It’s been a wild ride through the M&A world for pharma this year, and analysts predict that may just continue into 2015. Companies have been wheeling and dealing at breakneck pace, with more than a couple inking multiple pacts. But plenty of drugmakers are still in search of a deal that will move the needle.
One such drugmaker is Pfizer, whose CEO Ian Read has said he plans to keep the tax inversion dream alive heading into next year. In 2014, U.S. pharma seemed to go after overseas drugmakers left and right in hopes of leveraging addresses in tax-advantaged domiciles. There was Mylan’s deal for Abbott’s Netherlands-based generics business; Horizon Pharma’s pickup of Ireland’s Vidara Therapeutics; and, of course, Pfizer’s run at U.K.-based Big Pharma peer AstraZeneca, to name a few.
After the U.S. treasury this fall rolled out stricter rules that put the squeeze on inverting companies, it looked like inversion fever may cool down a bit. AbbVie ($ABBV), for one, pulled the plug on its $55 billion merger with Shire, and a handful of smaller companies like North Carolina’s Salix Pharmaceuticals canceled trans-Atlantic pacts of their own.
But so far, Read still seems poised to carry the trend into 2015. Treasury rules or no, as long as the value is there, “I see no reason why we wouldn’t be able to do an inversion,” he said in October.
Another M&A ball that will likely keep rolling in the new year? Consumer health deals. Companies are taking advantage of the sector’s growth promise, particularly in emerging-markets countries with expanding middle classes. Some of Big Pharma’s biggest are jockeying for position in the space, and after this year’s M&A activity, they’ll likely follow up in hopes of getting ahead.
GlaxoSmithKline and Novartis shook up the rankings in April, agreeing to establish a Glaxo-controlled consumer health joint venture that will make them the global leaders in the OTC arena. Bayer was quick to follow up, nabbing Merck’s unit for $14.2 billion–its second OTC move of the year following a pickup of China’s Dihon. But that won’t be enough for the German pharma to achieve its goal of taking the worldwide leader spot–meaning we’ll likely see some more activity to come.
And it won’t all be from Bayer. Plenty of other drugmakers have been active in OTC as of late, including big guns like Sanofi–which has bolstered its consumer presence significantly through acquisitions since buying out Tennessee’s Chattem–and smaller companies like Perrigo, which this year beefed up on the consumer side with a $4.5 billion buyout of Belgium’s Omega Pharma.
And of course, all eyes will be on activist investor Bill Ackman to see if the unconventional dealmaking tactics he showcased during this year’s Valeant-Allergan takeover battle catch on. After he teamed up with the Canadian pharma to help it acquire California-based Allergan, he quietly built up a stake to become the drugmaker’s largest shareholder–a position he tried to leverage in the ensuing hostile bid process.
While the move may inspire wannabe acquirers to think outside the box, it’s not certain that they’ll choose to take the same path. First, there’s the important footnote that Valeant and Ackman lost their takeover fight, with Actavis ultimately stealing Allergan in a whopper deal that will land the combined company in pharma’s top 10 companies by revenue. And second, the SEC is currently investigating for possible insider trading.
But Ackman himself may not be quitting. Shortly before the Actavis swoop-in, he grabbed a $1.5 billion stake in animal health leader Zoetis, a move that prompted rumors he’d try to get the Pfizer spinoff sold to Valeant–whose chief has expressed interest in diving into the field–or another drugmaker.
Whether he tries his hand again-or others follow his lead–remains to be seen.
By Carly Helfand