Pharmaceuticals & Biotechnology

The overall outlook for the Pharmaceuticals & Biotechnology sector is optimistic. Low-cost service offerings from Contract Research Organizations and Contract Manufacturing Organizations, rising pricing pressures, lack of internal capabilities, and access to industry experts are expected to drive growth throughout the projection period. This industry is anticipated to continue to implement Mergers and Acquisitions (M&A), regional development, service portfolio expansion, and competitive pricing strategies to nurture a highly competitive atmosphere and acquire an elevated market share.

The Pharmaceutical & Biotechnology industry has seen an increase in popularity due to COVID-19, which has led to refinement in corporate strategy and focus on innovation. This industry has experienced strong equity market growth despite the negative publicity on drug pricing and continuing struggle to conduct and fund research and clinical trials. Pharmaceuticals should continue to acquire biotech businesses and pursue licensing agreements, partnerships, and joint ventures which are anticipated to increase biotech M&A volume and activity. Exhibit 1 shows the performance of the Pharmaceuticals & Biotechnology sector since 2016 relative to the overall economy, comparing sector revenue change to GDP growth from 2016-4Q2020.

Pharmaceutical & Biotechnology revenue totaled $1.8 trillion in 2020. While industry revenue increased 5% from 2015-2020, the industry is expected to grow at an annualized rate of 5.4%-8.1% from 2021-2026. Industry growth is expected to continue as companies announce approval of late-stage development vaccines and emergence of new diseases that trigger the need for effective remedies. M&A activity within the Pharmaceutical & Biotechnology industry is expected to continue to diversify as businesses assess disruptions to structural changes in healthcare and government policies. Exhibit 2 shows the trends in investing activity from 2015-2020.

Companies are anticipated to look to increase scale in various therapeutic areas, including the boost of gene therapy capabilities and oncology, and most importantly, have robust balance sheets and capital that can be used for M&A. Despite the COVID-19 pandemic, M&A activity increased 17% during the first half of 2020. The Pharmaceutical & Biotechnology industry witnessed substantial success in producing effective treatments towards COVID-19, with many pharmaceutical companies launching their potential vaccines. An increase of new technologies and drug approvals under development by Pharmaceutical & Biotechnology companies is expected to be critical in demonstrating to the global audience that this industry serves as a leader in finding solutions to reduce the severity of diseases.

As of the end of FY2020, Pharmaceuticals and Biotechnology M&A deals worth $174 billion had been announced globally, which include AstraZeneca and Alexion Pharmaceuticals, Gilead Sciences and Immunomedics, Bristol Myers Squibb and MyoKardia, Johnson & Johnson and Momenta Pharmaceuticals, and Sanofi and Principia Biopharma. AstraZeneca acquired Alexion for $39 billion as part of their strategic plan to expand into rare drug-disease drug development and grow into an immunology market leader. Gilead Sciences’ acquisition of Immunomedics for $21 billion was to better construct a strong and diverse oncology portfolio. Bristol Myers Squibb’s acquisition of MyoKardia for $13 billion was intended to expand their cardiovascular drug portfolio with a potential blockbuster for a form of chronic heart disease.

Similarly, Johnson & Johnson acquired Momenta Pharmaceuticals for $6.5 billion to bolster their portfolio of treatments for autoimmune diseases. Sanofi added a promising biotech company in Principia Biopharma to pivot efforts toward innovative therapies to spur growth. In sum, the overall outlook for M&A activity in the Pharmaceuticals and Biotechnology industry appears to remain stable with support from the industry’s non-clinical nature and favorable demand characteristics.

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