83% likely their company will be involved in a merger or acquisition / KPMG survey*

In the KPMG survey, 83 percent of executives said it is likely their company will be involved in a merger or acquisition as a buyer or seller in the next two years. Further, 41 percent of executives surveyed said the largest area of spending in the next year would be for acquisitions, followed by new products and services, at 38 percent, and research and development, at 38 percent. Similarly, a strategic acquisition was cited as the highest priority investment area by 41 percent of executives surveyed, followed by expansion into new markets by 22 percent.

“Mergers and acquisitions will be exceptional forces over the next two years, as industry executives look to gain access to new products and markets, and new revenue streams,” said Ed Giniat, KPMG U.S. chair of pharmaceuticals. “Industry leaders have their work cut out for them to offset the patent losses and regulatory and pricing pressures.”

According to the KPMG survey, 58 percent of executives identified patent expirations of key therapies and generic competition as the top issue facing their company, followed by increasing regulation and enforcement at 45 percent, and lack of new products in the pipeline at 34 percent.
“The good news is companies have cash to invest in or acquire new medicine breakthroughs, or markets and customers to drive some growth,” said David Blumberg, KPMG national advisory pharmaceutical sector lead partner.

In fact, more than three quarters of executives said their organizations had significant cash on hand and half of them said they expect to increase capital spending over the next year. Further, more than a third said investment was already underway, while an additional 36 percent said investment would be made before the end of the first quarter of 2012.

“Today, pharmaceutical leaders are pursuing geographic expansion in a major way to spur organic growth,” said KPMG’s Blumberg

KPMG on Pharma's M&A Plans: A View From the Top

(*) The KPMG survey was conducted in May/June and reflects the responses from 100 senior executives in the U.S. pharmaceutical industry. Based on revenue in the most recent fiscal year, 52 percent of respondents represent U.S. companies with annual revenues of more than $10 billion, 34 percent with annual revenues of $1 billion to $10 billion, and 14 percent with annual revenues of $100 million to $1 billion.