Healthcare mergers and acquisitions activity could see a significant increase in 2019, compared to the previous year, according to Bloomberg Law. The report states that 2019 could see an increase in transaction volume, with increased focus on hospice, diagnostics and…
Healthcare mergers and acquisitions activity could see a significant increase in 2019, compared to the previous year, according to Bloomberg Law. The report states that 2019 could see an increase in transaction volume, with increased focus on hospice, diagnostics and home care providers. Three months into the year and two major acquisitions have already been announced. Drug manufacturer Eli Lilly purchased Loxo Oncology, Inc. for about USD 8 billion in January 2019, aiming to broaden the scope of its oncology portfolio into precision cancer medicines. In the same month, Bristol-Myers Squibb acquired cancer-drug company Celgene, for about USD 74 billion. Healthcare mergers and acquisitions activity is expected increase to USD331 billion in 2019, according to a recent report by Baker McKenzie. Deal making in the sector is expected to increase 7 percent year-on-year as compared to 2018.
Healthcare companies are also seeing an increase in divestures with a renewed focus on business units that are driving the core strategic growth of the company, and the consolidation of a specific therapeutic area as a result. Sanofi, for instance, divested its European generics business amidst an increase in competition to refocus on the business’s core strengths, according to EY’s Global Corporate Divestment Study. Similarly, pharmaceutical and life sciences companies are divesting non-core assets in order to scale and focus on leading drug development in specific disease areas. As businesses aim for portfolio optimization through divestitures and inorganic growth, the industry is also seeing various horizontal deals. For instance, Bristol-Myers Squibb’s acquisition of Celgene will result in the company owning about 18 percent of the oncology market. Ernst & Young in its 2019 Firepower Report noted that bolt-on transactions accounted for 81 percent of deal volume and 43 percent of total deal value for life sciences M&A in 2018. Another significant deal in this regard this year was Johnson & Johnson’s USD 2.1 billion acquisition of Ci:z Holdings Co., a Japanese company that sells dermo-cosmetic, cosmetic and skincare products.
Baker McKenzie expects companies from Asia and the United States to announce larger deals as well as megadeals over the course of the year. In January 2019 Japanese pharmaceutical company Takeda completed its previously announced acquisition of Shire plc, a global specialty biopharmaceutical company for USD 58 billion. The industry is also set to witness more partnerships between health insurance companies and pharmacy chains. A recent example of this was insurance giant Cigna’s acquisition of Express Scripts in the last quarter of 2018. Tech acquisitions are set to rise across the spectrum of patient care – hospice, pharmaceuticals, life sciences and insurance companies are all looking to add digital capabilities to their business in a bid to reduce costs, acquire new technologies and speed up care delivery.
Global healthcare spending is expected to climb to about USD 10 trillion by 2022, according to Deloitte. Clinical and technological advancements and the need to add capabilities and scale up through inorganic growth will fuel deal activity as well. As companies continue to seek to outpace the competition, healthcare deal activity is set to heat up this year.
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