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Life Sciences M&A in a holding pattern

Continued uncertainty surrounding President Trump’s proposed tax reforms has slowed activity in the Life Sciences sector, with deal values holding well below the record levels seen in previous years. If Trump’s promised corporate tax cut materialises, big U.S. players may be encouraged to repatriate (and spend) the huge amounts of cash currently held offshore.  But as the timeline for reform has continued to drift, a number of players in the sector seem to have hit the pause button.  Reports suggest that, following the announcement of the Republican framework for tax reform in late September, the draft legislation will be put before Congress by the end of this year.  If so, the industry may have a clearer picture by early 2018.

This ambiguity has not completely deterred buyers from opportunistic acquisitions, particularly where there is a strategic need to fill gaps in their portfolios. Gilead Sciences’ USD11.9bn acquisition of Kite Pharma is an example of this, with the former gaining access to the fast-moving field of cell therapy for the treatment of cancer.

Elsewhere in the sector, pricing continues to be a major concern for generic drug companies, driving ever growing pressure on margins and shrinking growth. Many have been forced to divest of non-core assets in order to pay down debt, for example Teva Pharmaceutical Industries’ recent sale of both its contraceptive brand PARAGARD and the remaining assets in its global women’s health business for a combined value of USD2.48bn.

Please click here to access the full Q3 edition of Allen & Overy’s M&A Insights.