Here's a multibillion-dollar question: With their improved cash positions, will pharma companies increase spending this year on acquisitions? Over at Moody's, analysts predict that the answer to this question will be "yes" and that deep-pocketed pharma companies will spend big dollars on M&A deals.
Why? As Reuters reported, Moody's noted that Pfizer ($PFE), Novartis ($NVS) and Roche ($RHHBY), to name three outfits, have reduced their debt loads from megadeals of three to four years ago. And it positions the drugmakers to pull the trigger on buyouts, potentially larger ones than the industry has witnessed in the past couple of years.
Still, by most accounts, pharma chiefs favor "bolt-on" type deals that can be done without the organizational and financial strain of a megamerger. AstraZeneca ($AZN), which hungers for new products to replace top-sellers whose patents have expired, has been talking up bite-sized deals for a while and in 2012 joined forces with its diabetes partner Bristol-Myers Squibb ($BMY) in the acquisition of Amylin Pharmaceuticals for $7 billion. AstraZeneca CEO Pascal Soriot's recent move to tap the brakes on buying back company shares sent a message to analysts that the London-based drugmaker wanted to allocate its cash for acquisitions.
Reuters and Bloomberg didn't report on what companies could become the main courses of a pharma M&A feast in their respective articles on the Moody's report. Yet some of the oft-mentioned names have included Theravance ($THRX), Onyx Pharmaceuticals ($ONXX) and Cubist Pharmaceuticals ($CBST)--all of which offer buyers marketed products and late-stage prospects.
"The number of potential acquisition targets is rising because of the higher quality of drug pipelines and advances in areas like oncology and immunology," Moody's analysts wrote, as quoted by Bloomberg.
According to Ernst & Young's report today, pharma companies took part in a 9% increase to $27.4 billion in M&A activity in 2012 (excluding two megamergers in the prior year), a sign that deals activity has been already been on the upswing. For privately held biotech companies, any increase in M&A dealmaking from pharma bodes for shareholders and entrepreneurs because of the continued challenges in raising venture capital and completing IPOs.