|By PR Newswire||
|January 13, 2014 12:01 AM EST||
SAN FRANCISCO, Jan. 13, 2014 /PRNewswire/ -- Big pharma stayed on the sidelines in the 2013 mergers and acquisitions (M&A) market despite a continuing need to close a revenue "growth gap" that is expected to reach US$100 billion by 2015. While pharma companies have more "firepower" - or capacity for conducting M&A deals - they now face the dual challenges of higher valuations for attractive assets and relatively less purchasing power when compared to competitors in big biotech and specialty pharma. These and other findings were released today in the 2014 issue of EY's Firepower and Growth Gap report, The shifting balance of firepower.
"With strong shareholder returns and robust pipelines at a few companies, big pharma was largely absent from M&A in 2013," said Glen Giovannetti, EY's Global Life Sciences Leader. "As they face significant growth challenges ahead, pharma companies will need to become more acquisitive, but the growing strengths of big biotech and emerging pharma are leading to both increased competition for deals and more expensive targets."
Key findings highlighted in the report include:
- Pharma's growth gap remains: The projected 2015 growth gap for big pharma - the additional revenue needed to keep pace with the overall drug market - remained essentially unchanged at US$100 billion. The inability of big pharma to close this growth gap was due to both a lack of significant M&A and slowing sales, with revised third-quarter guidance indicating that aggregate 2013 sales are expected to decline by about 1%.
- Pharma's firepower increases: EY's Firepower Index revealed that big pharma's firepower increased by nearly US$100 billion, or 15%, in 2013. This increase was almost entirely driven by rising equity market valuations, which accounted for more than 90% of the increase.
- The balance of firepower is shifting: Despite an increase in overall firepower, big pharma's share, when compared to big biotech and specialty pharma, has fallen significantly from 85% in 2006 to 75% in 2012 and 70% in 2013. In addition, as valuations of big biotech and specialty pharma companies outpace those of big pharma, the relative firepower of big pharma (i.e., adjusted for higher target prices) has actually declined by more than 20% over the last year. These shifts should heighten the competition for deals in 2014. Big biotech and specialty pharma have already proven to be significant competitors for assets, with these sectors accounting for more than 80% of M&A activity by announced deal values in 2013.
Implications for 2014 and beyond
The shifting balance of firepower report identifies several factors and considerations likely to affect M&A in 2014 and beyond:
- Acquisitions to hedge pipeline disappointments seen as likely: Among the likely big pharma acquirers in 2014 will be those with growth gaps who decide to hedge potential disappointments in product launches and R&D.
- Divestitures to pursue growth targets may be seen: Given the rise in target valuations, some big pharma companies may turn to divestitures to boost firepower in 2014. EY estimates that approximately 12 divestitures by big pharma - principally from non-core businesses - could be worth up to US$100 billion in incremental firepower that could be redeployed for M&A.
- Use it or lose it?: For companies whose firepower is expected to remain the same or shrink, "use it or lose it" may become the focus - driving a surge in M&A activity.
"With both declining relative firepower and a smaller share of the total, big pharma companies need to allocate their limited resources carefully, increasing the importance of robust deal valuations, due diligence and integration," said Jeffrey Greene, EY's Global Life Sciences Transaction Advisory Leader. "To succeed in this environment, firms need the right capabilities, resources and processes. Amid elevated target prices and rigorous investor scrutiny, there is little room for error," adds Greene.
Notes to Editors
How EY's Global Life Sciences Center can help your business
Life sciences companies -- from emerging to multinational -- are facing challenging times as access to health care takes on new importance. Stakeholder expectations are shifting, the costs and risks of product development are increasing, alternative business models are manifesting, and collaborations are becoming more complex. At the same time, players from other sectors are entering the field, contributing to a new ecosystem for delivering health care. New measures of success are also emerging as the sector begins to focus on improving a patient's "health outcome," and not just on units of a product sold. Our Global Life Sciences Center brings together a worldwide network of more than 7,000 sector-focused assurance, tax, transaction and advisory professionals to anticipate trends, identify implications and develop points of view on how to respond to the critical sector issues. We can help you navigate your way forward and achieve success in the new health ecosystem. For additional research, insights and perspectives, visit ey.com/lifesciences or connect with us on our blog at lifesciencesblog.ey.com. You can also follow us on Twitter @EY_LifeSciences.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
Susan Lavin Jones
Feinstein Kean Healthcare
EY Global Life Sciences Center
+ 1 617 461 4023
+1 732 516 4226
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Nov. 28, 2014 05:00 PM EST Reads: 1,302
"We help companies that are using a lot of Software as a Service. We help companies manage and gain visibility into what people are using inside the company and decide to secure them or use standards to lock down or to embrace the adoption of SaaS inside the company," explained Scott Kriz, Co-founder and CEO of Bitium, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Nov. 27, 2014 07:00 PM EST Reads: 1,462
15th Cloud Expo, which took place Nov. 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA, expanded the conference content of @ThingsExpo, Big Data Expo, and DevOps Summit to include two developer events. IBM held a Bluemix Developer Playground on November 5 and ElasticBox held a Hackathon on November 6. Both events took place on the expo floor. The Bluemix Developer Playground, for developers of all levels, highlighted the ease of use of Bluemix, its services and functionalit...
Nov. 27, 2014 07:00 PM EST Reads: 1,426
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
Nov. 27, 2014 06:00 PM EST Reads: 1,827
Some developers believe that monitoring is a function of the operations team. Some operations teams firmly believe that monitoring the systems they maintain is sufficient to run the business successfully. Most of them are wrong. The complexity of today's applications have gone far and beyond the capabilities of "traditional" system-level monitoring tools and approaches and requires much broader knowledge of business and applications as a whole. The goal of DevOps is to connect all aspects of app...
Nov. 27, 2014 06:00 PM EST Reads: 1,237
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
Nov. 27, 2014 05:00 PM EST Reads: 1,401
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
Nov. 27, 2014 04:45 PM EST Reads: 1,298
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
Nov. 27, 2014 04:45 PM EST Reads: 1,241
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...
Nov. 27, 2014 04:30 PM EST Reads: 1,302
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water,...
Nov. 27, 2014 04:00 PM EST Reads: 1,372
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
Nov. 27, 2014 04:00 PM EST Reads: 1,703
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
Nov. 27, 2014 03:00 PM EST Reads: 1,381
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...
Nov. 27, 2014 03:00 PM EST Reads: 1,522
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
Nov. 27, 2014 01:00 PM EST Reads: 1,713
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
Nov. 27, 2014 11:00 AM EST Reads: 1,329