Pharmaceutical companies looking for companies for M&A
2022.12.20 06:14
Pharmaceutical companies looking for companies for M&A
Budrigannews.com – In 2023, pharmaceutical companies are set for a shopping spree. Pfizer (PFE.N) and GSK (GSK.L) are in relatively good health thanks to record sales of vaccines and a recovery in cancer treatments following the pandemic. CEOs have a potential half-trillion-dollar stash to use on dealmaking. The listed biotechnology companies that are likely to be their targets are not in a position to play hardball.
Deals worth nearly $66 billion were announced by the beginning of December in 2022, 60% below the 9-year average, according to data from Refinitiv; Better will be in 2023. Berenberg analysts say that drug companies are relatively healthy, with debt around 1.6 times expected EBITDA in 2023. The top 15 listed drugmakers, including Pfizer, Moderna (MRNA.O), Novartis (NOVN.S), and Roche (ROG.S), would have $486 billion of firepower if they could double that to three times EBITDA.
CEOs might be less likely to put that money to use if patents expire. In the coming years, Bristol-Myers Squibb (BMY.N), Amgen (AMGN.O), Pfizer, and GSK will all lose their exclusive rights to some of their most popular treatments. The easiest way to generate new revenue is to acquire biotech companies with rapid expansion. By 2025, Bristol-Myers Squibb alone anticipates losing up to $14 billion in sales due to the expiration of Revlimid’s patents, which are used to treat multiple myeloma.
Conditions for a takeover appear favorable as well. By the middle of December, the Nasdaq Biotechnology Index (.NBI) had lost around 20% from its August 2021 peak. Ascendis Pharma, which creates medicines to treat growth hormone deficiencies, is one potential target. According to data from Refinitiv, Incyte (INCY.O), a specialist in oncology, was worth $18 billion at the beginning of December, or 23 times forward earnings. This is a significant decrease from its peak in 2021, when it was trading on 30 times.
CEOs of biotech companies might be reluctant to sell or insist on a high takeover premium. For instance, Seagen (SGEN.O), which was valued at $22 billion at the beginning of December, has defeated Merck & Co. However, cash-strapped biotechs will find it increasingly challenging to obtain new equity or funding as interest rates rise. Because of this, Big Pharma is in an ideal position to negotiate.
Refinitiv data as of December 7 show that global pharmaceutical companies spent nearly $66 billion on takeovers in 2022. That is underneath the 9-year normal of almost $164 billion.
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