In 2017, there have only been $11.5 billion in biotech mergers & acquisitions, and even though this can change with just one deal, commentators are blaming the doubt on U.S. tax policy. Biotech M&A topped $30 billion for two straight years in 2015 and 2016, boosted by some large deals such as Pfizer’s $14 billion purchase of Medivation.
In its discussions on the numbers, Bloomberg reported that the root of this problem is the lack of action from President Trump on tax reform. In the meantime, everyone is waiting for the president to act on his promised reforms in the run-ups to his election; biotech and pharma businesses are halting decisions on M&A.
This year was anticipated to be a big one for pharma merger and acquisitions as a number of large corporations look to enhance their pipelines through acquisitions. And even though things got off to a strong start with Takeda’s $5.2 billion acquisition of Ariad back in January, there has been minimal action since then.
An analysis from Bloomberg discounted Johnson & Johnson’s $30 billion acquisition of Actellion, which was completed in June. Although some would class Actelion as a biotech, it was too big, with products approved of its own, to be categorized as a biotech. The suggestions are that there are a group of companies that are ready for a takeover, for example, Kite Pharma, and Tesaro to name two.
Tesaro has its PARP inhibitor Zejula (niraparib) already approved in ovarian cancer, while Kite is honing in on US approval for its revolutionary CAR-T blood cancer therapy. United States biotech companies Clovis and Puma also have PARP inhibitors approved and have also been seen as potential acquisition targets.
The US corporate tax rate is currently 35%, much higher than the majority of developed economies. Pfizer’s chief executive Ian Read is one of the most outspoken big pharma CEOs in his calls for corporate tax reform. He says his company won’t be spending until there is more clarity about tax reform.
The problem for President Trump is while ‘fiscally conservative’ Republicans in Congress endorse tax cuts, a lot of them also prioritize trimming federal deficits and spending. This means that many Republicans making it tough for Trump to win over his own party will challenge a huge cut.
Many experts feel that Trump could still reach a cut of 35% but predictions that it won’t be cut further than levels beyond 25-28%. With that being said, big pharma looks set to wait patiently unless an attractive M&A proposition surfaces.