Consolidation in the
Pharmaceutical Industry
Charles Baum, MD, MS, FACG
Vice President and Head US Medical Affairs
Takeda Pharmaceuticals USA
Bio-Pharma M&A History
• 30 y consolidation: ~110 companies >>> 30
• Early – national consolidation (e.g., Glaxo, Welcome and Smith/Kline)
• Later
– US market serves as nidus for small overseas companies
– Multinational consolidation
David Davidovic, http://www.pm360online.com/the-history-of-biopharma-industry-mas-lessons-learned-and-trends-to-watch/
The History of Bio-Pharma M&A's: Pfizer
10 companies >>>>> 1
David Davidovic, http://www.pm360online.com/the-history-of-biopharma-industry-mas-lessons-learned-and-trends-to-watch/
The History of Bio-Pharma M&A's: Sanofi
18 companies >>>>> 1
David Davidovic, http://www.pm360online.com/the-history-of-biopharma-industry-mas-lessons-learned-and-trends-to-watch/
Historical Drivers of M&A
• 1980's (profit pressure)
- Rising R+D costs
- Passage of Waxman Hatch Act
- Price competition from generics
• 1990's (declining profits)
- LOE and end of blockbuster era
- Rise of buyer-side market power (MCOs/PBMs)
• 2000's (single digit growth)
- Shrinking Pipelines and Emergence of bio-techs
- Overcapacity drives branded pharma M&A
- Eliminating competition drives generics manufacturers M&A
Annual Number of Pharmaceutical Mergers
(2004-2014)
Number of Deals over $1 Billion
25
20
15
10
5
0
2004
2005
2006
2007
https://www.levinassociates.com/dealsearch
2008
2009
2010
2011
2012
2013
2014
Overcapacity Drives M&As
• M&As result in cost savings of 30-40% appeasing investors
• Restructuring of Development and Commercial functions
- Strategic shift from "me too" to novel specialty and orphan indications
- New commercial models that leverage lower cost multi-channel/digital
marketing
- A shift from salesforce to value-based contracts with payers and health
systems (IDNs)
- Reduce research investment in favor of biotech partnerships and acquisitions.
- Outsourcing
William Pursche: The McKinsey Quarterly, 1996
M&As Drive Global Footprint:
Example -Takeda and Nycomed Merger
Low Interest Rates
Favorable
Exchange Rates
Medicaid Spending and Prescriptions for Albendazole (Amedra
Pharma) and Mebendazole (Terminated by Teva)
High Cost Generic Drugs –
Implications for patients and
policymakers.
Alpern et al., NEJM
371;20:1859-1862
Generics Manufacturers and Pricing
• Turing Pharmaceuticals
- Martin Shkreli raises price of generic Daraprim (pyramethamine) from $13.50
to $750 per tab – used to treat life threatening toxoplasmosis infections in HIV
and cancer patients
• Valeant has acquired 100 drugs and increased price of 56 drugs by
average of 66%
- The case of Isuprel and Nitropress (525% and 212% increases)
- Ascension health has calculated cost impact for its system of ~$8 M.
• PhRMA speaks out
Despite Several Bad Actors Generic Drug
Prices Continue to Fall
http://www.aarp.org/content/d
am/aarp/ppi/2015/trends-inretail-prices-of-genericprescription-drugs.pdf
Impact of Consolidation for Innovators
Financial
• Reduction in competition drives bargaining power with payers
• Tax implications
Efficiency
• Greater expertise, deal making agility, regulatory success
Innovation
• Focused pipelines – specialty pharma, oncology and orphan
indications
• Emphasis on Inorganic Growth
- Increase in venture capital and fostering of biotech
- Academic partnerships
FDA Approvals Indicate
M&As Have Positive Effect
on Pharmaceutical
Innovation
http://www.fda.gov/drugs/developme
ntapprovalprocess/druginnovation/uc
m20025676.htm
Number of US Biotech Companies is Growing
27%
Increase
since 2012
Public Co.
Private Co.
Total
http://www.statista.com/statistics/197930/number-of-united-states-biotech-companies-by-type/
Looking Beyond M&A
• Partnerships (basic and foundational research, co-promotion and codevelopment/commercialization arrangements)
• Spinoffs and divestitures
• Asset swap deals
• ACA is helping drive alignment between payers, healthcare and
pharmaceutical manufacturers
• Moving "beyond the pill" is driving non-traditional business
development