Navigation Links
Big pharma's need to tap M&A for growth will persist in 2014, while dealmaking landscape becomes more competitive

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.

(Logo: )

"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:

  • Pharma's growth gap remains: The projected 2015 growth gap for big pharma - the additional revenue needed to keep pace with the overall drug market - remained essentially unchanged at US$100 billion. The inability of big pharma to close this growth gap was due to both a lack of significant M&A and slowing sales, with revised third-quarter guidance indicating that aggregate 2013 sales are expected to decline by about 1%.
  • Pharma's firepower increases: EY's Firepower Index revealed that big pharma's firepower increased by nearly US$100 billion, or 15%, in 2013. This increase was almost entirely driven by rising equity market valuations, which accounted for more than 90% of the increase.
  • The balance of firepower is shifting: Despite an increase in overall firepower, big pharma's share, when compared to big biotech and specialty pharma, has fallen significantly from 85% in 2006 to 75% in 2012 and 70% in 2013. In addition, as valuations of big biotech and specialty pharma companies outpace those of big pharma, the relative firepower of big pharma (i.e., adjusted for higher target prices) has actually declined by more than 20% over the last year. These shifts should heighten the competition for deals in 2014. Big biotech and specialty pharma have already proven to be significant competitors for assets, with these sectors accounting for more than 80% of M&A activity by announced deal values in 2013.
  • 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:

  • Acquisitions to hedge pipeline disappointments seen as likely: Among the likely big pharma acquirers in 2014 will be those with growth gaps who decide to hedge potential disappointments in product launches and R&D.
  • Divestitures to pursue growth targets may be seen: Given the rise in target valuations, some big pharma companies may turn to divestitures to boost firepower in 2014. EY estimates that approximately 12 divestitures by big pharma - principally from non-core businesses - could be worth up to US$100 billion in incremental firepower that could be redeployed for M&A.
  • Use it or lose it?: For companies whose firepower is expected to remain the same or shrink, "use it or lose it" may become the focus - driving a surge in M&A activity.
  • "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 or connect with us on our blog at You can also follow us on Twitter @EY_LifeSciences.

    About EY 
    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.
    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit Greg Kelley

    Susan Lavin JonesFeinstein Kean Healthcare

    EY Global Life Sciences Center+ 1 617 461 4023

    +1 732 516

    Copyright©2012 PR Newswire.
    All rights reserved

    Related medicine technology :

    1. Virtify Announces Second Webinar on Regulatory Information Management Strategies for Small and Mid-Sized Pharmas
    2. Innovation Rolls Out New PharmASSIST Dispenser Model 4 with Medication Self Calibration Capability
    3. AstraZeneca Neuroscience partners with ePharmaSolutions to optimize Clinical Trial Management
    4. PharmaSphere: Early-Stage Technology Transfer Collaborations - Enabling Platform Technologies & Deal Synergies between Academia and the Pharmaceutical Industry
    5. ePharmaSolutions Wins Major Award for Life Sciences Industry Innovation
    6. In Q1 Public Biopharmas Shift Fundraising into Overdrive
    7. Cumberland Pharmaceuticals And PT. SOHO Industri Pharmasi enter Into Exclusive Licensing Agreement For Caldolor In Indonesia
    8. ePharmaSolutions Launches an Innovative Patient Recruitment Application for Windows 8
    9. Partnerships, Licensing, Investments and M&A Deals and Trends for May 2013 in Pharmaceuticals
    10. Medical Equipment Monthly Deals Analysis: February 2013 - M&A and Investment Trends
    11. Medical Equipment Annual Deals Analysis: M&A and Investments Trends - 2012
    Post Your Comments:
    (Date:12/1/2015)... VIEJO, Calif. , Dec. 1, 2015 /PRNewswire/ ... the prevalence of symptoms for pseudobulbar affect (PBA), ... outbursts of laughing and/or crying resulting from certain ... use of antipsychotic medications in nursing home residents, ... Geriatric Psychiatry. The study showed that almost one ...
    (Date:12/1/2015)... , Dec. 1, 2015 Research and ... of the "2016 Global Enteric Disease Testing ... Salmonella, Shigella, Vibrio, Yersinia--France, Germany, Italy, Japan, Spain, ... Japan . --> ... The report is based on a combination ...
    (Date:12/1/2015)... UPPSALA, Sverige, December 1, 2015 ... Breast Cancer Study Group (IBCSG, Bern ... att ingå i en klinisk studie av palbociclib, ... --> Studien, med namn PYTHIA, ... med anti-hormonella läkemedel i kombination med palbociclib, som ...
    Breaking Medicine Technology:
    (Date:12/1/2015)... CHICAGO (PRWEB) , ... December 01, 2015 , ... ... risk quantification and optimization of adjunctive imaging is the focus of numerous abstracts ... (RSNA) meeting, November 29-December 4, 2015. Nine abstracts highlight the use of ...
    (Date:12/1/2015)... ... December 01, 2015 , ... ... everything. That is why Hollister Incorporated has launched the VaPro Plus Pocket™ touch ... product in the VaPro touch free catheter portfolio,” said Michael Gresavage, Vice President ...
    (Date:12/1/2015)... ... December 01, 2015 , ... SAN FRANCISCO, Calif. (December ... the organization has awarded Education and Developmental Therapies (EDT), an Applied Behavior Analysis ... celebrates exceptional special needs providers that excel in synthesizing the areas of clinical ...
    (Date:12/1/2015)... ... December 01, 2015 , ... ... it has been awarded a fixed price per sprint agile development contract to ... at $34 million over five years, provides software engineering, infrastructure, as well as ...
    (Date:12/1/2015)... (PRWEB) , ... December 01, 2015 , ... ... clinical solutions for the care management and population health arenas, is pleased to ... clinical and cost containment services, has successfully implemented the ACUITY Complete Care™ Management ...
    Breaking Medicine News(10 mins):