Licensing deals fall as r&d expenditure is cut

But M&A activity remained robust in 2011, says PharmaVentures

Overall pharmaceutical deal-making activity fell 18% in 2011 as pharmaceutical companies cut R&D expenditure and streamlined their research and development activities, according to a study by PharmaVentures.

According to a review of the UK advisory firm’s database, which contains details of more than 43,000 deal records, licensing deals fell by 16% while the most sought-after assets commanded sizeable premiums in 2011. In contrast, M&A activity remained robust in 2011 and deal values rose by 30%, although contingent payments were commonplace, the authors say.

In terms of therapeutic area, cancer-based deals continued to dominate the landscape, with Roche being the most prolific firm. Emerging markets also remained at the top of the dealmaking agenda, particularly in India and China.

The report highlights AstraZeneca’s 2011 acquisition of Guangdong BeiKang Pharmaceutical, a manufacturer of generic injectable antibiotics.

Other big pharma companies followed the joint venture route into emerging markets in 2011, including Bayer HealthCare’s sales and marketing joint venture with Zydus Cadila in India, and Merck & Co’s alliance with Sun Pharmaceutical Industries to develop and market novel combinations and formulations of branded generics.

Fintan Walton, chief executive of PharmaVentures, said the industry is undergoing ‘a rapid and major transformation driven by declining R&D productivity and blockbuster drugs coming off patent’.

However, with quality assets commanding higher premiums, he added that there is still a ‘significant opportunity for great deals to be done’.

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