The Actavis plc (NYSE:ACT) CEO, Brent Saunders, says his company is a pioneer in growth pharma. Basically, if you can’t build it, buy it.
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There’s a frenzied M&A bubble sweeping the pharma industry. This idea of “growth pharma” is a new age for pharma giants who can no longer get growth from developing blockbuster new drugs, rather, they are attempting to buy growth via M&A.
According to a report by KPMG, first half of 2015 has seen pharma deals worth $221 billion, up some 300% year-over-year. The buyouts, divestments, mergers, spinoffs, etc. have created a new industry structure barely recognizable from a few years ago.
Just have a look at the deals this year: Actavis completed the acquisition of Botox maker Allergan for $219 a share and a $85 premium from when the company was put in play by Valeant and Pershing Square.
Then, we had the new Actavis-Allergan buy bought Kythera Biopharmaceuticals for $2.1 billion just two weeks after the merger.
Teva Pharma bought up Allergan’s generic business $40.5 billion dollars recently. Allergan also decided to spend some $560 million on a deal for the biopharma company, Naurex.
Roche has bought a majority stake in Bill Gates funded Foundation Medicine for more than $1 Billion. There was also Abbvie’s acquisition of Pharmacyclics for $21.1 Billion and the Pfizer- Hospira $17 Billion buyout.
The big question becomes; are these deals a positive for the end user?
The industry is now divided into two segments. The riskier startups developing groundbreaking new drugs and the established pharma giants commercializing the drugs with their distribution machinery and then marketing the new drugs via large sales forces.
Once new drugs are on the verge of getting through the clinical phase trials, it’s starting to make sense for the big commercial pharma companies to acquire them to shorten time to commercialization.
So you have the argument that this consolidation helps turn the science in labs into good medicine quicker and more efficiently.
But don’t be fooled, it’s all about the benjamins, from buying growth to tax inversions to reduce taxes.
Now, we’re on the verge of a mega pharma deal, with certain companies being too big to be