Pharma M&A shoots up to $159B for first half, but prices could dampen the mood

Print 17 July 2015
Carly Helfand / FiercePharma

Think last year was an M&A record-breaker in biopharma? 2015 is on track to top it, a new report says.

According to Mergermarket, in the first 6 months of this year, global M&A activity in the pharma, medical and biotech industries hit its highest half-year value since 2001 with $211.2 billion worth of deals. That's a 2.7% boost from H1 2014's $205.7 billion mark.

And it's pharma that's powering the uptick. The industry has recorded 168 deals so far this year, accounting for $159.1 billion of the overall total. And that's a leap of 58.6% over what pharma had posted by this time last year.

Valeant CEO J. Michael Pearson

Why the change? Plenty of companies have notched acquisitions since January 1 to keep the M&A wave rolling. Shire ($SHPG) was quick out of the gate with a buyout of NPS Pharma, Valeant ($VRX) scored buys of Salix and bankrupt Dendreon's assets, and Pfizer ($PFE) snagged Hospira ($HSP) for $15 billion, to name a few.

But buyout targets are also commanding higher price tags, Mergermarket notes--especially in the U.S. There, companies have watched the average adjusted EBITDA multiples jump from 16.7x in last year's first half to 22.3x in this year's.

Whether that'll keep on happening remains to be seen. Right now, a number of pharma companies are working to fend off bids they claim undervalue their businesses, and their pursuers could end up raising their offers in order to take home the prize. Currently, Perrigo ($PRGO) is working to dodge Mylan ($MYL), and Mylan has shunned efforts from its own wannabe-owner, Teva ($TEVA). Depomed ($DEPO) also this week swallowed a poison pill to block a takeover try from Ireland's Horizon ($HZNP).

Not all of the industry's execs approve of the deal mania, though. GlaxoSmithKline's ($GSK) CEO Andrew Witty has called recent valuations "stretched," noting that super-low interest rates have spurred companies to make "poor choices" in the M&A arena. And in May, Valeant chief J. Michael Pearson pointed out "a bit of a bubble" in the space.

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