bn threshold announced – this compares with 22 over the course of 2014 and 14 in 2013. Again, this statistic points to another big M&A year in the offing.
|Five biggest pharma and biotech M&A deals announced in Q1 2015|
|Month announced||Acquirer||Target||Deal status||Value ($bn)|
Of course this analysis does not reflect Mylan’s approach to Perrigo in the opening days of the second quarter, worth close to $30bn, and today’s parry from Teva. The Israeli generics giant has pulled the trigger on a hostile $82 per share cash-and-stock approach, which it says represents a 38% premium to Mylan’s share price before the Perrigo bid and a 48% premium to the price before speculation of Teva’s interest emerged, in early March.
Given that Mylan had already publically rebuffed the idea of this merger this is a situation that could well rumble on. And while a third party is unlikely to get involved, given Mylan’s size and the probable lack of interest from other companies big enough to wade in, investors are in bullish mood and no doubt willing to push for an even more generous premium – or at least a bigger proportion of cash.
Either way, if only the smaller of these two deals gets done the running tally for 2015 would be pushed above $100bn. Five years ago M&A levels like this were never achieved without the presence of a big pharma mega-merger, a fact that serves to underline how far valuations have travelled.
This is happening in some areas more than others, like the speciality and generics spaces occupied by Salix, Valeant, Mylan and Teva, but also in oncology and specifically immuno-oncology. The $1.25bn Bristol-Myers Squibb paid for preclinical player Flexus Biosciences in February, for example, must surely have been driven higher by an intensely competitive process.
And while competition for assets remains sky high, the flames of investor expectation are being fanned by buoyant stock market conditions, particularly in the US. All of which means more M&A action can be expected as the year unfolds.
|A decade in deal making|
|Year announced||Deal value ($bn)||Deal count|
|NB: Data include mega-mergers|
All data sourced to EvaluatePharma.