The future of pharmaceutical companies - mergers and acquisitions.

1, background 2, the driving force of mergers and acquisitions 3, case analysis - Gilead's path to mergers and acquisitions development 4, domestic and foreign pharmaceutical industry mergers and acquisitions compared 5, the inspiration to domestic pharmaceutical companies 1, background All along, China's pharmaceutical market is dominated by generic drugs, generic drugs and patent expired original research drugs long-term accounted for more than 80% of sales.
With the implementation of policies such as generic consistency evaluation and volume procurement in recent years, the price of generic drugs has been greatly reduced (Figure 1), and it is difficult for traditional generic companies to gain access to the high profit margins of the past, with conservative estimates that more than half of them will be eliminated in the next five years.
meanwhile, the growth rate of the pharmaceutical industry is expected to slow under the policies of reasonable drug use and reform of medical insurance payment methods, and traditional pharmaceutical companies are facing the test of transformation and upgrading.
In order to encourage the research and development of high-quality innovative drugs, the State Drug Administration has implemented policies and regulations such as accelerating the approval of innovative drugs, speeding up the domestic marketing of imported drugs, joining ICH, the system of license holders for drug listing (MAH), and amending the Drug Administration Law, which have greatly improved the speed of research and development of new drugs and the quality of drugs (Figure 1, Figure 2).
, many domestic pharmaceutical companies are carrying out innovative drug research and development, but also a number of research and development of the original innovative drug biotechnology companies, research and development capabilities continue to improve.
Figure 1. Number of New Drugs approved for listing by NMPA (CFDA) in China Figure 2. The clinical quantity of new drugs declared in China over the years From an innovative point of view, the current research and development of new drugs in China is mostly me-too/me-better, usually for the target of existing listed drugs for differential research.
the early stage of innovation transformation in the pharmaceutical industry, this research and development model can gradually improve the research and development capabilities of enterprises and narrow the gap with large foreign pharmaceutical companies.
But in the long run, me-too/me-better drugs often have similar efficacy to existing ones, making it difficult to address unsurfined clinical needs, and on the other hand, in some popular areas of research, they are prone to severe homogenization competition (Figure 3), and under a range of health-care reform policies, such as health-care control fees, these drugs are also difficult to bring significant benefits to businesses.
Take Japan as an example, under the impetus of the national new drug approval, medical insurance and other policies, Japanese pharmaceutical companies have also experienced the transformation and upgrading from generic drugs (me-too/me-better) to original innovative drugs, innovation and research and development capabilities continue to improve, local pharmaceutical enterprises gradually to the international market.
Figure 3. Hot tumor targets have been listed and the number of drugs under research in China Only by developing more innovative drugs based on new technologies and mechanisms to address clinically unsothed needs can we face the market competition from home and abroad and the deepening reform of the medical system, and occupy a larger market share.
but the development of modern science and technology is very rapid, the cycle of drug research and development is very long, the knowledge of traditional in-house research and development personnel often can not keep up with the speed of new technology development.
pharmaceutical companies often face operational pressure from heavyweight drug patents to expire and new product development to keep pace with product updates, and research and development risks are increasing as the FDA tightens its approval of new drugs.
, acquiring more promising technologies from outside or researching drugs is often the main coping strategy for the business.
For domestic pharmaceutical companies, especially large-scale research and development enterprises, we should pay attention to the innovation and upgrading of research and development through mergers and acquisitions, focus on domestic and foreign start-ups of new drug research and development, and forward-looking layout of cutting-edge technology areas.
addition, China's pharmaceutical market accounts for only about 10 per cent of the world's total, and traditional Chinese medicines and generics account for a significant portion of sales, and the domestic market alone is still not enough to support costly research and development of innovative drugs.
pharmaceutical companies should actively open up foreign markets through mergers and acquisitions to further improve the industrial chain.
This paper mainly discusses the innovation and upgrading of pharmaceutical companies from the perspective of mergers and acquisitions, analyzes the driving forces of mergers and acquisitions in the pharmaceutical industry, compares differences at home and abroad, and provides suggestions for mergers and acquisitions of domestic pharmaceutical companies.
2, the driving force of mergers and acquisitions of the pharmaceutical industry is the market economy environment to achieve the integration of resources in the industry, enterprises to obtain sustained revenue growth, accelerate the efficiency of new drug research and development of an important way, large pharmaceutical companies are carrying out a large number of mergers and acquisitions transactions, according to incomplete statistics, since 2010 the total number of global TOP10 pharmaceutical companies has reached nearly 500 billion U.S. dollars.
the history of the world's largest pharmaceutical companies, most of the major developments are related to mergers and acquisitions (Figure 4).
, the main drivers of pharmaceutical mergers and acquisitions include innovation upgrading, collaborative development and expansion in overseas markets.
innovation and upgrade.
New drug development is a high-risk, high-investment investment, and the early development of new technologies and therapies often comes from small biotech companies that focus on early drug development and lack sufficient experience in clinical research, market development, and so on.
For large pharmaceutical companies, which have a complete industrial chain from early development and clinical research to commercialization, the acquisition of innovative companies with core technologies and potential products can quickly bring products to market and improve overall research and development efficiency.
reduce research and development risks, enrich product pipelines, and maintain the company's profit growth.
for small technology companies, this is a rapid marketization process that enables faster market returns.
according to statistics, more than half of the top 10 drugs sold in 2015-2018 were acquired through mergers and acquisitions, including star drugs such as Addamyma, Opdivo and Keytruda (Table 1).
to expand the market size, to obtain synergies and scale effects.
biopharmaceuticals is one of the most frequent mergers and acquisitions between companies, and the scale of mergers and acquisitions is huge.
has had a number of mergers and acquisitions of more than $50bn in the past two years, including BMS's acquisition of Shinji, Takeda's acquisition of Shire and AbbVie's acquisition of Erjian.
mergers and acquisitions between pharmaceutical companies can rapidly expand the market size, mutual access to advantageous resources, product portfolio complement each other, at the same time can greatly reduce financial and operating costs, resulting in synergies.
BMS estimates that the acquisition of New Base will save it $2.5 billion in operating costs.
to develop overseas markets.
acquires teams from overseas pharmaceutical companies for their medical affairs, clinical development and sales, allowing companies to quickly enter the local market.
, Takeda, Astellas and other Japanese pharmaceutical companies in the beginning of this century through overseas mergers and acquisitions gradually opened up the European and American markets, become the world's leading pharmaceutical companies.
if these companies are firmly in Japan, growth will be very limited, " he said.
Figure 4. Statistics on Mergers and Acquisitions of Global TOP10 Pharmaceutical Companies since 2010 Table 1. Part of the case studies of heavyweight drugs obtained through transactions3, mergers and acquisitions - Gilead's path to merger and acquisition development. Gilead Sciences is a research and development biopharmaceutical company featuring antiviral/anti-infected drugs, with a number of heavy drugs.
has the star drug Sofibwe in the field of anti-hepatitis C, and led the era of "hepatitis C cure" based on sofibvir, which has been holding nearly 50% of the market share for many years in the field of anti-HIV.
's dominance in the field of antiviral drugs, Gilead's sales reached $32.15 billion in 2015, ranking sixth among the world's pharmaceutical companies, and the company, which has been in business for just over three decades, has become a global pharmaceutical giant.
Gilead was founded in 1987 and, after receiving venture capital, relied mainly on contractual research projects, acquiring the right to develop a set of nucleotide compounds from a laboratory at a European university in 1991 to begin research on antiviral drugs.
In 1996, the first new drug, Sidorfowe, was approved for listing by the FDA, and although it did not result in significant revenue growth for Gilead, the first new drug raised $250 million, laying the groundwork for a later merger.
, Gilead has since embarked on a journey of mergers and acquisitions, acquiring NeXstar Pharma, which has annual sales of $130 million, for $550 million in 1999 and acquiring two liposome products, AmBisome and Dauno Xome.
Then, through the acquisition of Triangle Gilead, which acquired the anti-HIV drug enqudabin, the company launched Genvoya, Truvada, Odefsey and other heavyweight compound drugs, and by 2018 Gilead's total sales of HIV drugs has exceeded $14 billion.
In 2011, Gilead acquired Phalmasset for $11.2 billion to acquire three chronic hepatitis C drugs, including Sofibwe, which was approved in 2013 and whose combination of drugs and combination drugs has a cure rate of more than 95% for patients with multiple genotypes of hepatitis C, ushering in an era of pure oral cure for hepatitis C.
between 2014 and 2017, Sophebwe-based anti-hepatitis C drugs generated more than $55 billion in revenue for Gilead, which was once among the top 10 drug companies in the world in terms of revenue.
In recent years, the global market for hepatitis C drugs has shrunk from $23.6 billion in 2015 to $7.8 billion in 2018 as a result of the large number of hepatitis C patients cured, and with fierce competition from companies such as AbbVie, Gilead's drug sales have fallen sharply.
other hand, early research and development of anti-HIV drugs is also coming to the patent cliff stage, Gilead urgently needs to enter new therapeutic areas to achieve revenue growth.
acquired CAR-T pioneer Kite Pharma in 2017 for $11.9 billion, while Cell Lab Designs acquired two CAR-T technology platforms to begin its entry into cell therapy.
In the meantime, Gilead has also enriched its research and development pipelines in the areas of NASH, oncology, inflammation, etc. through acquisitions and cooperative development, including the JAK1 inhibitor Filgotinib, developed in partnership with Galapagos, which has submitted a listing application to the FDA and is expected to bring new sales growth to Gilead.
Figure 5. Gilead's Annual Revenue and Growth Rate Table 2. Gilead's mergers and acquisitions are a summary of Gilead's history of mergers and acquisitions, in which several successful mergers and acquisitions, correct post-investment operations and subsequent research and development capabilities have played an important role (Figure 5, Table 2).
, which ranged from early lipospologic drugs to Enquabin and Sofibwe, which generated huge profits, are both acquired through mergers and acquisitions, and At a critical time when revenue declines in recent years are facing transformation, Gilead is also enriching its research and development pipeline through mergers and acquisitions in multiple therapeutic areas, with 31 new drugs in the clinical research and NDA phases in the areas of HIV, HBV, NASH, oncology and immunology.
Re fact, Gilead's mergers and acquisitions are not many compared to other large pharmaceutical companies, but Gilead has always been able to accurately find the right acquisition target and complete further research and development upgrades after the merger, from the early stages of the company's development to the acquisition of Phalmasset, almost every investment can significantly promote the company's growth."
therefore, on the basis of a wealth of research and development experience, forward-looking, effective and accurate merger and acquisition strategy is essential to the development of pharmaceutical companies.
4, domestic and foreign pharmaceutical industry mergers and acquisitions transactions compared in recent years, the domestic two-vote system, consistency evaluation, volume procurement and other policies and capital markets, the pharmaceutical industry is increasingly active in mergers and acquisitions, traditional generic pharmaceutical enterprises are through mergers and acquisitions to complete the integration of resources, China Resources Pharmaceuticals, Fosun Pharma, Shanghai Pharmaceuticals and other large pharmaceutical companies are also actively participating in mergers and acquisitions at home and abroad to complete the strategic transformation.
, however, compared with foreign pharmaceutical industry mergers and acquisitions, the scale of mergers and acquisitions is large, there are also great differences in the content of mergers and acquisitions (Figure 6, Table 3, Table 4).
in terms of the amount of mergers and acquisitions, the global pharmaceutical industry will have a total of $163.2 billion in mergers and acquisitions in 2018, with domestic mergers and acquisitions accounting for less than a quarter of the world's total, and few single deals exceeding $1 billion.
From the purpose of the transaction, foreign countries mainly to acquire special products or technology innovation companies and large companies between strong mergers and acquisitions, the target company is usually small research and development companies, involving new cancer therapies, rare diseases, neurodegenerative diseases and other key therapeutic areas, the purpose of the merger is to enrich the product pipeline, to achieve innovation and upgrading of enterprises.
The purpose of domestic mergers and acquisitions mainly includes the integration of generic pharmaceutical companies, shell listing and strategic investment, but also involves a number of cross-industry mergers and acquisitions, the target companies are mainly prescription drugs and generic drugs, rarely have innovative products and technologies.
Globally, the main players in mergers and acquisitions are large pharmaceutical companies, while at home, leading pharmaceutical companies rarely participate in mergers and acquisitions, and most of their products are developed independently and rarely acquired through mergers and acquisitions.
research and development capabilities and market size of the domestic pharmaceutical industry are the main reasons for the gap between domestic and foreign mergers and acquisitions.
On the one hand, China's pharmaceutical industry is still in the early stage of the transition from generics to innovative drugs, the overall level of research and development is not high, low-quality targets, many enterprises are still mainly generic drugs, mergers and acquisitions between generic enterprises and vertical mergers and acquisitions within the industry will still be the main trend in the next few years;
Figure 6. Total Mergers and Acquisitions in the Domestic and Foreign Pharmaceutical Industry Table 3. 2018 Global Biopharmaceutical Mergers and Acquisitions TOP10 Table 4. 2018 China Biopharmaceutical Mergers and Acquisitions Top 10 5, Inspiration to Domestic Pharmaceutical Companies In the past 2018 and 2019, the development of China's pharmaceutical industry has been magnificent, both the rapid development of financing and listing of emerging biotech companies and the urgent need for traditional enterprises to under pressure to transform.
in the future development process, the domestic pharmaceutical industry will certainly carry out intense resource integration, mergers and acquisitions.