One deal rules them all in the third quarter

At first glance, takeover activity in the third quarter looks to have rebounded to the level seen at the beginning of the year. But nearly two thirds of the total $63bn spent came from one big acquisition: Teva’s purchase of Allergan’s generic business.

Take this out of the mix and the remaining $23bn would have been even lower than the second quarter’s lacklustre total. As it stands 2015 looks unlikely to live up to last year, one of the biggest ever for M&A – particularly if the recent stock market downturn leaves companies cautious about spending money.


The first nine months of 2015 have seen bigger bucks spent than a year ago: $158.4bn versus $123.6bn. This also means that this year has already eclipsed 2009, the second-biggest year for deals in the past decade.

However, the tail end of 2014 put it in a different league entirely, with a monster fourth quarter that would be difficult to replicate. Several hostile takeover approaches remain unresolved, and if one or more come off this would push up 2015’s mega-deal tally. But investors should probably not hold their breath, with the Teva-Mylan-Perrigo merry-go-round looking particularly intractable.

A decade in deal making
Year announced Deal value ($bn) Deal count
2015 Jan-Sep 158 175
2014 217 199
2013 80 199
2012 43 198
2011 56 203
2010 109 198
2009 152 171
2008 109 188
2007 71 171
2006 101 153
Note: data include mega-mergers.

Apart from the Teva-Allergan deal, the rest of the last quarter’s acquisitions came in under the $10bn mark, echoing the trend for smaller buys seen in Q2 (M&A keeps up feverish pace in first half of 2015, July 15, 2015).

But, although Teva’s acquisition stands out in terms of value, it illustrates a broader move towards generics – perhaps not surprising as drug pricing comes under increasing scrutiny. Two other generics deals made the top 10: Hikma’s acquisition of Boehringer’s Roxane Laboratories and Lannett’s purchase of Kremers Urban Pharmaceuticals.

10 biggest pharma and biotech M&A deals announced in Q3 2015
Deal announced Acquirer Target Deal status Value ($bn)
Jul Teva Pharmaceutical Industries Generics business of Allergan Open 40.5
Jul Celgene Receptos Closed 7.2
Jul Hikma Pharmaceuticals Roxane Laboratories Open 2.8
Sep Concordia Healthcare Amdipharm Mercury Company Open 2.1
Sep Amgen Dezima Pharma Open 1.6
Aug Bristol-Myers Squibb Promedior Open 1.3
Sep Lannett Company Kremers Urban Pharmaceuticals Open 1.2
Aug Valeant Pharmaceuticals Sprout Pharmaceuticals Open 1.0
Aug Amicus Therapeutics Scioderm Closed 0.9
Jul Valeant Pharmaceuticals Amoun Pharmaceutical Open 0.8

Valeant Pharmaceuticals, another speciality pharma/generics player and a big spender in recent years, has taken a different direction, splashing out $800m on Egypt’s Amoun Pharmaceutical, giving it a doorway to the Middle Eastern and African markets. It is wise to look to new areas for growth amid the clamour over price gouging; Valeant has been under fire as one of the worst culprits.

Valeant was the only company with two top-10 deals: it also bet $1bn on the uncertain but potentially lucrative new market of female sexual dysfunction by buying Sprout Pharmaceuticals.

CETP regrets?

While Sprout might be a risky proposition, at least its drug Addyi has already got the nod from the FDA, something that is looking increasingly unlikely for Dezima’s lipid-lowering candidate, the CETP inhibitor TA-8995.

Amgen might be regretting its purchase after Lilly’s evacetrapib became the third project in the CETP class to fail in clinical trials this week (Lilly’s evacetrapib failure the end of the road for CETP? October 12, 2015). 

Now Dezima and Merck & Co are the only companies with late-stage CETP assets. Amgen could be kicking itself that it did not instead acquire Esperion, which is working on a rival approach, ACL inhibition.

Lilly’s evacetrapib failure has highlighted the sparseness of its pipeline – its other big hope is the equally improbable Alzheimer’s contender solanezumab.

The company is notable in its absence from the M&A tables, being the only big pharma player not to have struck a deal over the past three years. Indeed, its last big buy in pharma was the $6.5bn acquisition of ImClone Systems back in 2008.

All this would be academic if Lilly’s homegrown projects were faring a bit better, but right now M&A is starting to look like the only way forward (Another fail for Lilly’s labs – time to make a deal? October 13, 2015). The company needs to put its hand in its pocket, and soon.

But Lilly is not alone in eschewing acquisitions – large purchases are becoming increasingly rare for big pharma and, once again, speciality and mid-sized companies dominate the listings. And this trend should continue as defensive deals drive consolidation of the mid-tier players.

The industry's big spenders – three-year M&A bill
Company 3yr spend ($bn) 3yr deal count M&A ranking
Big pharma
Pfizer 19.3 8 4
AbbVie 17.6 1 6
Novartis 17.2 9 7
Merck & Co 14.4 5 10
Roche 11.9 8 12
Total 10 big pharma 105.7 64
Other big drug makers (market cap ≥$20bn)
Allergan 112.8 12 1
Teva Pharmaceutical Industries 45.3 7 2
Valeant Pharmaceuticals 23.3 9 3
Bayer 17.7 4 5
Perrigo Company 14.9 9 8
Total 88 non-big pharma 337.7 251

Of course, as we saw in the third quarter, everything can change with one big purchase. The question is whether there will be another one before the year is out.

To contact the writer of this story email Madeleine Armstrong in London at madeleinea@epvantage.com or follow  @medtech_ma on Twitter

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