Fitch Wire+: Global Pharma M&A Risks

...A race to find the next blockbuster drug, combined with the availability of cheap financing, is leading to riskier M&A activity that in the long-run could weaken credit profiles in the pharmaceutical sector, Fitch Ratings says. The acceleration in deal activity in the first few months of 2015 reinforces our negative rating outlook on the sector despite its positive fundamentals. Since the start of the year, over USD70bn of deals have been announced in the pharma sector globally. This is higher than at the same point in 2014, which was itself a record year for pharma M&A. The rationale of the deals has also evolved, with less focus on scale and cost synergies that drove the Bayer/Merck transaction or the Novartis/GSK asset swap announced during 2014. The incentive of tax inversions for transatlantic M&A has also fallen following changes to the US tax code. Instead, companies are concentrating on bolstering their research and development profiles with specialty drugs as they look to offset...

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