Impetus for Activity
Many of the same factors that resulted in 2011’s acquisitions will drive M&A activity this year. For example, last year Sanofi capped a months-long, publicly speculated courtship of Genzyme with a $20.1 million offer. The deal was completed in April, and in October Sanofi reported that Genzyme would serve as the new company’s rare disease and multiple sclerosis unit.
“This was a very complementary deal for both in regard to geographic presence,” Rozelman pointed out. “Sanofi historically lacked scale in the U.S., so it used partners like Bristol-Myers Squibb to distribute products like Plavix and Avapro. More importantly, this deal with Genzyme allowed Sanofi to really shift its mix from its patent-challenged blockbuster drugs to key growth platforms.”
Alan Carr, Needham & Co. biotech analyst, has pegged increased M&A activity in 2012 to two factors: efforts to reduce red tape for drug developers pursuing FDA review and an overall improved outlook on the market. “If the regulatory environment improves, which we believe may gradually occur, increased M&A activity could follow,” Carr wrote in a December 23 note to investors.
Volatility overseas, however, will continue to dampen U.S. markets. Additionally, efforts to cut red tape are unlikely to go as far as industry wants. So the drivers of increased M&A activity in 2012 most likely won’t be Wall Street or some sort of kinder, gentler FDA.
More than likely, mergers and acquisitions in 2012 will be driven by the same factors that have stoked activity in recent years—pharma’s desire for revenues given patent expiries, their need to bolster R&D pipelines, and their paradigm shift into the world of biologic development. Biotech drug developers, particularly the larger companies, will also compete on the M&A stage as they try to diversify their disease and technology focus.