When Deals Go Wrong: Lessons from Failure
Author: Melanie Senior
Publisher: Datamonitor Healthcare
Acquisitions are central to growth, and 2018 was a strong year.
2018 was a very strong year for dealmaking. The value of biopharmaceutical mergers and acquisitions (M&A) grew by 20% to reach over $160bn, with the top 10 deals accounting for almost 80% of that, according to Informa’s Medtrack and Strategic Transactions
- Acquisitions and licensing are core to pharma and big biotech growth as pipelines thin and assets lose patent protection.
- In 2018, there were 18 acquisitions worth over $1bn, including Takeda’s $60bn Shire deal. 2019 began the same way, as Bristol-Myers Squibb bought Celgene for $74bn in the fourth-largest deal ever, followed in June by AbbVie’s $63bn offer for Allergan. These deals illustrate how Big Pharma companies, in this decade, are not buying each other, but instead picking off candidates from a grown-up generation of biotech companies.
- A look back at prior years’ equally eye-popping deal sums reveals many billions of dollars of write-offs and lost value.
- Key assets failed or disappointed in at least half of 2014’s largest acquisitions and licensing deals.
- Failure is part of the drug discovery landscape. But some lessons can be learned from dud deals.
6 BIOPHARMA M&A GREW 20% TO $160BN IN 2018
6 Acquisitions are central to growth, and 2018 was a strong year
7 Big Pharma buy big biotechs
15 WHY DEALS FAIL
15 The reasons may be clinical, economic, or strategic
15 Strong need and competition push up prices beyond “reasonable value”
24 BEWARE WARNING SIGNS – AT THERAPY AREA, DRUG CLASS, AND COMPOUND LEVEL
24 Therapy area effects
24 Drug class effects
24 Compound effects
26 Red-hot therapy areas do not guarantee success
30 HALF OF 2014’S LARGEST LICENSING DEALS WENT SOUR
30 Reasons for failure: new technologies, new priorities, competition
36 CLASS OF 2018–19: CAN RARE DISEASES SUSTAIN BIG PHARMA?
36 Nearly half of 2018 and 2019’s largest M&A deals focus on rare diseases
39 Value-destroying deals will continue
42 About the author
LIST OF FIGURES
11 Figure 1: Failed biopharma M&A deals, 2014–16
12 Figure 2: 2014 biopharma acquisitions with upfront value of $200m or more
19 Figure 3: Selected CNS deals (2014–16) – 13 deals with upfront value of $200m or more
LIST OF TABLES
7 Table 1: Top 10 M&A deals by value, 2018
8 Table 2: Celgene was a big shopper: 2017–19 M&A and alliance deals
15 Table 3: Select examples of deal failures, by failure type, 2014–16
31 Table 4: Failed or amended licensing deals from 2014, with upfront value of $100m or more
32 Table 5: Failed or amended licensing deals from 2015, with upfront value of $100m or more
37 Table 6: Significant rare diseases M&A since January 2018
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