The biopharma sector experienced a unique landscape in 2021, characterized by a paradox of high potential and low execution in mergers and acquisitions (M&A).
Despite companies boasting their highest "firepower" since 2014, the total value of acquisitions fell to a low point. This discrepancy highlights a shift in strategy, as the ratio of partnerships to M&A transactions continued to tilt in favor of partnerships, although their overall volume slightly decreased from the record levels seen in 2020. The intensity of M&A activity remains notable, with a rising number of transactions even as the total deal value declines.
The allure of the biopharma sector is underscored by an average premium of 62% on stock prices, which escalates to as much as 150% for cutting-edge technologies like cell therapies. This premium reflects the growing market for biotech products, which are projected to account for 43% of estimated sales between 2020 and 2026, surpassing conventional therapy products at 40%. The emergence of "new modalities," which are expected to represent 17% of sales, further emphasizes the sector's innovative potential. In this seller's market, companies must approach divestments and the integration of new activities with heightened professionalism to realize anticipated synergies.
The MedTech industry mirrored the biopharma sector's M&A dynamics, witnessing a resurgence in activity with total deal values reaching an impressive US$111 billion by November 30, 2021. This figure marks the highest total since 2014, surpassing the previous record of US$98 billion. Additionally, the transaction volume in MedTech has exceeded levels achieved in 2015, indicating a robust appetite for consolidation and growth within the sector.
Driving this M&A activity is a combination of factors, with MedTech companies holding a record US$600 billion in firepower as of late 2021. However, financial strength alone does not account for the surge in transactions. The COVID-19 pandemic has significantly influenced the landscape, prompting companies to pursue immediate opportunities while also adapting to the long-term changes in healthcare delivery. The shift towards remote monitoring technologies, which facilitate care in home settings, has become a focal point for acquisitions, reflecting the evolving needs of patients and healthcare providers alike.
As the biopharma and MedTech sectors navigate this complex environment, the interplay of financial capability, strategic partnerships, and innovative technologies will continue to shape the future of M&A activity. The ongoing transformation in healthcare delivery models, driven by the pandemic, presents both challenges and opportunities for companies looking to expand their portfolios and enhance their market positions.