Updated on 19 June 2012
Recent M&A deals could be regarded as a defensive strategy against the patent cliff
The number of mergers and acquisitions (M&A) that have been made over the past two years have almost returned to pre-downturn levels. This is in line with the recovery made by the pharmaceutical industry from the initial impact of the global economic downturn.
During the downturn, the number of M&A deals in the major developed markets declined dramatically, as pharma relegated deal making in favor of conserving cash by cutting costs and making redundancies. Despite ongoing financial concerns in many markets, by 2011 pharmaceutical companies implemented much of their initial cost-cutting measures and were again ready to concentrate on deal-making activities.
Multinational companies have been keen to expand their presence in emerging markets amid concerns over slowing sales and revenue growth in the mature markets. This has been further fueled by the expected losses that are to be incurred as significant patents begin to expire. Recent M&A deals could be regarded as a defensive strategy against the patent cliff. Companies are either cutting costs during the restructuring process post-M&A or are growing their sales by entering higher-growth therapeutic or geographic markets, thereby maintaining or improving profit margins. Companies in the emerging Asia Pacific markets have drawn much attention in this environment.
At the same time, pharmaceutical markets within Asia Pacific are slowly maturing, and domestic companies are growing and consolidating independently. Analysis of trends in M&A activity in Asia Pacific showed increasing deal being made during 2007-10, although this leveled off in 2011. The majority of the 677 deals recorded between Q1 2007 and Q2 2011 involved one APAC-based company acquiring or merging with another APAC-based company (this comprised of 52 percent of the deals).Chinese companies were involved in the highest volume of deals, with 46 M&A recorded in the first half of 2011 alone, and most of these (65 percent) were domestic deals that involved the consolidation of two the operations of two Chinese firms. As would be expected, due to the size and mature nature of their pharmaceutical market, Japanese companies were involved in many of the highest value M&A transactions, having made a number of notable deals in an effort to expand their geographic and therapeutic reach.
Based on the analysis of 677 deals recorded between Q1 2007 and Q2 2011, considering company and deal size, and resulting synergies and opportunities, Datamonitor offers the following list of 20 of the top M&A deals in Asia Pacific (presented in chronological order according to the date of deal announcement):