15 December 2020

What Does COVID-19 Mean for Life Science M&As?

By Paul Atkinson By Paul Atkinson

In 2019, we experienced an all-time mergers and acquisitions (M&As) record for life sciences. Deal value soared to $357 billion, as companies increased therapy area focus and closed growth gaps.

This activity was largely driven by big pharma. For example, Bristol Myer-Squibb’s (BMS) acquisition of Celgene was one of the biggest deals in pharmaceutical history, combining to form the fourth largest drug company in the US (behind Pfizer, Novartis and Roche).

Big biotech and medtech companies were a little less active, discouraged by high valuations. However, that’s not to say they didn’t get involved.

With such a strong 2019, 2020 was expected to be a ‘mega year’ for life science companies with a reported $1.4 trillion in firepower at their disposal for M&As.

However, COVID-19 gave us an unexpected twist.

What Happened in 2020?

Having adapted to the challenges of a global pandemic, we end 2020 with the S&P 500 at around 10% lower than pre-crisis high (mid-February). Meanwhile, the US pharmaceutical index and US medtech index are more or less identical to their pre-crisis highs and the US Biotech index is up considerably.

So, evidence would suggest that companies have adapted well and the market is in a healthy state. Jianwei Zhu, who is Director of M&A at Siemens Healthineers, agreed. He told me that while there was an initial period of hesitation due to the uncertainty of COVID-19, deal volume has picked-up.

I’m not aware of any major pandemic impact on the market as a whole. COVID-19 related products and services are definitely seeing growth; however, other elective areas have experienced a dip.

The Biggest Deals

One of the most talked about deals of 2020 featured molecular diagnostic giants, Qiagen, and Thermo Fisher. If you’re interested in hearing more about this deal, listen to our CM Conversations podcast with Qiagen CEO, Thierry Bernard.

However, all you need to know is that this deal was aborted. This was down to a failing to secure shareholder support and disagreements in valuation, which Jianwei claimed had been a challenge for many other 2020 deals.

I think people have similar approaches and appetite in term of doing deals. However, valuation is an interesting topic, with people trying to normalise the performance and quantify COVID-19 impact.

Nevertheless, there has been activity – as suggested by the SG 500. In July, Invitae and ArcherDX combined to create a global leader in comprehensive cancer genetics and precision oncology. The new entity is poised to transform care for cancer patients, accelerating adoption of genetics through the most comprehensive suite of products and services available.

Invitae isn’t alone. Gilead Pharmaceuticals has gone big on M&As in 202 too. In March, the company acquired Forty-Seven - a company using an experimental approach to turn off the signal tumours used to avoid the immune system – in a deal worth $4.9 billion to bolster its cancer portfolio.

Gilead wasn’t finished there. In September, the US biopharmaceutical delivered a $21 billion mega-deal to secure Immunomedics. This purchase meant that Gilead were now the proprietors of the drug Trodelvy, which is approved for difficult to treat breast cancer – further enhancing the company’s cancer offering.

What About 2021?

I expect this encouraging activity to follow us into 2021.

According to a recent survey, 58% life science executives say they plan to actively pursue M&A in the next 12 months. Of these, more than three-quarters say that their planned M&A activity will include bolt-on acquisitions or deal-making for transitional capabilities.

Given the strong preference for smaller bolt-on deals, the value of life sciences M&A is unlikely to eclipse the 2019 total. However, that’s not to say the market is not in a healthy and exciting position.

Once things have normalised, there is expectation that the new normal will look very different from before COVID-19 times. Some changes made by life science companies in response to the pandemic may be temporary, but more will be permanent. These changes will create new opportunities for portfolio re-optimization, supply chain repatriation and digital transformation.

Leaders will be determined to reimagine their strategy and how they use transformative deal-making to reposition themselves for renewed growth in the uncertain future.

If you'd like to discuss the life sciences market of learn more about the CM Life Science’s recruitment services, please email me at Paul.Atkinson@lifesci-cm.com.

You can see more of my content on my consultant page.

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Paul Atkinson

Paul Atkinson is a Director and leads a large team, covering the broader diagnostic markets. As well as handling major accounts, Paul prides himself on his ability to provide a truly consultative service to clients, benefiting from his many years’ experience in the diagnostics space.

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