Life Sciences Deals Cool, Deal Values Heat Up

At 22, the number of completed acquisitions among U.S. life sciences firms declined about 40% in the second quarter of 2013 relative to the previous quarter and to the same quarter last year, according to a report from Pricewaterhouse­Coopers. The money picture, however, was different: The $11.7 billion combined value of these deals was up 66% from first-quarter 2013, although when compared with the same period in 2012, it was down 32%.

Although fewer deals are occurring, rising average values may be signaling heightened competition, the consulting firm suggests. Despite a downward trend over several quarters, PwC believes that the life sciences industry is poised for more activity. Companies have readily available financing to seek new products and geographic growth. And several previously announced large transactions are to close later this year.

Not all life sciences sectors—pharma, biotech, medical devices, diagnostics, and services—behaved the same in the quarter. In number, pharma deals slipped much less than the average, whereas their value increased more dramatically. Pharma firms are using midsized, “tuck in” acquisitions to enhance their R&D efforts or product offerings, PwC says. In contrast, deal activity declined sharply in the other sectors.

San Francisco merchant bank Burrill & Co. reported that the global combined value of announced and finished deals in the first half of 2013 was down about 10% to $60.3 billion from first-half 2012. Announced and completed deals in the U.S. were down 18% to $38.6 billion in the half. Life sciences companies are focusing more on partnering to address pipeline needs while big pharma firms continue to trim divisions, products, and therapeutic areas, the banking firm says.