Decoding the M&A landscape

Navigating the complex terrain of the pharma industry demands constant adaptation and strategic manoeuvring. As the pharma market continues to grow and branch out, major players aim to expand and diversify to remain at the top of the game. Companies are eagerly engaging in strategic deal-making, probably more than ever before. The Indian pharma landscape has also witnessed significant expansion, punctuated by noteworthy acquisitions. 

Global M&A landscape of 2024

According to Aurojyoti Bose, Lead Analyst, GlobalData, the pharma industry’s strategic alliances and M&A deal landscape presented a contrasting trend during 2024. There was an increase in the number of M&A deals announced in 2024 compared to the previous year but strategic alliances’ volume fell. While M&A deals volume registered a year-on-year growth of 17.7 per cent during 2024, announcement of strategic alliances fell by 17.2 per cent.

Globally, several pharma giants made alliances for the expansion and diversification of product portfolios, focusing on improving supply chains and strengthening manufacturing capacity acting as key rationales driving M&A strategies. Bose highlighted, “Many companies were seen going into a buying frenzy and we saw them announcing a spate of M&As during the year. Some notable companies that went for multiple M&A announcements during the year included Novartis AG, Novo Nordisk AS, Merck & Co, Sanofi, GSK plc, Johnson & Johnson and AstraZeneca Plc, among others.”

Bose stated that all the top three markets by M&A deal volume, the US, China and India registered growth in 2024. “Historically, the US has been the hotbed for M&A activity and the trend remains unchanged in 2024 as well. It continues to outpace its peers by a significant margin by accounting for around 40 per cent of the total number of M&A deals announced globally during the last three years,” says Bose

The US saw 2.4 per cent growth in M&A deal volume in 2024 compared to the previous year. The next two top markets by M&A deal volume, China and India also contributed to the overall growth. The number of M&A deals announced in China increased by 15.1 per cent in 2024 compared to 2024 while M&A deal volume for India was up by 42.5 per cent.

The India story

The Indian pharma industry had a robust 2024 in terms of M&A deals activity. According to GlobalData, the industry witnessed 31 M&A deals in Q3 valued at $2.3 billion. The $1.6 billion BSV acquisition by Mankind Pharma was the biggest disclosed deal for the industry in 2024.

The report also states that M&A activity in India increased by 404 per cent in Q3 2024 compared to the previous quarter’s total of $456.2 million and rose by 53 per cent compared to Q3 2023 in terms of value. In terms of volume, there was a sizeable increase of 72 per cent in Q3 2024 versus the previous quarter and was 24 per cent higher than in Q3 2023 (1).

Opportunities and key growth areas 

A recent report by EY Parthenon – OPPI titled, “Viksit Bharat@2047: Transforming India from pharmacy of the world to pharma powerhouse for the world” highlighted the need for a unified vision for innovation, with a focus on building a collaborative ecosystem to define clear milestones and goals (2). 

The industry gears up for a future driven by an increasing need to progress its biopharma capabilities, expand portfolios, and innovate new drugs and therapies, all while the demand for generics continues to grow.

Therefore, strategic imperatives like portfolio expansion, manufacturing prowess, and supply chain optimisation have made consolidation through M&As a burgeoning trend in the industry. It is now becoming a more ubiquitous method to amplify businesses, tap into nice markets, innovate and expand.

So, let’s examine the drivers of M&As in detail.

1. Looming patent expiries 

Patent expirations have been a significant opportunity for the Indian pharma space that is dominated by generics and biosimilars manufacturing. 37 per cent of respondents in an EY-OPPI report view competition from generic drugs and biosimilars as a top trend, while 30 per cent cite the patent cliff as a significant concern (2). EY analysis of EvaluatePharma data indicates that the biopharma industry is facing a substantial loss of exclusivity, with more than $300 billion in sales at risk through 2030 due to expiring patents on high-revenue products. This looming patent expiration is likely to drive interest in mergers and acquisitions, with 77 per cent of surveyed executives expecting M&A to increase in 2025. 

2. Expanding portfolios

In order to grow their potential and expand market reach, pharma firms must diversify their product portfolios. While another EY analysis (2) indicates that smaller biotech firms were responsible for 55 per cent of all new NME approvals by the USFDA from 2015 to 2019. 37 large biopharma companies obtained the remaining 45 per cent. While 60 per cent of these NMEs were sourced externally through collaborations, acquisitions, deals/in-licensing, investments, or partnerships with smaller biotechs and academia.

So, major players in the generics and biosimilars space are likely to benefit by consolidating if they find the right portfolio to enter niche markets and fill gaps within their existing portfolios. 

Emphasising the high-potential areas of driving M&As in the pharma B2B space, industry Subhakanta Bal, MD, Rothschild & Co. explains that there has been strong M&A activity driven both by PE funds and corporates. “The industry continues to be fragmented, providing the opportunity for consolidation. PE activity has been led by funds doing platform investments and subsequent bolt-on acquisitions to acquire capabilities and scale up. Trade activity has been primarily driven by a desire to expand in high-growth segments such as high-potency APIs, oncology, peptides and injectables,” he says.

He adds that several strategic transactions have been in the form of brand/portfolio acquisitions to fill specific portfolio gaps or plug whitespaces within a certain therapy. In certain therapeutic areas, organic growth has been lower than expectations, making acquisitions a preferred alternative. The ability to eke out cost synergies through procurement efficiencies and SG&A cost optimisation are additional benefits,” he says.

3. Build integrated capabilities

Pharma companies are trying to build end-to-end capabilities to capture a larger share of the pharma value chain and enhance operational efficiencies.

Bal observes that there seems to be rising demand from customers for integrated service offerings, which would further drive companies to fill gaps in service offerings through acquisitions. “Given the supply chain disruptions faced during COVID-19, there is a greater awareness of the need to diversify the supply chain and avoid overreliance on one country. Outside of China, India and Italy are two of the major API manufacturing hubs, which is expected to further fuel the demand for APIs from India. This could also drive inbound activity with overseas companies looking to acquire assets, especially those with strong development capabilities, regulatory track record, and presence in high growth/complex segments,” explains Bal.

Thus, companies are directing substantial investments to acquire entities which will enhance their R&D and manufacturing capabilities beyond generics or small molecules. 

4. Entering new markets

Acquiring companies in new markets allows Indian firms access to established distribution networks, local expertise, and regulatory knowledge in specific regions, thus overcoming entry barriers. This, in turn, has also resulted in a spate of M&As. 

Bal conveys that many large domestic companies have been eager to enhance their presence beyond the Indian market. He adds, “Most large Indian pharma companies enjoy a healthy balance sheet, providing the ammunition to fund inorganic growth. Outside of India, some of the larger Indian diversified generics majors are eager to scale up their specialty businesses, especially in the US, through acquisitions and/or inlicensing. This trend is likely to continue as these companies continue to build a portfolio of branded specialty products and biosimilars.” 

5. Technology-driven M&As

Technology-driven M&As are on the rise as companies look to strategically acquire targets with cutting-edge technologies to accelerate innovation, enhance drug development, and gain a competitive edge. 

According to a report titled “Current Pharma M&A Trends” by Deloitte, a driving goal of pharma M&As is to embrace innovative and disruptive technologies to get ahead of the competition, instead of reinventing the wheel (4). This trend is fueled by the need to access advanced capabilities in areas like biologics, biosimilars, and digital health solutions. Companies specialising in novel drug delivery systems or AIdriven drug discovery pose as an attractive target for acquisitions.

These deals not only provide access to intellectual property and talent but also enable companies to expand their portfolios and enter new therapeutic areas. The evolving regulatory landscape and increasing competition further drive this trend, as companies seek to leverage technology to improve efficiency and reduce costs. 

A deal that exemplifies and reflects most of the industry dynamics mentioned earlier is Mankind Pharma’s acquisition of Bharat Serums and Vaccines in 2024. This deal was driven by Mankind’s aim to diversify its product portfolio and gain BSV’s biologics capabilities.

Deal overview

Mankind acquired a 100 per cent stake in BSV from PE investor Advent International, for an enterprise value of approximately Rs 13,630 crores. BSV’s leadership in biologics, immunoglobulins, and recombinant technology made it an ideal acquisition target for Mankind in order to strengthen its position in the specialty pharmaceuticals segment (5) 

As per Makind’s BSV call transcripts, Rajeev Juneja, MD, Mankind Pharma states, “BSV acquisition is in line with our stated acquisition cases of high entry barrier business with long-run rate win for growth, specialty, R&D tech platform, solidifying our position offering in space like complementary drug portfolio with high potential OTX brands, EBITDA margin accretive to Mankind’s margin, and unlock synergy by leveraging Mankind’s extensive reach to target rapidly growing highly underpenetrated markets, especially in fertility as well.”

BSV’s range of products covering fertility, pregnancy and post-pregnancy was a key focus area. Additionally, beyond product offering, BSV has a developed, robust, Specialty R&D tech platform with capabilities in recombinant, niche biologics, novel delivery and immunological immunoglobulins. Financially, the performance of BSV was another key factor for Mankind. With an adjusted EBITDA margin of 28 per cent and a strong growth trajectory in FY24, BSV demonstrated solid financial health. 

What does the future behold?

According to Bal, consolidation is expected to continue in the pharma sector because M&As offer numerous strategic advantages in the form of revenue/cost synergies, increased scale, lower time to market (versus organic build-out) and filling specific portfolio gaps/whitespaces. He adds, “The scale and breadth of the portfolio, by itself, seem to have a meaningful influence on the bargaining power with customers/suppliers and other in dustry partners. The industry (both on the B2C and B2B side) continues to be highly fragmented, thereby providing the ingredient for continued M&A.” 

The PwC 2025 Outlook on Global M&A Trends in the Healthcare Industry also points to the same trend. It states that as the macro and regulatory environment which slowed health industries’ dealmaking in recent years begins to improve, dealmakers should be ready to act quickly on innovative assets when they hit the market. Development of interest rates should be watched closely along with policy changes arising from the new US administration. In particular, the anticipated easing of regulations may provide a tailwind to pharma and health industries’ dealmaking, not just in the US, but also globally (6). Therefore, industry leaders who are already thinking several steps ahead and can successfully navigate remaining uncertainties will have a significant opportunity in 2025 to use M&A to accelerate their businesses for success. 

As an incessant business, pharma firms will need to form deals to stay competitive. Looking ahead, the industry will witness sustained consolidation as companies grapple with competitive pressures, the looming patent cliff, and the relentless pursuit of innovation in a rapidly transforming environment. 

Companies that proactively build the capabilities to acquire, divest and integrate the right assets have the potential to outperform the rest of the sector. 

 

References:

1.https://www.pharmaceuticaltechnology.com/datainsights/india-m-a-activitypharmaceutical-industry/ 

2.https://www.ey.com/content/dam/ey-unified-site/ey-com/enin/newsroom/2024/11/ey-oppithought-leadership-viksitbharat-2047.pdf

3.https://www.expresspharma. in/ma-trends-to-watch-out-inpharma/ 

4.https://www2.deloitte.com/in/en/pages/life-sciences-andhealthcare/articles/currentpharma-m-and-a-trends.html

5.https://www.mankindpharma.com/wp-content/uploads/2024/12/mankindpharma_bsv_acquisition_call_tr anscript1722573520.pdf#:~:text=One%20 of%20the%20prime%20examples%20of%20BSV’s,reveals%20Anti%2DD%20where% 20BSV%20is%20the%20only&te xt=This%20transcript%20has% 20some%20minor%20edits%20t o%20enhance

6.https://www.pwc.com/gx/en/ services/deals/trends/health-industries.html

 

kavita.jani@expressindia.com  

kavitanjani@gmail.com