Updated on 18 June 2013
PricewaterhouseCoopers (PwC) reports that M&A activities in Korea pharmaceutical industry has dipped over the last five years due to uncertainty of sales growth through alliances and expansion of product portfolios. M&A is not attracting enough companies to bring more deals on the table and there is unavailability of funding and cash among domestic companies for acquisition. PwC mentions that average market capitalization of listed pharmaceutical companies in Korea is approximately $250 million, while average market capitalization without the top five listed pharmaceutical companies is approximately $137 million. In order to acquire 40-50 percent of the shares of a Korean pharma company, an acquirer would need approximately $55 million. PwC mentions that though most of the pharmaceutical companies are family owned, more M&A deals between foreign and domestic companies would be visible in coming years due to globalization.
Bright year ahead
In the current scenario where pharmaceutical companies are sitting on a patent cliff, while the drug pipeline is getting exhausted, the big players of the industry will have to look for acquisition strategies to enrich the shrinking possibilities in the sector.
A survey by KPMG has predicted that healthcare and pharmaceuticals will be the second highest sector to witness a boost in merger and acquisition activities (M&A) in the coming years.
PricewaterhouseCoopers (PwC) reports that during the first quarter of 2013, the total volume of pharmaceutical and life sciences deals increased by 48 percent as compared to the first quarter of 2012. Also, the total deal value more than doubled on the strength of several large divestitures that were completed during the quarter. These results signal a continuation of trends that were observed in the previous quarters, including the trend of companies seeking to unlock shareholder value through divestitures and a general resurgence of deal activity.
This trend is likely to continue for the remainder of 2013 as industry participants rely on M&A activity to achieve their growth strategies, including expanding their geographic reach and product offerings. The pharmaceutical segment recorded 12 transactions in the first quarter of 2013, up from five during the same quarter of 2012. PwC notes that the value of transactions carried out during the first quarter of 2013 rose by 137 percent to $2.9 billion, as compared to $1.2 billion for the same quarter of 2012. This indicates an increase in activities in neurodegenerative diseases including Parkinson's and Alzheimer's.
Meanwhile, the number of transactions in medical devices sector saw a decline during the first quarter of 2013. However, it might pick up in the latter half of 2013, as many companies seek to strengthen their existing product portfolios and enter into new markets.