Ernst & Young's report today highlighted a growing financial weakness among Big Pharma companies as Big Biotech has begun to flex its growing muscles at the deal table, but everyone expects the multinationals to continue to play the starring role when it comes to the biggest deal stories of the coming year.
Bloomberg did the math on the Big Five American pharmas--Pfizer ($PFE), Johnson & Johnson ($JNJ), Abbott ($ABT), Sanofi ($SNY) and Merck ($MRK)--and found $70 billion in cash ready for deals. And a considerable portion of that money is expected to be earmarked for some major buyouts.
"Many large cap pharma companies still face a patent cliff and have the financial capability and strategic willingness to partner and acquire their way to continued innovation," Leerink Swann analysts noted recently, highlighting Eli Lilly ($LLY), Bristol-Myers Squibb ($BMY) and AstraZeneca ($AZN) as the most likely bidders. Lilly has vowed to steer clear of mega-deals, of course, as CEO John Lechleiter swears to remain focused on internal R&D. But the company does pull off the occasional bolt-on buyout. Bristol-Myers, meanwhile, has been a busy M&A player and AstraZeneca is making no secret of the fact that it badly needs to acquire new products and late-stage assets.
Bloomberg's assessment going into the J.P. Morgan Healthcare Conference focuses on the return of the $10 billion-plus deal. And there are a number of biotech companies such as Biogen Idec ($BIIB), Celgene ($CELG), Regeneron ($REGN) and Alexion ($ALXN) that could fit that big bill. Of course, every year starts off with fevered speculation about M&A as the industry flocks to San Francisco.
"We're through many cost-cutting programs, restructurings and portfolio arrangements," JPMorgan's Henry Gosebruch told Bloomberg. "When you put that together with record levels of cash available and improving, but still moderate R&D productivity, we think there will be more big pharma M&A activity in 2013."
Few years, though, live up to the heated San Francisco forecast for industry M&A. But there are plenty of signs that something big is on the horizon.
- here's the story from Bloomberg
Commentary: E&Y: As Big Pharma falters, Big Biotech helps fill a $100B M&A firepower "gap" | Expect bold moves in the biopharma industry in 2013
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