SINGAPORE (Jan 7): Dealmaking in the global healthcare sector is forecast to rise modestly this year after 2019 “started with a bang” with news of US pharmaceutical giant Bristol-Myers Squibb’s intended acquisition of Celgene for US$74 billion ($100.5 billion).
This is according to Baker McKenzie’s Global Transactions Forecast report for 2019, which predicts a rise of 7% to US$331 billion this year – notwithstanding the BMS-Celgene tie-up – after the healthcare sector registered a 5% drop to US$308 billion in 2018.
In its latest report, the firm notes that pharmaceutical companies are still shedding non-core assets with the aim to specialise, gain access to new technology and grow their product pipelines.
“As companies compete to add drugs to their portfolios, we’re seeing more early stage acquisitions and licensing, sometimes before proof of concept,” says Jane Hobson, healthcare M&A partner at Baker McKenzie.
“A lot of the medical device companies are shifting their business models so that they don’t just offer a medical device. Instead, they offer a solution or patient support around it, or they offer to run a service for a hospital. Many manufacturers are having to buy in that expertise,” she adds.
Based on Baker McKenzie’s expert forecasts, US and Asia are set to dominate deal activity this year due to both regions’ populations with relatively disposable incomes.
The firm foresees IPO activity to be especially boosted in the biotech sector due to US FDA efforts to speed up approvals.
In Asia, it notes that new rules on the Hong Kong Stock Exchange (HKSE) have made it easier for biotech companies to list as they may now come to the market in the early stages of research and development without profit or turnover.
Nonetheless, Baker McKenzie says it is expecting global deal activity for the healthcare sector to reach is cyclical trough in 2020 as a result of political uncertainty and regulations as they take their toll.
Data protection is also a likely challenge for a number of healthcare players due to recent implementation of the EU’s General Data Protection Regulation (GDPR) and other similar measures, it adds.
“These regulations will force companies to protect patients’ data, but at the same time, they need to collect data for the development of new drugs. Whether regulators tend to enforce protection or make data available to responsible parties, M&A activities will be impacted,” comments Hideo Norikoshi, healthcare M&A partner at Baker McKenzie.
