From Consumer Health to Cutting-Edge Therapies: The Decade in Review

M&A life science transactions can reveal trends and evolutionary patterns in the industry, and can lead to a new ecosystem

The integration success between two or more organizations may not be immediately apparent, and the process can be lengthy and cumbersome.

Right-sizing the financial performance and genuine worth of the transactions is challenging due to the diversity of business models, the volatility of market situations, the complexity of ownership structures, and the different reporting techniques and standards.

Similar to how it may take some time for the impact of a new policy or law to become evident in politics, it may be challenging to gauge the success of an M&A deal beyond the initial excitement generated by its public announcement.

Life science is no exception, and the ranking of pharmaceutical firms based on the number of collaborations and acquisitions completed in a decade can be dynamic and variable depending on the source.

However, researching partnerships, acquisitions, and divestments made by large multinational firms over time reveals trends and evolutionary patterns in the ecosystem.

In this article, I will consider some mergers and acquisitions transactions to extrapolate how life sciences will change in the near future.

I will start by exploring the information available in the last decade’s financial statements of large life science firms to gain a quantitative idea of how serious they have been around the change.

I will then explore some representative transactions for each of them, looking at what types of collaborations they have engaged in and how that will alter the focus.

I will end by exploring the potential implications of these changes, the weaknesses, and possible considerations of the transformation ahead that can lead to a new ecosystem.

The following paragraphs constitute the various sections of this article:

An overview of the life science ecosystem with a lens of 6 large organizations.
A look at the net acquisition/divestments in the last decade of representative big pharma organizations.
A selection of M&A transactions that helps to extrapolate the strategy.
A holistic view of how the Life Science ecosystem will evolve
Opportunities and threats of this transformation
Concluding Thoughts

Life Science with a few words

The life science ecosystem is a network of organizations and technologies that enhance biology and human health. Research institutes, pharmaceutical businesses, biotechnology firms, university scientists, and healthcare providers are among them.

Technology like genomics and increased R&D have transformed Life Science in the past decade. These advances have increased the knowledge of biological processes, opened the ecosystem to new biotechnology firms and products, and helped define more accurate and effective therapies.

Digital health and telemedicine have also made patient treatment more accessible and convenient. These shifts have resulted in a more streamlined, effective Life Science ecosystem that places a premium on collaboration and fresh ideas to advance the field and better health.

These advances have increased the need for more effective therapies for life-threatening diseases and the drive to stay competitive in a fast-changing healthcare landscape.

As a result, several big pharma corporations focused more on research and development, partnering with smaller biotech firms and purchasing promising startups to stay ahead in medical innovation. This strategy centers on placing innovative treatments and therapies, especially in personalized medicine, gene therapy, and immunotherapy.

How serious are Big Pharma about the change?

Pfizer, Novartis, Roche, GSK, J&J, and Bristol-Myers Squibb, among others, have made significant contributions to the field of life sciences, continuing to play a critical role in advancing the industry.

A way to get a sense of their strategies is to compare the respective net acquisitions/divestment, a Cash Flow Statement line indicating the overall cash change coming from business investments and sales over the last decade.

Looking at the six pharma companies, it is clear that they have all acquired more than sold over the years, almost at the same rate, except GSK, which appears to have followed a different strategy.

The annual comparison of net acquisitions/divestment balance to the revenue in 2021 corroborates this assertion.

What are they trying to do?

With this in mind, in the following session, we will look at some of the most relevant M&A transactions completed by each firm over the last decade to compare the strategies qualitatively.

Pfizer

Pfizer is an American pharmaceutical corporation operating in over 180 countries. Pfizer is well-known for its cutting-edge pharmaceutical and vaccine development, with breakthroughs in cancer, heart disease, and neurological illness therapy among its many accomplishments. The firm pioneered antibiotics and prescription medications.

2020 — Pfizer and BioNTech partnered to develop, manufacture, and deliver a COVID-19 vaccine in 2020. Overall value not disclosed.
2020 — Pfizer and CStone Pharmaceuticals partnered to develop and market immuno-oncology treatments for China and other Asian markets. Overall value not disclosed.
2019 — Pfizer sold its $13 billion consumer healthcare business to GlaxoSmithKline in 2019. The divestment focused on innovative medicine.
2018 — Pfizer acquired biopharmaceutical business Array BioPharma for $10.64 billion. Pfizer wanted to strengthen its cancer and inflammatory portfolio with the acquisition.
2016 — Pfizer purchased biopharmaceutical startup Medivation for $14 billion. The acquisition aimed to boost Pfizer’s oncology portfolio.
2015 — Pfizer acquired specialty pharmaceutical and drug delivery business Hospira for $17 billion in 2015. The deal expanded Pfizer’s injectable and biosimilar drug portfolio.
2014 — Pfizer and Merck & Co. partnered to develop and market immuno-oncology medication avelumab. Value not disclosed.
2013 — Pfizer announced the $230 million acquisition of Ferrosan, a consumer healthcare startup. The acquisition aimed to grow Pfizer’s consumer healthcare division.
2013 — Pfizer and Merck KGaA partnered to develop and market ertugliflozin, a diabetes medication, in 2012. Value not disclosed.
2011 — Pfizer acquired King Pharmaceuticals for $3.6 billion. The acquisition aimed to increase Pfizer’s pain management portfolio.

Over the past decade, Pfizer’s M&A strategy has centered on acquiring companies that will help it increase its innovative pharmaceutical portfolio, particularly around oncology and inflammatory treatments and biosimilar and injectable drugs. Pfizer moved out from the consumer healthcare business. Pfizer exited the consumer healthcare business.

Novartis

Novartis is a Basel-based pharmaceutical business operating in 140 countries. Novartis develops novel therapies for cancer, cardiovascular, and neurological patients. The company is known for its gene therapy and digital health research and development.

2021 — Novartis sold its Roche holding (held since 2001, 33% of aggregate outstanding bearer shares) to Roche in a bilateral transaction for USD 20.7 billion.
2019 — Novartis decided to spin off the Alcon surgical business to strengthen its focus on biopharma. It also announced a plus $5B share buyback.
2018 — Novartis acquired the gene therapy business AveXis for $8.7 billion. The acquisition bolstered the company’s neurology and gene therapy positions.
2018 — Novartis sold GSK its joint venture stakes to combine its OTC business with GSK’s consumer healthcare division for USD 13 billion.
In 2017 — Novartis acquired the radiopharmaceutical business Advanced Accelerator Applications for $3.9 billion. The acquisition aimed to increase the company’s nuclear medicine portfolio.
2014 — Novartis sold influenza vaccines to CSL Limited for USD 275 million. The same year, Grifols S.A. bought its blood transfusion diagnostics section for USD 1.7 billion.
2015 — Novartis NVD sold its animal health business to Eli Lilly for $5.4 billion. The divestment allowed the corporation to concentrate on Innovative medicine.
2014 — Novartis announced a partnership with Google to create smart contact lenses for diabetes treatment. The partnership’s value was private.
2013 — Novartis bought GlaxoSmithKline’s cancer drugs for $16 billion. The acquisition aimed to boost the company’s oncology portfolio.
2011 — Novartis announced the purchase of Alcon, an eye-care company, for $51 billion in 2011. The acquisition’s goal was to strengthen the company’s position in eye care.

Over the last decade, Novartis has divested non-core businesses such as animal health, flu vaccines, OTC, and eye care while acquiring gene therapy and radiopharmaceutical companies to strengthen its biopharma and oncology portfolios.

GSK

GlaxoSmithKline (GSK) is a British pharmaceutical company operating in over 150 countries. GSK develops innovative drugs, vaccines, and consumer health products for respiratory diseases, HIV/AIDS, and cancer.

2021 — GSK sold its Cephalosporin antibiotics business to Sandoz, a Novartis division (USD 350 million).
2021 — GSK has agreed to sell all of its approximately 32 million shares of common stock of Innoviva back to Innoviva for 12.25 USD per share, raising gross proceeds of USD 392 million.
2018 — GSK acquired Tesaro, an oncology-focused biopharmaceutical company (USD 5.1 billion). The objective of this acquisition was to strengthen GSK’s oncology portfolio.
2018 — GSK divested its drinks business, Horlicks and other consumer healthcare nutrition products, to Unilever for USD 3.8 billion. The objective was to focus on its core pharmaceutical business.
2017 — GSK divested its rare disease portfolio to Orphan Europe for an undisclosed sum. The objective was to focus on its core therapeutic areas.
2015 — GSK entered into a strategic collaboration with Google’s life sciences division, Verily, to form Galvani Bioelectronics to develop bioelectronics medicines.
2015 — GSK GSK sold its marketed oncology portfolio, related R&D efforts, and rights to its AKT inhibitor to Novartis for USD 16 billion. Novartis also received commercialization partner rights for future cancer drugs.
2013 — GSK agreed to sell its nutritional drinks brands Lucozade and Ribena to Suntory Beverage & Food Ltd.
2013 — GSK divested its thrombosis brands ArixtraTM and FraxiparineTM to Aspen Pharmacare for GBP 700 million.
2012 — GSK acquired Human Genome Sciences for $3.6 billion to gain access to its lupus drug Benlysta.

GSK has evolved its strategy. After divesting cancer and innovation medicine businesses to focus on consumer healthcare and vaccines, it appears to be returning to biopharma and innovation.

Roche

Roche is a Swiss healthcare multinational based in Basel that develops and delivers innovative treatments for serious diseases. Roche is a leader in personalized healthcare, oncology, immunology, and diagnostics.

2021 — Roche acquired Spark Therapeutics for $4.3 billion. The objective was to expand Roche’s gene therapy portfolio.
2020 — Roche acquired Irish biotech firm Inflazome for an upfront payment of $449m.
2017 — Roche acquired mySugr, a diabetes management platform, for an undisclosed sum. The objective was to enhance Roche’s diabetes care offering.
2018 — Roche acquired Flatiron Health, a provider of oncology-specific electronic health record software and real-world data analytics, for USD 1.9 billion. The objective was to enhance Roche’s oncology research and development.
2019 — Roche acquired Promedior, a biotechnology company focused on fibrosis (USD 1.39 billion). The objective was to expand Roche’s portfolio in the fibrosis area.
2016 — Roche acquired a majority stake in Foundation Medicine, a precision medicine company, for a total transaction value of USD 2.4 billion. The objective was to enhance Roche’s personalized healthcare offerings.
2014 — Roche acquired Seragon Pharmaceuticals, a biotechnology company focused on breast cancer, for USD 1.7 billion. The objective was to expand Roche’s oncology portfolio.
2014 — Roche acquired InterMune, a biotechnology company focused on fibrosis, for USD 8.3 billion. The objective was to expand Roche’s portfolio in the fibrosis area.
2014 — Roche acquired Ariosa Diagnostics, a provider of non-invasive prenatal testing, for USD 325 million. The objective was to expand Roche’s diagnostic offerings.
2011 — Roche acquired Anadys Pharmaceuticals, a biotechnology company focused on hepatitis C, for USD 230 million. The objective was to expand Roche’s hepatitis C portfolio.

Roche’s M&A strategy has centered on growing in oncology, fibrosis, and personalized healthcare and improving diabetic treatment and diagnostic capabilities. Spark Therapeutics, Inflazome, Promedior, and Flatiron Health were recently acquired, with a total transaction value of over $8 billion.

Johnson and Johnson

Johnson & Johnson is an American healthcare company operating in over 60 countries. Johnson & Johnson sells medical devices, prescription drugs, and consumer health products.

2021 — Johnson & Johnson announced plans to split its consumer products business from its pharmaceutical and medical device operations, creating two publicly traded companies. The news sent shares higher in premarket trading.
2020 — Johnson & Johnson announced its plan to acquire Momenta Pharmaceuticals, a biotechnology company focused on developing therapies for autoimmune and inflammatory diseases, for USD 6.5 billion.
2019 — Johnson & Johnson acquired Auris Health, a medical technology company focused on developing robotic technologies for lung cancer, for USD 3.4 billion.
2018 — Johnson & Johnson divested its LifeScan diabetes care business to Platinum Equity for USD 2.1 billion. The objective was to focus on its core therapeutic areas.
2019 — Johnson & Johnson divested its Advanced Sterilization Products (ASP) business to Fortive Corporation for an aggregate value of approximately USD 2.8 billion.
2017 — Johnson & Johnson acquired Actelion, a biopharmaceutical company focused on developing therapies for pulmonary arterial hypertension, for USD 30 billion.
2014 — Johnson & Johnson acquired Alios BioPharma, a biotechnology company focused on developing therapies for viral diseases, for USD 1.75 billion.
2012 — Johnson & Johnson acquired Synthes, a medical device company focused on orthopedics, for USD 19.7 billion.
2013 — Johnson & Johnson acquired Aragon Pharmaceuticals, a biotechnology company focused on developing therapies for prostate cancer, for USD 1 billion.
2011 — Johnson & Johnson acquired Crucell, a biotechnology company focused on developing therapies for infectious diseases, for USD 2.4 billion.

Separating its consumer goods division from its pharmaceutical and medical device businesses is a major strategic shift for Johnson & Johnson. In the last years, the corporation has been buying up smaller biotech firms to branch out into new therapeutic areas. J&J decided to sell off its diabetes care and Advanced Sterilization Products divisions concentrating on its core operations.

Bristol-Myers Squibb

Bristol-Myers Squibb (BMS) is a US pharmaceutical company operating in 160 countries. BMS develops novel cancer, cardiovascular, and immunology treatments.

2019 — Bristol-Myers Squibb acquired Celgene Corporation, a biotechnology company focused on developing therapies for cancer and inflammatory diseases, for USD 74 billion. The objective was to create a leading biopharmaceutical company with a deep and diverse pipeline of innovative therapies.
2018 — Bristol-Myers Squibb divested its consumer health business to Procter & Gamble for USD 13.4 billion. The objective was to focus on its core biopharmaceutical business.
2018 — Bristol-Myers Squibb entered into a strategic collaboration with Nektar Therapeutics to develop and commercialize immuno-oncology therapies for USD 1.85 billion.
2015 — Bristol-Myers Squibb acquired Flexus Biosciences, a biotechnology company focused on developing therapies for cancer, for USD 1.25 billion. The objective was to expand Bristol-Myers Squibb’s immuno-oncology portfolio.
2016 — Bristol-Myers Squibb acquired Padlock Therapeutics, a biotechnology company focused on developing therapies for autoimmune diseases, for USD 250 million. The objective was to expand Bristol-Myers Squibb’s immunology portfolio.
2014 — Bristol-Myers Squibb entered into a strategic collaboration with Ono Pharmaceutical to develop and commercialize immuno-oncology therapies. The value of the transaction was not disclosed.
2012 — Bristol-Myers Squibb acquired Amylin Pharmaceuticals, a biotechnology company focused on developing therapies for diabetes, for USD 5.3 billion. The objective was to expand Bristol-Myers Squibb’s diabetes portfolio.
2011 — Bristol-Myers Squibb acquired Inhibitex, a biotechnology company focused on developing therapies for infectious diseases, for USD 2.5 billion. The objective was to expand Bristol-Myers Squibb’s infectious disease portfolio.
2016 — Bristol-Myers Squibb Acquires Cormorant Pharmaceuticals, to broaden their oncology pipeline focus on the tumor microenvironment and combination therapy for USD 520 million.
2015 — Bristol-Myers Squibb Acquires Exclusive License from Novo Nordisk for a Discovery Research Program Focused on Autoimmune Diseases.

As a result of their merger, Bristol-Myers Squibb and Celgene have become major pharmaceutical powerhouses with a wide range of promising new treatments under development. Focusing on its core biopharmaceutical business, the firm sold its consumer health business to Procter & Gamble. The company also formed immuno-oncology partnerships and extended its cancer, autoimmune, and infectious disease therapeutics, acquiring smaller organizations.

How will the Life Science ecosystem evolve?

In the last decade, several of the world’s largest pharmaceutical firms have shifted their strategy to concentrate on biopharmaceuticals while selling off their less strategic operations. They are buying up smaller biotech companies so they may expand into new therapeutic areas and have an ampler selection of cutting-edge drugs. Oncology, inflammation, autoimmunity, and other disease areas receive special attention as new approaches to healthcare delivery. More and more businesses are leaving the consumer healthcare sector to focus on biopharma and innovation again. They seem to follow only one objective: to fortify their product lines and dominate the industry.

Opportunities and threats of this transformation

This strategy has various risks.

To begin with, people and healthcare systems might lose out if business consolidation leads to less competition and higher drug pricing.

Second, the high costs of mergers and acquisitions are siphoning resources away from R&D operations, with consequent loss of know-how and flexibility to follow new research directions.

Lastly, merging various corporate cultures and product lines can be difficult and could cause operational delays and inefficiencies.

Lastly, there is a risk that acquisitions will not produce the promised profits because drug research success is uncertain and susceptible to circumstances outside a company’s control, such as regulatory clearance and market rivalry.

But that’s not all.

It has been challenging for new entrants to break into the pharmaceutical sector due to the industry’s long development cycles, stringent regulatory standards, and expensive financial needs.

Lately, the likelihood of new technology giants joining the life sciences industry and upending the current hegemony of established major life science corporations can rise due to the lack of flexibility brought on by the loss of expertise and technological advancements.

AI, ML, and big data analytics are transforming the industry. Corporations that use these technologies and construct adaptable systems will streamline their operations, save costs, and shorten the time it takes to bring new medicines to market.

Amazon, for example, with its massive digital capabilities and current distribution channels, might join the pharmaceutical market and provide creative solutions that could disrupt established medication research, distribution, and sales models.

When technology obsolescence is combined with a lack of know-how on own set-up, the outcome is business paralysis.

Several companies have trouble finding people with the right skills because workers with experience in their old, specialized setups are retiring or getting laid off. At the same time, new technologies are changing how people work and increasing the demand for new skills and abilities. Businesses that don’t change to keep up with these changes could lose their competitive edge and fall behind.

Concluding Thoughts

The article examines the influence of mergers and acquisitions (M&A) on the life science ecosystem, noting the difficulties encountered in carrying out these deals. It investigates the net acquisition/divestment of representative major pharma businesses during the previous decade, as well as the potential ramifications of these changes, vulnerabilities, and future concerns of the transition. Large pharma companies have made major contributions to the evolution of the life science ecosystem by focusing on novel treatments and therapies, particularly in personalized medicine, gene therapy, and immunotherapy. There are risks associated with this strategy, including the possibility of business consolidation leading to less competition and higher drug pricing, the high costs of mergers and acquisitions diverting resources away from R&D operations, and the risk of acquisitions failing to produce promised profits. The article also covers the influence of technology and how organizations that utilize it may streamline their processes, save money, and reduce the time it takes to bring new drugs to market. Yet, technological obsolescence and a lack of know-how on own setup can lead to a business standstill.