{"id":109765,"date":"2026-08-24T10:16:14","date_gmt":"2026-08-24T10:16:14","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/109765\/"},"modified":"2026-08-24T10:16:14","modified_gmt":"2026-08-24T10:16:14","slug":"pharma-dealmaking-is-back-but-investors-arent-convinced","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/109765\/","title":{"rendered":"Pharma dealmaking is back \u2013 but investors aren\u2019t convinced"},"content":{"rendered":"

The end came with more of a whimper than a bang as the unconfirmed merger talks<\/a> between AstraZeneca (AZN) and US pharmaceutical company Bristol Myers Squibb (US:BMY) that would have created a $400bn behemoth appeared to fall apart. <\/p>\n

Beyond the brief share price flutter caused by reports of preliminary discussions, the episode illustrates a broader problem facing the industry. Large drugmakers are approaching a major patent cliff from 2029 onwards, putting an estimated $200bn (\u00a3150bn) of collective sales at risk.<\/p>\n

Yet the supply of mature biotech assets available to replace those revenues remains relatively thin, with the sector only just recovering from the after-effects of the biotech bust. That helps explain the apparent logic of AstraZeneca combining with a big, established rival such as Bristol Myers Squibb to bolster its future cash flows. <\/p>\n

\"Line<\/p>\n

On the other hand, Stifel analysts believe this is creating a logic for big deals that has not been apparent for some time: \u201cA key feature of the current environment is a greater spread in values of the large pharma,\u201d they said. \u201cThe top three to five pharma [companies] have valuations that are vastly higher than those in, say, ranks 10 to 20 and there is an overwhelmingly strong industrial logic for sector consolidation.\u201d<\/p>\n

That said, the broker also identified big revaluations of early-stage biotechnology firms over the past year or so. These are companies with drug candidates still in phase 1 trials, where the chances of ultimately bringing a drug to market remain low.<\/p>\n

This small-cap subgroup has rebounded by 84 per cent, and is now trading above its last valuation peak in 2021, according to Stifel. By contrast, companies with phase 3 products have fallen back in the second half of the year as deals have slowed down, with valuations topping out at about $1.85bn per company \u2013 although this is still up 14 per cent for the year. <\/p>\n

Overall, investors seem to be rating companies that have good data at any phase of the development cycle, which is good for small-cap valuations but is hardly a discriminating way to invest in a sector defined by risk.<\/p>\n

This pivot towards earlier-stage companies seems to reflect the relative thinness of available deals on the ground as prices for bigger established companies rise. It is not for want of buyer interest: dealmaking has been accelerating.<\/p>\n

According to healthcare consultancy IQVIA, biopharma M&A totalled $130bn in the first half of 2026, almost matching the full-year figure for 2025. The 42 deals completed over the period were equivalent to 84 per cent of last year\u2019s total. <\/p>\n

The average deal size rose to $3.1bn in the first half, from $2.7bn in 2025. In other words, pharmaceutical companies are deploying more cash on bigger deals, even as they compete for a shrinking pool of viable late-stage targets. <\/p>\n

That recovery is also showing up in various forms of capital raising. Stifel calculates that, on an annualised basis, this year is set to see the second-strongest financing year in the past half-decade. The broker estimates that companies will raise $171bn in 2026, compared with a record $199bn the biopharma sector raised in 2021.<\/p>\n

Read more from Investors\u2019 Chronicle<\/p>\n

Why AstraZeneca-BMS didn\u2019t add up<\/p>\n

Yet, despite this backdrop of recovering M&A, one of the reasons why talks between AstraZeneca and Bristol Myers Squibb failed to develop may well be that the market was deeply sceptical of the idea of pairing up AstraZeneca\u2019s high-growth portfolio with BMS\u2019s flat earnings. <\/p>\n

Add in antitrust concerns with the overlaps in the companies\u2019 oncology portfolios, plus the sheer organisational complexity of combining a group with a potential $400bn market capitalisation and nearly 130,000 employees, and the probability of success was 50\/50 at best. <\/p>\n

Undoubtedly, the deal was also haunted by memories of past disastrous megadeals, which became fashionable during the low-interest-rate era in the 2010s. This has affected all the biggest names in differing ways.<\/p>\n

For instance, it is only Johnson & Johnson\u2019s (US:JNJ) subsequent outperformance that has laid the ghost to rest of its misconceived $30bn takeover of Actelion in 2017 \u2013 a deal that led to some big subsequent writedowns. <\/p>\n

However, German giant Bayer\u2019s (DE:BAYN) $63bn takeover of Monsanto in 2018, which led to years of litigation and massive costs, still stands out on its own as the quintessential biopharma M&A disaster. <\/p>\n

Indeed, investors seem to have taken those cautionary lessons to heart now that pharmaceutical companies\u2019 cost of capital at around 9 per cent \u2013 even for the biggest blue-chip companies \u2013 makes M&A a good deal more expensive than during the cheap money atmosphere that fuelled those mistakes. <\/p>\n","protected":false},"excerpt":{"rendered":"The end came with more of a whimper than a bang as the unconfirmed merger talks between AstraZeneca…\n","protected":false},"author":2,"featured_media":109766,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[20662],"tags":[11153,320,8489,18,703,702,1827],"class_list":["post-109765","post","type-post","status-publish","format-standard","has-post-thumbnail","category-astrazeneca","tag-astrazeneca","tag-ftse-100","tag-global","tag-news","tag-standard-article","tag-stocks-shares","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117149970309425024","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/109765","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=109765"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/109765\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/109766"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=109765"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=109765"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=109765"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}