Pharmaceutical market growth rates have halved inside the past five years, and will remain modest into the next decade. At the same time, new drug approval rates have slowed. With costs continuing to rise, the industry’s margins are already being squeezed, but will come under growing pressure as payers adopt more stringent pharmaceutical cost-containment policies and as patents on a slew of blockbusting brands expire.

The world’s ten biggest pharmaceutical companies have committed almost $230bn to M&A deals since the beginning of 2007. The size of their assets and the cash-generating capabilities of their existing businesses have rendered them largely immune from the effects of the global economic downturn, during which big pharma M&A spending has actually accelerated. Key M&A announcements will continue to be made on a regular basis into 2010 and beyond.

Key findings of this report

• The pharmaceutical industry’s ten biggest players face the expiry of patents on brands that generate annual revenues of more than $130bn within the next five years. This ‘patent cliff’ is driving the acquisition of biotech assets designed to strengthen big pharma pipelines.

• Biotech/biopharma companies were the subject of nearly half the M&A transactions completed or announced by leading pharmaceutical companies between January 2007 and July 2009, and accounted for four of the ten biggest M&A deals witnessed in that period.

• The world’s ten biggest pharmaceutical companies generated prescription drug sales totaling $308bn in 2008. Their operations generated aggregate net cash of more than $106bn and pre-tax profits of $81bn. At the end of 2008 they were sitting on collective net assets worth $354bn.

• The ten leading companies have completed or reached definitive agreements on 64 M&A deals since January 2007. Together, they have committed almost $230bn to healthcare M&A transactions in the past two-and-a-half years.

• Biotech companies aside, consumer healthcare and generic businesses are among the most popular acquisition targets, reflecting a desire on the part of big pharma to reduce levels of exposure to conditions in the global market for prescription drugs.

• Two of the world’s five biggest generics businesses are active candidates for disposal. Sandoz and Teva aside, all of the world’s other leading generic companies are potential acquisition targets.

Use this report to:

• Quantify individual pharmaceutical company exposure to major patent expiries in the next five years.

• Compare the strengths and weaknesses of big pharma pipelines and identify the gaps that biotech acquisitions will be used to plug.

• Track recent M&A activity by the world’s ten biggest pharmaceutical companies in terms of both deal values and strategic intent.

• Gain valuable insights into the strategic approaches to M&A activity being pursued by individual big pharma CEOs.

• Understand why most previous pharmaceutical mega-mergers failed to deliver long-term benefits, and how Pfizer and Merck hope to avoid repeating the industry’s past mistakes.

• Identify prime biotech/biopharma acquisition targets and the global, regional or national generic businesses most likely to attract acquisition bids.