Analysts believe M&A activity in the pharmaceutical sector could rise in 2019: report

Analysts and investors hinted that M&A activity among drugmakers could increase in 2019 compared to the prior year, Business Insider reported Friday. The speculation comes after Bristol-Myers Squibb agreed to purchase Celgene for $74 billion, followed by Eli Lilly's deal to acquire Loxo Oncology for $8 billion.

Mike Gaito, JPMorgan global co-head of healthcare investment banking, commented "anytime you start the year with a bellwether biotech company like Celgene being acquired, it gets everyone excited for deal activity," continuing "we're extremely busy coming into the new year."

According to Cantor Fitzgerald analyst Alethia Young, Amgen and Gilead Sciences, which "both have well over $30B in cash," could be among the acquisitive drugmakers this year. Young particularly noted that Amgen "may be much more active in M&A this year."

Meanwhile, Mizuho analyst Salim Syed recently hinted that Biogen could be on the lookout for deals this year. However, despite estimating that the company has as much as $18 billion to spend in a deal, the analyst suggested that Biogen would be unlikely to pursue a large target.

Among other drugmakers, during a presentation at JPMorgan, Johnson & Johnson seemed to express potential interest in smaller deals, with CEO Alex Gorksy explaining that the company's best deals have been "the tuck-ins, the bolt-ons." The executive cautioned "bigger is always more complicated," adding "it's always more challenging, just more disruption."

Moreover, Merck & Co. chief executive Ken Frazier remarked "I think the fact that you haven't seen a large deal coming out of Merck recently is not a reflection of the fact that we're not looking at those." Frazier continued "I think with the valuations coming down, it creates more possibilities."

The news also follows rumours that Pfizer might have interest in a takeover of Amarin. In addition, Baker McKenzie estimated earlier this month that global pharmaceutical M&A activity could reach $331 billion in 2019, which would represent a 7-percent increase over last year.

Major deals signed in 2018 include Takeda's $62-billion acquisition of Shire, which was finalised this month. In addition, Sanofi entered into separate deals to acquire Bioverativ for $11.6 billion and Ablynx for 3.9 billion euros ($4.5 billion), while Roche purchased Flatiron Health for $1.9 billion.

For related analysis, see JP Morgan 2019: With two deals already in the bag, what comes next for pharma M&A in 2019

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