Pharmaceutical and life sciences (PLS) merger and acquisition (M&A) volume increased 53.1 percent in the first quarter of 2014, highlighting the expected increase in deal activity from the previous year, according to Pharmaceutical and Life Sciences Deals Insights Quarterly, a quarterly analysis of M&A trends and outlook for the PLS sector issued today by PwC US.
"The first quarter of 2014 began where 2013 left off with the continuation of robust M&A activity in the PLS industry. CEOs are increasingly optimistic about their companies' prospects and are seeking opportunities to grow their businesses through adopting new technologies, optimizing shareholder value and diversifying their portfolios," said Dimitri Drone, U.S. pharmaceutical and life sciences deals leader, PwC. "We're working with clients in developing strategies to reassess and realign their portfolios in light of the evolving industry dynamics and ultimately helping to expand their businesses." There were 49 PLS transactions in the first quarter of 2014, compared to 32 deals in the fourth quarter of 2013. Total deal value also jumped more than 20 percent to $44.9 billion in the first quarter of 2014 compared to approximately $37.2 billion in the fourth quarter of 2013. On an annual basis, deal volume and value increased 40 percent and 122.6 percent, respectively, in the first quarter of 2014 compared to the first quarter of 2013.
Thirteen divestitures were completed in the first quarter of 2014, representing a total value of $10.1 billion - a trend that may continue or accelerate in the coming quarters as PLS companies continue to look for opportunities to optimize shareholder value and develop new business models. Additionally, strategic alliances and joint ventures remain the primary vehicles for deal activity in the PLS industry.
Looking at the PLS industry sectors, medical device manufacturers remained active in deal activity with 19 total deals in the first quarter as companies are evaluating opportunities that will have an impact on their businesses through adopting new technologies to improve patient experiences and outcomes. Additionally, pharmaceutical companies represented 16 deals in the first quarter and are seeking opportunities to unlock shareholder value through divestitures while gaining strength in their core businesses.
Biotechnology companies continue to add pressure on pharmaceutical companies as they are looking to diversify their product portfolios and gain scale through M&A. After a pause in deal activity, the diagnostics and services sectors returned to the deals table through a continued focus on R&D effectiveness, advances in personalized medicine, and the emergence of new technologies - a trend that is likely to drive continued M&A interest.
"We can expect to see continued PLS M&A activity in 2014 as strong equity markets, overall economic stability, and trends within the individual sectors are creating an environment ripe for further investor interest in the industry," concluded Drone.