It’s no secret that biotech M&A activity has been lagging so far this year, though new figures reported by Bloomberg displayed just calm things have been.
In the new report, Bloomberg discovered that biotech deals in 2017 “are on pace for almost half the yearly totals of the past two years,” with only $11.5 billion in m&a completed so far in 2017, half the total over the previous 24 months.
Also, Bloomberg says the global biotech M&A’s “are headed for the lowest annual level in four years.” In the last two years, the total merger and acquisition deal volume reached more than $30 billion, and more than $25 billion in 2014. Just four years ago, deals were at the lowest subsiding in recent times, at under $10 billion.
The question is why such a down year in activity? The answer is President Donald Trump’s promised tax reform, still needs to be explained, which is putting the pause on potential buyers, according to analysts.
It also has to do with Big Pharma CEOs stating in their last couple quarterly financials that they are looking for smaller; bolt on deals, and see many biotechs over-valued. It also comes on the tail end of a small R&D sell-off in the second quarter with big pharma’s such as GlaxoSmithKline and Lilly, licensing out or switching up their pipeline in a string of reconfigurations.
Biopharmas are still feeling the pressure by potential pricing restrictions, but the threat seems to be a warning as the current administration deals with problems such as Obamacare, cutting regulation and immigration.
As EP Vantage noted in its recent “2017 Pharma and Biotech Half-Year Review” report “After the first half of 2017 biopharma investors are in a position to be exuberant: the threat of U.S. price controls that have overshadowed the sector for a year have largely disappeared.”
It also mentions that M&A deals have “disappointed,” stating: “One could point to the macro issues of a lack of corporate tax reform and big pharma’s inability to use overseas cash to fund domestic transactions as holding back M&A activity.”
“However, big pharma still is confronting high biotech valuations, making them reluctant to take big acquisition risks.”