A Look at the Biggest Pharmaceutical Mergers and Acquisitions in 2019Author: iDeals
Mergers and acquisitions (M&A) in pharmaceuticals got off to a roaring start in 2019. In the first week of the year, two multi-billion-dollar deals were announced. Together, the deals totaled $82 billion, and one of the two landed in the top 10 biggest pharmaceutical M&As of all time.
The first week of January was merely the beginning. Between January and June 2019, more than $173 billion in pharmaceutical M&A deals were recorded, says Alex Philippidis, senior news editor for Genetic Engineering & Biotechnology News. That number didn’t include deals that were announced in 2018 and completed in 2019, like the purchase of Shire by Takeda Pharmaceuticals for $58.6 billion.
As 2019 draws to a close, here are some of the biggest deals and takeaways from pharmaceutical mergers and acquisitions during the year.
Bristol-Myers Squibb Acquires Celgene
2019 began with one of the biggest pharmaceutical M&As ever recorded: On January 3, 2019, Bristol-Myers Squibb announced its plans to acquire Celgene for $74 billion. The goal: to strengthen BMS’s position in immunology, inflammation and oncology, while helping Celgene address patent challenges and other problems head-on.
“Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organization with a goal of discovering, developing, and delivering innovative medicines for patients with serious diseases,” says Giovanni Caforio, MD, chairman and CEO of Bristol-Myers Squibb.
While the deal was one of the largest ever recorded, it faced some delays. In November 2019, the Federal Trade Commission announced that BMS and Celgene had agreed to sell Celgene’s Otezla to Amgen for $13.4 billion, after the FTC raised concerns that the original deal would violate federal antitrust law. Otezla is one of the most popular treatments for psoriasis.
On Wednesday, November 20, 2019, BMS and Celgene completed the transaction, Jon Swartz at MarketWatch reports.
Eli Lilly Acquires Loxo Oncology
Loxo Oncology is a new kid on the block, receiving its first-ever approval from the Food and Drug Administration (FDA) in 2018 for Vitrakvi, which can target a wide range of cancers that arise from a single genetic mutation.
Loxo distributes Vitrakvi in coordination with Bayer, which meant that Eli Lilly’s January 7, 2019, announcement that it was acquiring Loxo Oncology raised eyebrows. So did the announced price tag of $8 billion.
The deal also completed far more quickly than many of the other large deals announced in early 2019, with Eli Lilly and Loxo announcing the end of the process in February 2019.
“We believe that Lilly will bring a great deal of strength to this partnership in addition to what Loxo has already done,” says Anne White, president of Lilly Oncology.
The deal allows Eli Lilly to continue its repositioning as a leader in oncology, say Reuters reporters Manojna Maddipatla and Saumya Sibi Joseph. The company spun off its animal health division earlier this year as it focuses on ways to diversify and strengthen its position. Eli Lilly’s flagship medications Humalog and Cialis face competition from an increasing number of companies.
Loxo’s focus is on medications that target genetic mutations, rather than particular types of tumors. A second drug, known as selpercatinib or LOXO-292, shows promise for patients who have lung cancer resulting from a rare genetic mutation, says Riley Griffin at Bloomberg.
“The Loxo Oncology team has always been relentless and unified around the common goal of bringing highly selective medicines to patients with genomically defined cancers,” says Josh Bilenker, MD, CEO of Loxo Oncology. The company’s early successes indicate that Loxo Oncology may be a small acquisition that offers big benefits for Eli Lilly, justifying the $8 billion price tag.
To Be Completed: AbbVie Acquires Allergan
In June 2019, AbbVie announced its plan to acquire Allergan for approximately $63 billion, making the deal the second-largest to be announced in the first half of 2019.
The deal, for which negotiations began in March 2019, came as a surprise: AbbVie and Allergan had kept it under wraps prior to announcement, and AbbVie had no competition in seeking Allergan’s approval, says Kyle Blankenship, associate editor at FiercePharma.
One of AbbVie’s primary goals in acquiring Allergan is to protect itself as the patent expires on Humira, a treatment for rheumatoid arthritis that is also one of the best-selling drugs in the world. Acquiring Allergan means acquiring Allergan’s own flagship medication, Botox — used not only in cosmetic procedures but also to treat neurological conditions like migraine and blepharospasm.
Mergers and acquisitions intended to soften the blow of losing patent protection are common, and have become more common in recent years. “This is the age of blockbusters. And when blockbusters start to go away, companies don’t have too many things they can do,” says David Maris, a Wells Fargo analyst specializing in the pharmaceutical industry.
The deal’s announcement, however, didn’t generate the enthusiasm either AbbVie or Allergan had hoped for. AbbVie’s stock value dropped more than 15 percent following the announcement and making AbbVie the third-worst performer in pharmaceutical trading, ahead of just Teva and Mylan.
The reason? While both AbbVie and Allergan stand to diversify as a result of the transaction, their respective strengths and challenges don’t mesh intuitively. AbbVie’s power is in hematology and immunology, while Allergan has focused on neurology, eye care and aesthetics.
The two companies have distinct strengths, weaknesses, opportunities and challenges, which may make them difficult to align with one another, says Christopher Raymond at Piper Jaffray. By contrast, the BMS-Celgene merger focuses each company on creating a world-leading oncology team.
The AbbVie-Allergan deal currently stands to be completed in 2020.
A Look Ahead: Pharmaceutical M&A in 2020
Pharmaceutical mergers and acquisitions have exploded in the last five years. In particular, deals in gene therapy, immuno-oncology, microbiome and orphan drugs took off: More than 2,880 were recorded worldwide from 2015 to 2019, with a total value of more than $1 trillion, according to a GlobalData study.
Of these, acquisitions in immuno-oncology were most popular, while microbiome acquisitions landed at the bottom of the list, says Jesus Cuaron, associate director of cardiovascular and metabolic disease and gender health pharma at GlobalData.
As the patents on popular biologics like Humira start to expire, allowing generics to compete with the name-brand originals, interest in research that involves biologic medications and similar biotech approaches is likely to increase. So is interest in M&A deals that allow companies to expand into biosimilars, Ying Chen and fellow researchers at McKinsey write.
In every pharmaceutical area, however, it can be more appealing to pharma companies to buy one another rather than build their own R&D departments and product lines, says Robert Teitelman at Barron’s.
First, buying is often less risky than building. The late 1990s and early 2000s also saw an explosion in the growth of new biomedical research companies, many of which have since borne fruit and offer easy sources of investment via M&A. And, as noted above, the rise of generics often encourages pharmaceutical companies to protect their bottom lines by seeking blockbuster deals, typically defined as any deal over $40 billion.
The first half of 2019 saw more than $200 billion in acquisitions, with the biggest focus on cancer drugs and gene therapies, as Bob Herman at Axios reports. Large pharma companies in particular have the available cash to make M&A deals that bring these types of drugs into their portfolios, allowing them to see more immediate benefits than if that money was funneled into R&D or other projects internally.
Companies face pressure to maintain a strong bottom line in the face of declining prices, rising competition and hefty R&D expenses increases. That’s why M&A activity is likely to stay strong in the pharmaceutical sector — and why 2020 could bring even more record-breaking deals.