Pharmaceuticals buck trend in mergers and acquisitions

Merger and acquisition deals in the China pharmaceutical sector remain active with domestic and overseas players eager to gain a piece of a booming market. 

Deal values have increased remarkably in all sectors except outbound, indicating the hedging nature of the pharmaceutical market against the drop of overall M&A activities, PwC said. 

The number of deals so far this year has reached 242, compared with the 258 in the first half of last year, with activities from domestic strategic buyers almost doubled that in the second half of 2018.

The combined value of these acquisition deals had risen 45 percent to US$10.8 billion.

Driven by medical reform and pharma regulatory changes, domestic strategic acquisitions were up by 88 percent and 90 percent in volume and size, respectively, with 12 mega-deals valued at more than US$100 million, compared to just six in the second half of last year.

Foreign inbound strategic M&As also became more active with overseas players eager to gain a foothold in the domestic market.

The rebound after the slowdown in the second half of 2018 was partly boosted by the large number of deals in the biotechnology sector, which benefited from the new preferential listing rules of the Hong Kong stock exchange and the STAR market, and it saw a record high of 40 deals.

Both the volume and size of outbound deals from the Chinese mainland continued to shrink in the first half, with the number dropping from 22 in the second half last year to 13, 12 of which took place in North America.

The total value of medical device related acquisition deals dropped 89 percent to US$769 million, the lowest during the past 5 years. No mega deals were conducted by domestic strategic buyers or private equity firms while outbound deals almost froze.

The total number of of domestic strategic M&As increased by 33 percent but the combined value decreased by 43 percent to US$615m. There were only three deals valued at over US$100m.