Pharmaceutical Industry M&A Activity Grew by 17% in H1 2020 Amid 56% Drop in Deal Value

Pharmaceutical merger and acquisition (M&A) activities have seemingly disregarded the economic uncertainty occasioned by the global pandemic, posting growth in 2020. According to the research data analyzed and published by Comprar Acciones, M&A activity in the industry rose by 17% year-over-year (YoY) during H1 2020.

Among the major deals reported during the period was Gilead’s acquisition of Forty Seven at nearly $5.0 billion. Another mega deal was the merger of Qiagen and Thermo Fisher Scientific, valued at $11.8 billion.

In terms of activity, Q1 2020 saw a total of 19 transactions, increasing to 22 in Q2 2020. Q2 deal values in the pharmaceutical subsector were worth $3.3 billion. That was the lowest they have ever been since Q1 2018.

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The report also reveals that big and medium-cap companies in pharma finished H1 with stocks up a cumulative $190 billion.

Pharma and Life Sciences (PLS) M&A Total Deal Value Sank from $272.9B to $35B YoY

According to PwC, there was a significant drop both in deal activity and value in pharma and life sciences (PLS) during H1 2020 compared to H2 2019. It is worth noting that PLS includes the pharmaceutical subsector, biotech, medical devices and services.

H1 2019 was even bigger for the PLS sector, which saw a total of 119 deals valued at $272.9 billion. In contrast, there were a total of 99 PLS deals in H1 2020 valued at $35 billion. On the other hand, there were 129 deals in H2 2019 valued at $85.6 billion.

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The decrease in value between H2 2019 and H1 2020 was a massive 87.2% while the decrease in deal volumes was 16.8%.

For the pharma subsector, the drop in deal values from H2 2019 to H1 2020 was 56%, as they totaled $7.7 billion. Comparatively, the total deal value for H1 2019 reached $100.1 billion.

It is important to note that in 2019, 40% of the total value of M&A in the sector was attributed to two megadeals. These were Bristol-Myers Squibb acquisition of Celegne, valued at $74 billion, and AbbVie’s acquisition of Allergan at $63 billion.

H2 2020 got off to a great start for the healthcare industry as a whole with 13 deals valued at $1 billion or higher according to S&P Global. The top deal of the year was Gilead’s acquisition of Immunomedics, valued at $19.92 billion, announced in mid-September.

Global Deal Volume Fell by 32% in H1 2020 as Value Plummeted by 53%

Global M&A deal activity overall declined massively in H1 2020 with the downtrend starting toward the end of Q1 2020. According to GlobalData, the number of deals went from 2,349 in February 2020 to 1,984 in March. Similarly, the total deal value plummeted from $151.2 billion to $129.9 billion.

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With the exception of Asia Pacific (APAC) and South and Central America, all other regions reported declines in both deal volume and value. Notably, the growth in the two regions was because both had one high-value deal during the period.

In the APAC region, there was the Charoen Pokphand acquisition of Tesco operations in Malaysia and Thailand at $10.6 billion. On the other hand, Covea’s acquisition of PartnerRe for $9.05 billion raised the South and Central America figures.

Overall, there was a 34.5% decline in deal values during Q1 2020. The number of closed deals dropped by 18.7% YoY in comparison to the Q1 average over the past three years. Transaction value, on the other hand, dropped by 29.2% compared to the same average time frame.

The decline carried into Q2 2020, with the number of closed deals decreasing by 35% according to S&P Global. However, transaction value got a boost from four megadeals worth more than $80 billion.

During the three-month period, the top seven deals, all of which were worth $10 billion or more each, accounted for 57% of total transaction value. That was a significant change considering that since 2015, such deals typically account for 29%.

Total transaction value for Q2 2020 was $678.8 billion. In comparison to Q2 2019, there was a 40% decline in deal volume during the period. It marked the largest drop in recent history since 2015.

Comparing H1 2020 to H1 2019, there was an overall decline of 32% YoY in deal volume, from 10,155 deals to 6,938 deals according to Merger Market. Deal values fell by 53% YoY from $1.9 trillion to $901.6 billion during the same period.

However, H2 2020 seems promising if Q3 2020 data is anything to go by. According to Refinitiv data, the third quarter saw 36 deals valued at $5 billion or above. Their total value was $456 billion.

Even though deal values and volumes are still down compared to 2019, the percentage decline decreased in Q3. The global deal value was down by 18% while volume sank by 10%.