M&A activity among some of the largest pharmaceutical firms has gotten off to a hot start in 2024, with several billion-Dollar deals being announced or reported this week. Pharma giants are positioning themselves for growth in the years ahead, bolstering their pipelines to offset upcoming patent expiries, which threaten to diminish the sales figures of key drugs. M&A in the biopharma space doubled last year in Dollar terms and, based on the balance sheets of the top global pharma companies, trillions of Dollars in capital are still available for continued dealmaking.
Related ETF & Stocks: VanEck Pharmaceutical ETF (PPH), Johnson & Johnson (JNJ), GSK plc (GSK), Novartis AG (NVS), Cytokinetics, Inc. (CYTK)
Several reported biopharma deals in January have helped the new year pick up where 2023 left off. For starters, Johnson & Johnson is set to acquire Ambrx Biopharma for $2 billion. This will add to J&J’s antibody-drug conjugate (ADC) pipeline, a group of targeted therapeutics meant to treat cancer. More specifically, the company will be able to leverage the success of Ambrx’s ARX517, an ADC that has shown promise in treating prostate cancer during an early-stage trial. This is J&J’s first significant pharma deal in some time, despite disclosing a lofty $57 billion sales target for their pharmaceutical products by 2025. That was revised down from a previous goal of generating $60 billion in pharmaceutical sales over that period. J&J’s most recently-reported pharma revenues were equivalent to $13.89 billion in Q3, which could be annualized at roughly $55.6 billion.
The company could see strong organic sales growth with products they already own, but the expiring patents of top company drug, Stelara, will begin to leave an increasingly large hole in their pharma revenues, which may need to be filled by may some form of M&A activity. The popular psoriasis treatment earned the company close to $10 billion in sales in each of the last two years, but the patent that effectively protected Stelara from generic competition in the US…
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