Mergers and acquisitions (M&As) remain an integral part of Big Pharma's strategy and will contribute almost two-thirds of peer-set sales growth until 2014, according to market analyst Datamonitor. The firm believes that M&As are a long-term feature of the pharma industry and have played a key role in shaping the structure and composition of today's leading companies.
The past decade has seen a wave of major M&A activity, from the creation of AstraZeneca (London) and GlaxoSmithKline (London) to the merger of Pfizer (New York) and Wyeth (Madison, WI), and Merck and Schering-Plough (Whitehouse Station and Kenilworth, NJ). To quantify how much sales growth has been driven by M&A versus how much has been self-produced through organic growth, Datamonitor analyzed a 20-year sales dataset comprising 14 years (1995-2006) of company reported sales and six years (2009-2014) of forecast data.
Big Pharma's sales were $84 billion in 1995 and, based on organic growth only, are forecast to increase to $195 billion by 2014. However, M&A activity is expected to lift 2014 sales to $381 billion. As a result, between 1995 and 2014, M&A activity is expected to account for 63% of absolute growth. Datamonitor also notes that the mergers may help Big Pharma maintain its share of the total prescription pharmaceutical market.