SAN FRANCISCO, Jan. 13, 2014 /PRNewswire/ -- Big pharma stayed on the sidelines in the 2013 mergers and acquisitions (M&A) market despite a continuing need to close a revenue "growth gap" that is expected to reach US$100 billion by 2015. While pharma companies have more "firepower" - or capacity for conducting M&A deals - they now face the dual challenges of higher valuations for attractive assets and relatively less purchasing power when compared to competitors in big biotech and specialty pharma. These and other findings were released today in the 2014 issue of EY's Firepower and Growth Gap report, The shifting balance of firepower.
"With strong shareholder returns and robust pipelines at a few companies, big pharma was largely absent from M&A in 2013," said Glen Giovannetti, EY's Global Life Sciences Leader. "As they face significant growth challenges ahead, pharma companies will need to become more acquisitive, but the growing strengths of big biotech and emerging pharma are leading to both increased competition for deals and more expensive targets."
Key findings highlighted in the report include:
Implications for 2014 and beyond
The shifting balance of firepower report identifies several factors and considerations likely to affect M&A in 2014 and beyond:
"With both declining relative firepower and a smaller share of the total, big pharma companies need to allocate their limited resources carefully, increasing the importance of robust deal valuations, due diligence and integration," said Jeffrey Greene, EY's Global Life Sciences Transaction Advisory Leader. "To succeed in this environment, firms need the right capabilities, resources and processes. Amid elevated target prices and rigorous investor scrutiny, there is little room for error," adds Greene.
Notes to EditorsHow EY's Global Life Sciences Center can help your businessLife sciences companies -- from emerging to multinational -- are facing challenging times as access to health care takes on new importance. Stakeholder expectations are shifting, the costs and risks of product development are increasing, alternative business models are manifesting, and collaborations are becoming more complex. At the same time, players from other sectors are entering the field, contributing to a new ecosystem for delivering health care. New measures of success are also emerging as the sector begins to focus on improving a patient's "health outcome," and not just on units of a product sold. Our Global Life Sciences Center brings together a worldwide network of more than 7,000 sector-focused assurance, tax, transaction and advisory professionals to anticipate trends, identify implications and develop points of view on how to respond to the critical sector issues. We can help you navigate your way forward and achieve success in the new health ecosystem. For additional research, insights and perspectives, visit ey.com/lifesciences or connect with us on our blog at lifesciencesblog.ey.com. You can also follow us on Twitter @EY_LifeSciences.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
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Susan Lavin JonesFeinstein Kean Healthcare
EY Global Life Sciences Center+ 1 617 461 4023
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