A Look at Pharma M&A — Consolidating Strengths In Oncology, Immunology and More

As predicted, the pharmaceutical industry is witnessing significant merger and acquisition activity. Among the top dealmakers is Pfizer PFE picking up Seagen SGEN — expected to cost the acquirer $43 billion. The acquisition falls into the oncology space and will enforce Pfizer’s prowess in the modern war against cancer.

In this case, the target company, which supports the acquisition, holds impressive credentials in antibody-drug conjugate technology. Seagen is a leader in killing cancer cells, a technique reported on previously in which certain cells track and destroy other cells that cause and expand cancer. 

Compared to older cancer treatments, the new direction is to make treatment more targeted, more efficient, less painful and more effective. This move will expand Pfizer’s broad portfolio in cancer fighting as well as its research capabilities, two critical elements for the industry giant.

Meanwhile, Merck MRK has acquired Prometheus Biosciences RXDX . The intention is to strengthen Merck’s position in another key area of leading-edge medicine: immunology. 

A good part of Prometheus’s value rests on MK-7240, a monoclonal antibody that has the capacity to battle tumors. This will build Merck’s ability to deal with autoimmune conditions including ulcerative colitis and Crohn’s disease. The acquisition will cost $10.8 billion according to Merck.

These two acquisitions show significant activity in fighting cancer and in dealing with rare diseases, two leading-edge issues in the industry.

The search for strategic dominance in defined areas was the driver behind other deals, as well. 

Amgen AMGN had a strong second quarter with revenue up. One of its most successful products is Vectibix, which treats colorectal cancer. This follows first quarter earnings that beat estimates. The company is working on an acquisition of Horizon Therapeutics HZNP estimated to come in at about $28 billion. Horizon makes Terezza, which treats thyroid eye disease. This is another example of a thrust into the rare disease space, which has attracted significant interest across the industry.

Sanofi SNY , enjoying great success with Dupixent, has acquired Provention Bio PRVB for about $3 billion. The target company holds expertise in dealing with type 1 diabetes through Tzield, the lone FDA-approved disease-modifying therapy to delay type 1 diabetes (T1D). This move strengthens Sanofi’s cardio capabilities. 

Key Takeaways

These four acquisitions confirm a number of strategic observations about the pharmaceutical industry. 

First, the giants are moving aggressively to acquire and protect the skills and products at the leading edge of cancer treatment, heart disease and rare diseases. 

Second, the pharmaceutical industry is using the massive wealth it gained during the pandemic to reach new medical horizons. 

Third, the great leading-edge medical ideas, sometimes struggling for funding inside smaller companies, are being picked up harmoniously by the cash-laden giants of the industry. As a result, hostile takeovers are not the standard.

The industry-wide revenue surge has been significant. Consider year-end 2019 (pre-pandemic) and 2022 revenue for Pfizer and Johnson & Johnson JNJ . Pfizer went from $52 billion to $100 billion; JNJ rose from $82 billion to $95 billion. 

While revenue and cash on hand have done very well in big pharma, a number of companies have seen a huge leap in market capitalization. For example, from year-end 2020 to September 2023, Eli Lilly LLY added $360 billion in market cap, a 222% increase; Novo Nordisk NVO grew by $258 billion, a 160% leap.