Diagnosis of a steady pharmaceutical deal flow

The pharmaceutical mergers and acquisitions (M&A) deal market continues to be a difficult place. In quarter two 2012, we saw deal volumes at a consistent level with quarter one deal values increasing. Increased deal values in Q2 2012 primarily resulted from large pharmaceutical deals becoming more active in the US and Europe.

Motivations for recent deals appear to be companies seeking to increase pipeline and innovation, or increase product ranges and presence in markets in order to address the expected revenue declines driven by the expiration of a large number of product patents, otherwise known as the 'product patent cliff'.

The broader economic climate remains uncertain. Difficult conditions will continue to impact the deal market in the near to medium term. For the second half of 2012, we anticipate activity levels will be broadly consistent with or better than the first half. Pharmaceutical companies will continue to chase growth (especially as government influenced pricing will continue to be challenging). Financial investors will continue to focus on high quality assets in this sector, likely in pharmaceutical services (outsourcing by large pharmaceutical companies for manufacturing and support functions), medical devices and speciality drug areas.