Most data indicates M&A activity has slowed in the pharmaceutical and biotech industries. However, that may change in 2022 as many drugmakers have accumulated significant cash balances and are ready to bulk up their pipelines. Several blockbuster deals to close out this year may be a preview of what to expect.
Additionally, with biotech and pharmaceutical stocks underperforming the broader healthcare sector throughout most of 2021, firms are expected to focus in on re-igniting investor interest in the space. Several firms, including Novartis and Bristol Myers Squibb, have already rolled out huge buyback plans.
Related ETFs: SPDR S&P Biotech ETF (XBI), Invesco Dynamic Pharmaceuticals ETF (PJP)
The healthcare industry, particularly pharmaceutical and biotech firms, may be gearing up for a very active year in 2022 after building up significant cash hoards that can be put toward mergers and acquisitions (M&A), share buybacks, and other expenditures focused on beefing up their drug pipelines and valuations.
Per BioPharmaDive, this year’s dealmaking in the pharmaceutical industry has receded to levels below that of the past three. However, we may be witnessing a preview of what is to come in 2022 with several multi-billion dollar deals being announced over the last few weeks. As Axios reports, CSL, a drug manufacturer based in Australia, said last week that it is buying Vifor Pharma for $11.7 billion. The day before that acquisition was announced, Pfizer, sitting on tens of billions of dollars from massive COVID-19 vaccine sales, said it would be acquiring Arena Pharmaceuticals for $6.7 billion.
Eighteen large-cap US and European biopharmas will have more than $500 billion in cash on hand by the end of 2022, SVB Leerink analyst Geoffrey Porges and his team wrote in a Wednesday note, cited by Fierce Pharma. Porges said the 18 biopharma majors covered in their report will have total M&A capacity of $1.72 trillion.
As BioPharmaDive notes, manufacturers of the COVID-19 vaccine makers remain particularly flush with cash and will continue to reap the benefits of boosters into next year. Pfizer, whose vax sales pulled in $36 billion this year, will see at least $29 billion in sales of these products next year — easily making the vaccine the highest-selling pharmaceutical product in history on an annual sales basis.
Biopharma refers to the biopharmaceutical companies that produce biopharma medicines, whereas biotechnology makes use of biomolecular and cellular processes in order to develop products that make use of living cells and cell materials.
Stocks in the latter category largely fell behind biopharma and the broader healthcare sector throughout 2021, coinciding with a downturn in M&A.
Biotech has seen just 116 deals this year, according to Evaluate Pharma, a data group for the industry, down 18% from 2020 and just over fifth lower than the average of the past ten years. As the Financial Times notes, the total…
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