A very busy 2016? The intersection of M&As and personalized medicine

Personalized medicine doesn’t dominate the pharma and biotech pipelines, but according to global law firm Reed Smith, it is probably going to exert a huge pull on the direction of merger and acquisition (M&A) activity this year.

 

According to a new study, “Life lines: Life sciences M&A and the rise of personalized medicine,” 94 percent of life-sciences companies are planning to make an acquisition in the next year, with 91 percent of U.S. respondents expecting these to be cross-border transactions—and more than two-thirds of those are likely to target personalized medicine.

 

Global law firm Reed Smith commissioned Mergermarket to survey 100 senior corporate executives who reveal the main drivers behind the pursuit of cross-border life-sciences deals, the challenges faced in executing those deals, and how advances in personalized medicine may change the face of the industry.

 

Looking back at the $164.3 billion in deals in the life-sciences sector just in the first half of last year—an increase of almost 53 percent over the previous year, Reed Smith pointed out such big moves as Teva Pharmaceutical’s $40.5-billion purchase of the generics division of Allergan and noted that the United States saw the lion’s share of deal value in the sector, with 82 U.S.-targeted deals announced in the first half of 2015, worth over $112 billion.

 

This dealmaking environment isn’t just about big money but is actually “transforming the nature of certain life-sciences companies,” the law firm maintains—Mylan, for example, whose $35-billion bid for Ireland’s Perrigo is likely to result in a company which is currently a manufacturer of generic drugs becoming a diversified healthcare business, and Reed Smith asserts: “There is every reason to expect life-sciences companies to continue to try to reinvent themselves in this fashion ... more than nine in 10 life sciences businesses (94 percent) currently expect to explore the possibility of an acquisition over the next 12 months—this rises to a full 100 percent for companies whose annual revenue is more than $5 billion.

 

Granted, drugs for broad indications continue to drive most pharmaceutical efforts, but this is where the personalized medicine angle comes into play.

 

In a highly competitive marketplace, where the struggle for differentiation has never been tougher, this broad focus will change, particularly given developments such as sophisticated new data analytics tools, according to Reed Smith’s Diane Frenier, a life sciences corporate partner, who is convinced of the attractions of personalized medicine to many companies in the sector.

 

“Targeted therapies enable them to differentiate their products with the payers and they’re likely to get better coverage as a result,” she says. “They’re also improving patient compliance—one of the biggest challenges with therapies is that patients don’t take the medication, often because they’re not seeing the benefits, but with targeted therapies, patients are more likely to see a benefit and to comply.”

 

Despite a continued and current focus on broad indication medicine, personalized medicine offers the promise of higher returns despite smaller potential patient populations given the more targeted nature of drugs—and there are a number of indicators which point to an even brighter future, Frenier asserts, saying: “Businesses are getting more strategic about where they want to focus—they have money on the balance sheet that they want to put to use for shareholders; they’re looking for ways to add value.”

 

“The future of medicine is to have the right medicine for the right patient and the right dose at the right time,” adds Carol Loepere, chair of Reed Smith’s Life Sciences Health Industry Group.

 

To see the report and its opinions in their entirety, visit http://dealdimensions.reedsmith.com/life-lines/key-findings