China is the most attractive target nation for pharma M&A

Hannah Blake

pharmaphorum

Pharmaceutical companies’ expenditure in the emerging markets is at the highest ever level, up by 95% from 2011, at a peak of US $3.5 billion so far this year. On the other hand, global merger and acquisition activity involving pharma has fallen to $146 billion so far in 2012, compared to $225 billion last year.

The most attractive target nation in the emerging markets for domestic and overseas acquirers is China, attracting $6.8 billion in investment, according to new Thomson Reuters data.

Singapore is the most acquisitive nation of pharma in the emerging markets, with outbound deals in 2012 totaling $9566 million, followed by the United States ($724.0m) and then Chile ($562.0m). The United Kingdom invested $24.1m in the emerging markets. Despite the rise in investment in emerging markets, the number of deals is still relatively low in 2012 at 46.

“We saw a flurry of dealmaking in 2011, with pharma deal investments surging back to pre-recession levels. However, predictions of a wave of M&amp,A activity across the sector, as pharmaceutical companies seek to counterbalance the effects of patent expiries on top-selling medicines and a lacklustre performance for driving innovation, have not yet played out in 2012. Instead, pharma investments in fast growing economies are gathering steam.

“Pharma companies continue to grapple with restrictors to growth in their core markets, including growing pressure on healthcare budgets, low innovation productivity and increased regulatory reform. While M&amp,A is an expensive remedy, “pharmerging" markets are obvious investment choices for cash-rich drug companies.

“2012 has been a good year for investment in pharma companies in emerging markets and we expect it will pick up further in 2013 now China’s new leadership has been ushered in. Foreign buyers, who may have previously been biding their time while awaiting the results, will regain confidence.”

Jennifer Bethlehem, Corporate partner, international law firm Freshfields.

&nbsp,