UK pharma pressing ahead with M&As in 2019

The UK pharmaceutical industry is pressing ahead with M&A activity and is geared to weather any disruption due to Brexit, according to the results of a survey.

EY’s 19th Capital Confidence Barometer (CCB19), a biannual survey of more than 2600 executives across 45 countries, found that 67% of UK life sciences execs had a stable or positive outlook on the impact of Brexit on investment and acquisition activity.

Globally however, the picture is less positive with about half of the surveyed executives (51%) believing that Brexit will negatively impact investments and acquisitions outside the UK and EU, as well as their ability to recruit and retain key talent.

The positivity within UK pharma contrasts with potential regulatory upheaval with the post-Brexit relocation of the European Medicines Agency from London to Amsterdam. There will also be the subsequent need for the sector to establish its own regulatory regime and its future relationship with the EU within the wider political context.

According to the report, the global life sciences industry is on track to achieve US$200 billion in deals in 2018, but the outlook appears to be more subdued with almost half (49%) that believe the sector economy is improving. 48% of respondents also indicated that they intend to pursue M&A within the next 12 months – a slight decrease on this time last year (50%).

The study also shows that life sciences companies are increasingly relying on portfolio optimisation to improve performance and free up capital for reinvestment. 59% of life sciences respondents say they are reviewing their portfolios more frequently than once a year – double the figure from last year (30%).

At a subsector level, biopharma (63%) performs these reviews more frequently than medtech (55%) and biotech (47%).

Matt Bartell, UK Life Sciences TAS Leader for EY said: “It’s no surprise that UK execs are more confident on Brexit compared with their global counterparts. Clearly those in the life sciences industry have done their homework and are ahead of many others in ensuring they are prepared to weather the Brexit storm and are able to continue focusing efforts on driving growth through M&A.

“Looking ahead to 2019, the combined strength of companies’ balance sheets, or firepower, is at an all-time high. This could fuel larger M&A than what we have seen recently, boosted by US tax reform, and as companies consider how to engage in emerging platforms of care.

“The other part lies in private equity’s increasing appetite for life sciences assets. We expect medtech and services businesses that support biopharma and specialty clinical laboratories to be their primary focus in the year ahead.”