miércoles, 30 de enero de 2019

Global Pharma & Life Sciences Deals Insights Year-end 2018 (II)


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Global Pharma & Life Sciences Deals Insights 2018 (I)

We expect 2019 to be an active year for deals in the PLS sector. The recently announced $74B combination of BMS and Celgene sets us off in the right direction for this year. Overall, we see other deals to potentially follow given that the underlying fundamentals remain strong and companies are now executing on their forward looking strategies driven by a need for scale and category leadership. 
We expect the following key contributing factors to drive an active M&A market in 2019: access to capital (currently on balance sheets as well as available financing); capital markets normalizing for biotech companies after a year of robust valuations; and a need for companies to act on their growth strategies. 

Our expectations by type of activity: 

  • Divestitures: We believe divestitures will highlight the M&A landscape in 2019 as larger companies look to divest noncore / non-strategic assets. Recent trends in the sector have shown that obtaining market leadership and scale are critical to success, and using sales proceeds from divestitures of non-core assets allows companies to reinvest where they have a strategic advantage. Unlocking value through spin-offs, divestitures and partnerships / JV’s will likely continue during 2019. Following a wave of leadership changes throughout the sector in 2018, new leaders will look to implement their strategic plans to advance their growth agendas in 2019 (both organic and inorganic) and replace divested businesses with products and services more in line with their core competencies. 
  • Private Equity: 2018 was a busy year for private equity, and we see this trend likely accelerating in 2019. Private equity has over $1.5 Trillion of dry-powder, and they have positioned themselves to transact on many of the divestitures and other businesses in the PLS sector. Unlike historical periods, private equity is no longer reactive (e.g. waiting until auction processes); they are proactively looking for take-private opportunities, corporate divestitures, partnerships with mid-market companies, and other alternative structures to bridge the gap between buyers’ and sellers’ value expectations. 
  • Partnerships (Alliances/JVs/Other): With the continued importance of achieving scale and operational efficiencies, we believe there will be many partnerships (in various forms) as all sub-sectors look to compete against the headwinds facing the broader healthcare sector. With a continued focus on reducing overall healthcare costs, channel consolidation, and the continued integration of the payor/provider landscape, it will become even more critical for companies to compete either through innovation or scale. We also believe there will be more partnerships between larger Rx companies and payors/providers. 
  • Capital Markets: After a strong showing in 2018, we generally see the first half of 2019 being a robust period for Biotech IPOs and other fund-raising activity with some concern for a potential slow down later in the year. The 67 PLS IPOs during 2018* represented an approximately 80% increase from 2017 levels and more than 30% of the overall IPO market. Of the 67 PLS IPOs, approximately 50 were Biotech companies that had strong showings in raising over $5.0B, with almost all (~90%) priced within or above the expected range. Through the remainder of 2018, these Biotech IPOs generated an average return of more than 16%. Overall, some normalization from 2018 highs will occur; however, we anticipate there will still be an appetite for investment in new technologies and growth businesses.(Ver informe completo)

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