Strategic trends in big pharma dealmaking Analysis of the deals signed recently by major pharmaceutical companies provides insights into dealmaking strategies. feature DredK/iStock/Thinkstock Laura J. Vitez & Richard K. Harrison Viewed simply, each deal has a buyer and a seller. In deals focused remaining 23 companies (that is, those companies that disclosed at on pharmaceutical assets and technologies, sellers are typically least five buy-side deals in 2016) in more depth. smaller companies looking to grow by raising capital and access- Revenue roughly correlated with announced transaction volume ing expertise or capacity through partnership. Buyers, on the for these companies, although there are a few notable exceptions other side, are usually larger companies looking to increase their (Fig. 1). Celgene, for example, was ranked 27th by revenue with $8 portfolio, expand into new therapy areas, access novel technology billion, but 10th by deal volume, with ten announced buy-side trans- platforms or introduce synergies to strengthen their organizations. actions. Similarly, the 17 deals announced by Allergan made it the We set out to understand the strategies being employed on the 5th most active dealmaker, although the company was 19th when buy-side of the dealmaking landscape by reviewing the key trans- ranked by revenue. actions—mergers and acquisitions (M&As), options to acquire, A dissection of deal volume by transaction type shows that several licensing deals/joint ventures and research-only deals—announced large pharma companies are working hard to innovate by executing in 2016 by the top 50 pharmaceutical companies (identified by total research-only exploratory transactions (shown in the green portion 2015 revenue). Of these companies, 22 announced four or fewer of the bars in Fig. 1). These may be to evaluate clinical combinations buy-side deals, and five announced no deals at all. We examined the (for example, in cancer) or to fund very early-stage technology-based 30 75 Total revenues in 2015 Research-only deals 25 Licensing deals/Joint ventures Options to acquire in 2015 (US$ billion) revenues Total 20 Mergers and acquisitions 50 15 10 25 Number of announced transactions 5 0 0 J&J Bayer Pfizer Roche Sanofi Eli Lilly Novartis AbbVieAmgen TakedaAllergan AstellasOtsukaBiogenCelgene Merck & Co. AstraZeneca Merck KGaA Daiichi Sankyo GlaxoSmithKline Bristol-MyersBoehringer Squibb Ingelheim Dainippon Sumitomo Figure 1: Leading pharmaceutical dealmakers of 2016. The key transactions (mergers and acquisitions, options to acquire, licensing deals/joint ventures and research-only deals) for the 23 pharmaceutical companies among the top 50 companies (as ranked by 2015 sales) that announced five or more buy-side transactions in 2016. biopharmadealmakers.nature.com | June 2017 | B3 research. Active exploratory dealmakers included Johnson & Johnson scientific leaders. In 2015, Boehringer Ingelheim launched a five-year (J&J), Roche, Merck & Co. and Merck KGaA. The typically small or R&D investment program that included €1.5 billion for collaborations non-existent dollar value of the research-only transactions means with external partners. Celgene has helped pioneer ‘build-to-buy’ that these and other companies probably made additional such acquisition option transactions, a relatively infrequent but important exploratory deals without public disclosure. approach for working with early-stage companies. Takeda, Amgen Licensing deals and joint ventures (shown in the blue portion of and GSK have all stated their interest in adopting open innovation the bars in Fig. 1) were the most active category; 166 such deals were models for areas of great medical need and scientific challenge, announced among the 23 companies examined. Five of these active and have placed innovation centers in key research hubs around dealmakers—J&J, Pfizer, Roche, Takeda and Bayer—announced ten the world. or more deals in this category, and three—Amgen, GlaxoSmithKline At the other end of the spectrum, several of the 23 companies (GSK) and Otsuka—announced only deals of this transaction type. focused primarily on deals for clinical-stage assets. Allergan M&As (shown in dark blue in the bars in Fig. 1) made up a smaller announced the largest number of clinical-stage deals but just one proportion of the total volume of deals overall and for most indi- transaction for a preclinical program, whereas Merck KGaA focused vidual companies, with the notable exception of Allergan, which was all of its deal activity around Bavencio (avelumab), an immuno-oncol- involved in nine M&A deals on top of its eight license agreements. ogy drug recently approved by the US Food and Drug Administration. Some of these deals were for companion diagnostics for Bavencio; Early-stage or late-stage? others were clinical-stage alliances to test Bavencio in combination Examining the mix of development stages of the accessed assets with other development-stage drugs—a common scenario that and technologies can provide insights into corporate strategies with contributes to the high volume of deals in oncology. respect to dealmaking. Half of the companies (12 out of 23) also announced at least one feature Charting the 23 companies according to the level of transactions deal for approved assets. Again, many of these were for the testing for early-stage assets highlighted the fact that such assets (the light of oncology combinations, in this case with drugs already on the blue portion of the bars in Fig. 2) made up 50% or more of the deal market. The remaining transactions for approved assets represent the volume for eight companies in the group. At the top of this list is more conservative but useful approach of adding marketed drugs to Sanofi, for which early-stage projects made up over 70% of trans- the company portfolio, often within limited territories. action volume. This is in line with the goals of the Sanofi Sunrise All but one company on the list (AbbVie) also invested in non- initiative, which was set up in 2013 to focus on very early-stage pharmaceutical assets—most notably J&J, Lilly, Bayer and Biogen, science with transformative potential. which each invested over 50% of their deal efforts by volume in Other companies focused on early-stage deals include AbbVie, nondrug assets. The nonpharma deal space for these companies Boehringer Ingelheim, Celgene, Takeda, GSK, Amgen and Pfizer. comprises mainly technology platforms, but also can include medical AbbVie Ventures states that it is seeking to augment the core R&D devices, diagnostics, animal health products and more, reflecting the interests of the company via access to next-generation science and breadth of the companies’ interests. Sanofi AbbVie Boehringer Ingelheim Celgene Takeda GlaxoSmithKline Amgen Pfizer Merck & Co. AstraZeneca Roche J&J Bristol-Myers Squibb Novartis Astellas Bayer Dainippon Sumitomo Daiichi Sankyo Eli Lilly Otsuka Biogen Allergan Merck KGaA 0 10 20 30 40 50 60 70 80 90 100 Percentage Early Clinical Approved Non-pharmaceutical asset Figure 2: Transactions for leading dealmaking companies in 2016, by stage of development. Proportion of key transactions (mergers and acquisitions, options to acquire, licensing deals/joint ventures and research-only deals) with an identifiable stage for the 23 pharmaceutical companies among the top 50 companies (as ranked by 2015 sales) that announced five or more buy-side transactions in 2016. B4 | June 2017 | biopharmadealmakers.nature.com Oncology 11 11 8 8 7 6 5 5 5 5 5 4 3 2 2 2 1 1 1 1 1 1 99 Neurology 1 1 2 2 2 1 2 1 2 2 1 1 2 20 Diversified 1 1 2 2 1 1 1 1 2 1 2 16 Autoimmunity/ inflammatory 2 1 1 1 1 1 2 1 1 1 1 1 1 15 Infection 2 1 1 1 2 1 2 1 2 1 15 Endocrinology/ metabolism 1 2 1 1 2 1 1 1 1 1 12 Ophthalmic 1 2 2 2 1 2 1 11 Therapy areas Therapy Gastrointestinal 1 5 1 7 Number of transactions Dermatologic 2 1 2 7 Cardiovascular 1 1 1 1 1 1 6 Other 1 2 1 1 1 1 1 1 9 J&J Roche Pfizer Bayer Eli Lilly Sanofi Total Celgene Takeda AbbVieAmgenNovartis AstellasOtsukaAllergan Biogen Merck & Co. Merck KGaAAstraZeneca Daiichi Sankyo GlaxoSmithKline feature Bristol-Myers Squibb Boehringer Ingelheim Dainippon Sumitomo Figure 3: Transactions for leading dealmaking companies in 2016, by therapy area. Number of key transactions (mergers and acquisitions, option to acquire, licensing deals/joint ventures and research-only deals) with an identifiable therapy area for the 23 pharmaceutical companies among the top 50 companies (as ranked by 2015 sales) that announced five or more buy-side transactions in 2016. Higher numbers of deals are indicated with darker shading. Therapeutic focus Between oncology and cardiovascular disease, a number of A breakdown of top buy-sider deals by therapy area illustrates the companies continue to explore deals in neurology, inflammation well-known importance of oncology to the industry (Fig. 3). All but and infectious diseases. Thirteen companies did at least one deal in one of the 23 companies (Biogen) made at least one deal in oncology, neurology, with six announcing two or more. This is an expansion of with 11 companies announcing five or more transactions. The industry interest over years past, as innovators strive to solve the very aggregate deal volume for these 23 companies was fivefold greater difficult problems of neurodegenerative disease. in oncology than for the next-largest therapeutic areas of neurology, Finally, company strategies by therapeutic area range from broadly inflammation or infection. The promise of immuno-oncology and to narrowly focused. Of the 23 companies we studied, only four the substantial unmet medical need in cancer continue to drive the announced deals in more than five therapy areas (Allergan, 10; J&J, 9; prominence of this therapeutic area. Pfizer, 8; and Novartis, 6).