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Drug deals: looking ahead to the pharma market of 2015
The big news out of the pharmaceuticals world last week was Merck’s acquisition of Massachusetts biotech firm and “superbug” innovator Cubist for an impressive $9.5bn. This move fits nicely with a larger trend – perhaps most evident in a recent wave of large-scale asset swaps – that sees big pharma M&A activity moving away from deals aimed purely at increasing market share and towards those intended to intensify a company’s focus on the things they’re really good at.
And that trend of consolidating around one’s strengths is, as we see it, only part of an even larger trend of reorganisation and restructuring that’s been sweeping through the pharma and biotech industry over the last few years. It’s a changed world out there, with expiring patents, competition from overseas generics manufacturers, spiralling research costs, increasing regulation, and, yes, lots of consolidation all conspiring to challenge once-solid business models. All of these pressures – and all of the soul searching they’re inspiring – are driving a good deal of consulting work: we size the global pharma & biotech consulting market at nearly $1bn in 2013, and we estimate it will grow another 5% over the course of 2015.
Technology and operational improvement will continue to be the biggest service lines in this market, and in 2015, we think they’ll see the fastest growth, too. Much of the work in these areas will, unsurprisingly, be aimed at improving efficiency and saving money – big priorities in an industry where so much competition is coming from overseas players with far lower overhead. But strategy does well, too, as companies try to figure out how best to position themselves in the rapidly changing marketplace – and, perhaps, what they want their next move to be in big pharma’s ongoing M&A game. Acquire or be acquired? Swap or hold? For many pharma players, these will be the questions that rule 2015.