Economic trends in the healthcare and pharmaceutical industries
Written by Ramesh Jassal, Senior Healthcare Analyst, Clearwater Corporate Finance
Despite sluggish growth overall in Western economies, there has been a dramatic increase in M&A (mergers and acquisitions) activity within the healthcare sector. Not only have we seen convincing growth from pharmaceutical businesses, there has been a significant increase in emerging markets, too.
These findings are outlined in IMAP’s 2012 Global Pharma and Biotech report, which suggests the future is bright for the pharmaceuticals sector.
Although deal numbers within the sector fell from 548 transactions in 2010 to 504 last year, deal values rose sharply by 75 percent to US$90 billion during the same period. And the larger end of the market was very active indeed, with the number of deals in the $100 million to $1 billion range increasing from 31 to 81.
This increase in deal values can be attributed to market consolidation in Western Europe and North America. Last year, North America was leading the way for acquisitions, with almost half of all outbound deals attributed to US buyers.
Now the tide is beginning to turn, further global growth in the pharma industry is expected to come from emerging markets where the health systems are rapidly developing, particularly in China. Although only a few acquisitions were announced or closed in 2011, dramatic growth is expected to continue here in the coming years.
Significantly, the introduction of health insurance and wider healthcare reforms in China last year meant that a market of one billion people was effectively created overnight. However, 76 percent of the Chinese market is dominated by generic drugs, making it difficult for European and US multi-nationals to tap into market opportunities. Between them, this accounts for just 2.5 percent of the $147 billion market.
In the past, mature countries have been reluctant to trade in emerging markets, with only a few acquisitions by global pharma companies in Latin America, India or China. But with the East offering huge growth opportunities, larger players in the pharmaceutical market should aggressively pursue acquisitions in China to establish a foothold.
As organic growth slows, large pharma companies have been driven to acquire smaller firms for new products and research and development (R&D) teams with promising research assets, pushing up valuations. In 2011, six of the 15 largest deals targeted R&D companies and included the $11.2 billion acquisition of Pharmasset and its next generation of hepatitis C treatments by HIV drug manufacturer Gilead.
Pipelines have dried up for many of the largest pharmaceutical companies, which sparked a spate of M&A activity for small niche providers and R&D intensive businesses. Given that quality drugs are extremely hard to find, we expect demand for mid-stage drugs to remain high and valuations to continue to rise. All this should continue to fuel M&A and we predict continuing consolidation in the pharma sector. .
Dexcom: changing the lives of people with type 1 diabetes
It is estimated that 9.3% of adults around the world are living with type 1 diabetes, which amounts to a total of 463 million people. A further 1.1 million children and adolescents under the age of 20 are living with the condition.
Unlike the more prevalent type 2 diabetes, where the body still produces insulin and symptoms develop slowly, people with type 1 diabetes need regular insulin injections or pumps, and must monitor their sugar levels frequently.
In recent years a number of remote glucose monitoring systems have become available that patients can use at home. These work with a sensor, usually placed under the skin, that measures glucose levels every few minutes. This information is then transmitted wirelessly to a device like a smartphone or tablet, which can then be shared with their clinician.
British actress Nina Wadia's son Aidan, 14, has type 1 diabetes, and has been managing his condition using Dexcom, a glucose monitoring system used by patients all over the world. Here Wadia explains how Dexcom has improved their lives.
As a parent of someone with type 1 diabetes, what is your day-to-day life like?
Being able to take a breath, think and pivot constantly without getting frustrated becomes an essential mindset because sometimes it feels like each day is determined to be different from the day before. Whatever worked yesterday is going to misfire today.
Which areas of yours and Aidan’s life are most impacted by diabetes?
The one thing that you have to fight hard to reclaim is spontaneity, especially when it comes to food and exercise. It’s only when this is taken do you realise how essential each one is. You can be flexible and there are no real limits, but only in the sense that a great athlete can be flexible without limits because they’ve trained super hard to be that way. So we’ve all had to become athletes when it comes to being spontaneous.
How has Dexcom helped you and Aidan?
Dexcom has brought future science fiction to real life today. The continuous glucose monitoring system is tiny, sits discreetly on his body and gives him a ten-day breather between sensor changes, so it's goodbye finger-pricking seven times daily.
Dexcom is totally active at a grass roots level and for Diabetes Awareness has pledged to donate £2,000 if #DexcomDiabetesStories and/or #DexcomWarriorStories is shared 200 times! I’ll be sharing more on social media and would love to hear how other families are winning their fights.
Maybe most importantly Dexcom is trying to introduce a reimbursement programme for type 1 diabetes patients which will give greater access to modern, life changing hi-tech. I want to spread the word on the importance of accessing it through this campaign.
If you compared your life today with how it was before Aidan was using Dexcom, what has changed?
It's always working, which lets him take his mind off diabetes for longer stretches. It also lets me get off his back. We both receive alerts so I no longer have to pester him by asking him what his number is, and especially importantly, I don’t have to wake him at night to prick his finger if I’m worried. Dexcom gave us back our sleep!