Big Pharma Mega-Mergers 1995-2014

Date: December 1, 2009
Pages: 114
Price:
US$ 7,600.00
Publisher: Datamonitor
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: BE2B7FD69BCEN
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Big Pharma Mega-Mergers 1995-2014
Introduction

Mega-mergers (defined here as M&A events with deal sizes >$5bn) have been a long-term strategic feature of the pharmaceutical industry and have played a key role in shaping the structure and composition of today's leading companies. Is it possible to quantify exactly how much of Big Pharma's sales growth has been driven by M&A versus how much has been self-produced through organic growth?

Scope

*This report analyzes 22 large scale M&A events that have occurred to date within the Big Pharma peer set over the period 1995-2014

*Datamonitor has identified two distinct classes of M&A event: small/fast growth acquisitions and big/slow growth acquisitions.

*Using these two classes Datamonitor has identified three company-level M&A growth strategies that can be attributed to each of the Big Pharma players:

*In addition to the impact of mega-M&A on sales performance the report also assesses the financial implications associated with different M&A strategies

Highlights

Twenty-two large-scale M&A events (defined as those valued above $5 billion) have occurred within Big Pharma over 19952014. Furthermore, every Big Pharma player has undertaken large scale M&A activity at some stage over this period, thereby illustrating it as an ingrained peer set strategy.

Over the period 19952014, Big Pharma prescription pharmaceutical sales are forecast to increase from $84 billion to $381 billion, with absolute growth of +$187 billion provided by M&A activity. In other words, two-thirds (c.63%) of Big Pharma sales expansion over a 20-year period will be driven entirely by M&A activity.

Reasons to Purchase

*Assess how much of Big Pharma's sales growth over 1995-2014 will be driven by M&A versus how much will be self-produced through organic growth.

*Assess how Datamonitor has classified each of the current Big Pharma players by their dominant M&A growth strategy

*Analyze the M&A and organic sales growth profiles for each Big Pharma company over the period 1995-2014
ABOUT DATAMONITOR HEALTHCARE

About the PharmaVitae team

CHAPTER 1 INTRODUCTION

Scope of analysis
Methodology
Company coverage
Data sources
Re-creating analysis from this report using PharmaVitae Explorer queries
Further reading

CHAPTER 2 EXECUTIVE SUMMARY

Key findings
M&A is the dominant form of Big Pharma sales growth over 1995-2014
c.63% of absolute Rx sales growth contributed by large-scale acquisitions
M&A has allowed Big Pharma sales growth rate to keep pace with overall market...
...while maintaining Big Pharma's overall market share
Since 1995, 22 large scale M&A events have occurred within Big Pharma
Each of the Big Pharma players have implemented large-scale M&A
Acquirer/target company overview
The 22 M&A events can be classified by scale and growth performance
Assessment of M&A size and five-year sales CAGR performance reveals two main acquisition types
Only three M&A events have delivered fast growth performance over subsequent five year period
All fast growth acquisitions share mAb-access characteristic
Roche's acquisition of Genentech has delivered most sustainable revenue growth
Only access to high-growth statins lifts large-scale acquisitions above flat growth threshold
Oncology mAbs to replace statins as leading product type in Rx market
Flat growth for recently acquired Big Pharma companies illustrates that M&A will be insufficient to offset patent cliff decline but scale growth remains imperative
Sales growth potential of large M&A events further diminished by demise of blockbuster growth model
Big Pharma R&D has been unable to keep pace with the acceleration in blockbuster growth driven by M&A
M&A event types illustrate fundamentally different company growth strategies
Big Pharma players who primarily use M&A to 'buy growth'
Big Pharma players who primarily use M&A to 'buy scale'
Big Pharma players who have engaged in >2 mega mergers: 'multi M&A'
Big Pharma players who have primarily avoided mega mergers and stayed 'organic'
Financial performance implications by M&A growth strategy type
Table of Contents
Table of figures

CHAPTER 3 BIG PHARMA M&A ACTIVITY, 1995-2014

Key findings
Big Pharma M&A timeline 1995-2009
M&A is the dominant source of Big Pharma sales growth over 1995-2014
c.63% of absolute Rx sales growth contributed by large-scale acquisitions
M&A has allowed Big Pharma sales growth rate to keep pace with overall market...
...while maintaining Big Pharma's overall market share
Increased scale has driven an expansion of blockbuster portfolios...
...but M&A will not allow Big Pharma to scale the patent cliff
Year-on-year growth analysis illustrates growing influence of M&A but also severity of patent cliff
Big Pharma M&A dependency analysis
Company-level market share analysis

CHAPTER 4 M&A ANALYSIS 1995-2014 BY COMPANY

Key findings
Classification of companies by M&A growth strategy
'Buy Growth' players
Roche-Genentech
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Johnson & Johnson
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Abbott-Solvay
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
'Buy Scale' players
Merck-Schering-Plough
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
GlaxoSmithKline
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Sanofi Aventis
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
AstraZeneca
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Bayer AG
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Multi-M&A players
Pfizer-Wyeth
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Novartis
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Organic growth players
Eli Lilly
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions
Bristol-Myers Squibb
Importance of M&A to overall performance
Overview of M&A lineage 1995-2014
Post-M&A performance of acquisitions

CHAPTER 5 FINACIAL CONSEQUENCES OF GROWTH, SCALE & ORGANIC STRATEGIES

Key findings
Introduction
Overview of financial and stock market analysis approach
Profit margin (EBIT / Total revenues)
Capital turnover (total revenues / capital employed)
Return on capital employed (EBIT / capital employed)
Market capitalization

CHAPTER 6 APPENDIX

Methodology
Definition of a merger & acquisition event, the mega-M&A threshold and the acquirer/target distinction
Framework for analyzing Big Pharma M&A events over 1995-2014
Abbreviations
Exchange rates
About Datamonitor
About Datamonitor Healthcare
Datamonitor consulting
Disclaimer

LIST OF TABLES

Table 1: Company coverage
Table 2: Big Pharma M&A timeline and overview, 1995-2014
Table 3: Big Pharma M&A timeline and overview, 1995-2014
Table 4: Example of RootCo ( DestCo growth
Table 5: Exchange rates, 2009

LIST OF FIGURES

Figure 1: The PharmaVitae Explorer
Figure 2: Big Pharma Rx pharmaceutical sales ($m) by source, 1995-2014
Figure 3: Big Pharma Rx pharmaceutical absolute sales growth ($m) by source, 1995-2014
Figure 4: Rx sales CAGR (%) for total market & Big Pharma peer set, 1995-2008 & 1995-2014
Figure 5: Big Pharma share (%)of total Rx pharmaceutical market by organic/M&A sales, 1995-2008
Figure 6: Lineage of companies with one round of M&A activity
Figure 7: Lineage of companies with two rounds of M&A activity
Figure 8: Lineage of companies with more than two rounds of M&A activity
Figure 9: Scatter chart analysis of acquired companies, 1995-2014
Figure 10: Big Pharma M&A events classified by % relative size of target company by acquiring company & % CAGR of target company (five years post-M&A)
Figure 11: Re-based absolute growth & total Rx revenue performance of Centocor, Knoll and Genentech, 13/19-year post-M&A period ($m)
Figure 12: Grouped Big Pharma M&A events classified by % relative size of target company by acquiring company & % CAGR of target company (5 years post-M&A)
Figure 13: Global Lipitor and Crestor sales ($m), 2001-14
Figure 14: Global sales ($m) of statins (C10A1) and oncology-mAbs (L1X3), 2001-14
Figure 15: Big Pharma blockbuster Rx sales ($m), 2001-14
Figure 16: Classification of Big Pharma companies by M&A growth strategy
Figure 17: Big Pharma companies classified by M&A growth strategy (by % CAGR of target company [five years post-M&A] and % of total growth due to M&A)
Figure 18: Big Pharma Rx pharmaceutical sales by source ($m), 1995-2014
Figure 19: Big Pharma Rx pharmaceutical absolute sales growth by source ($m), 1995-2014
Figure 20: Rx sales CAGR (%) for total market & Big Pharma peer set, 1995-2008 & 1995-2014
Figure 21: Big Pharma share (%) of total Rx pharmaceutical market by organic and M&A sales, 1995-2008
Figure 22: Big Pharma blockbuster Rx sales ($m), 2001-14
Figure 23: Big Pharma absolute Rx sales growth ($m) by source and time period, 1995-2014
Figure 24: Big Pharma year-on-year absolute Rx sales growth ($m) by source, 1996-2014
Figure 25: Percentage of absolute Rx sales growth by source, 1995-2014 (%)
Figure 26: Market share (%) analysis by Big Pharma company, 1995-2008
Figure 27: Classification of Big Pharma companies by M&A growth strategy
Figure 28: Roche absolute growth ($m) by organic/M&A, 1995-2014
Figure 29: Roche Rx revenues by acquired company, 1995-2014 ($m)
Figure 30: Roche year-on-year absolute growth by organic/M&A, 1995-2014 ($m)
Figure 31: Roche acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 32: Johnson & Johnson absolute growth ($m) by organic/M&A, 1995-2014
Figure 33: Johnson & Johnson Rx revenues by acquired company, 1995-2014 ($m)
Figure 34: Johnson & Johnson year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 35: Johnson & Johnson acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 36: Abbott absolute growth by organic/M&A, 1995-2014 ($m)
Figure 37: Abbott Rx revenues by acquired company ($m), 1995-2014
Figure 38: Abbott year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 39: Abbott acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 40: Merck & Co. absolute growth ($m) by organic/M&A, 1995-2014
Figure 41: Merck & Co. Rx revenues ($m) by acquired company, 1995-2014
Figure 42: Merck & Co. year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 43: Merck & Co. acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 44: GlaxoSmithKline absolute growth by organic/M&A, 1995-2014 ($m)
Figure 45: GlaxoSmithKline Rx revenues ($m) by acquired company, 1995-2014
Figure 46: GlaxoSmithKline year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 47: GlaxoSmithKline acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 48: Sanofi-Aventis absolute growth ($m) by organic/M&A, 1995-2014
Figure 49: Sanofi-Aventis Rx revenues ($m) by acquired company, 1995-2014
Figure 50: Sanofi-Aventis year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 51: Sanofi-Aventis acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 52: AstraZeneca absolute growth by organic/M&A, 1995-2014 ($m)
Figure 53: AstraZeneca Rx revenues ($m) by acquired company, 1995-2014
Figure 54: AstraZeneca year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 55: AstraZeneca acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 56: Bayer-Schering absolute growth ($m) by organic/M&A, 1995-2014
Figure 57: Bayer-Schering Rx revenues ($m) by acquired company, 1995-2014
Figure 58: Bayer-Schering year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 59: Bayer-Schering acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 60: Pfizer absolute growth ($m) by organic/M&A, 1995-2014
Figure 61: Pfizer Rx revenues ($m) by acquired company, 1995-2014
Figure 62: Pfizer year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 63: Pfizer acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 64: Novartis absolute growth ($m) by organic/M&A, 1995-2014
Figure 65: Novartis Rx revenues ($m) by acquired company, 1995-2014
Figure 66: Novartis year-on-year absolute growth ($m) by organic/M&A, 1995-2014
Figure 67: Novartis acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 68: Eli Lilly absolute growth ($m) by organic/M&A, 1995-2014
Figure 69: Eli Lilly Rx revenues ($m) by acquired company, 1995-2014
Figure 70: Eli Lilly year-on-year absolute growth by organic/M&A, 1995-2014 ($m)
Figure 71: Eli Lilly acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 72: Bristol-Myers Squibb absolute growth by organic/M&A, 1995-2014 ($m)
Figure 73: Bristol-Myers Squibb Rx revenues by acquired company, 1995-2014 ($m)
Figure 74: Bristol-Myers Squibb year-on-year absolute growth by organic/M&A, 1995-2014 ($m)
Figure 75: Bristol-Myers Squibb acquired company Rx revenues rebased as % of organic Rx revenues at year of acquisition
Figure 76: Return on capital employed formula
Figure 77: % EBIT / total revenues and % operating costs / total revenues, 2004-08 (weighted three-company average for Growth, Scale and Organic company sets)
Figure 78: Total revenues / capital employed and % goodwill & intangibles / total revenues, 2004-08 (weighted three-company average for Growth, Scale and Organic company sets)
Figure 79: EBIT / capital employed build-up from EBIT margin and capital turnover, 2004-08 (weighted three-company average for Growth, Scale and Organic company sets)
Figure 80: Market capitalization (indexed Jan 2005), 2005-08 (weighted three-company average for Growth, Scale and Organic company sets 2005-09)
Figure 81: Evolutionary timeline for theoretical company 'RootCo'
Figure 82: Theoretical sales performance for RootCo + Targ1Co & Targ2Co
Figure 83: Disaggregation of sales growth in organic and M&A components

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