"As the value of deals has shot up, so has the premium that buyers are willing to pay to secure novel and potentially lucrative medicines. In March, Pharmacyclics, a biotech company that makes a single blood cancer drug, was bought by AbbVie for $21bn, a premium of nearly 50 per cent over what the California-based group was worth before it emerged it was up for sale."
"One of the main reasons companies are paying such big premiums is because they are facing the loss of exclusivity on some of their best-selling drugs. Since 2011, many of the biggest pharmaceutical companies have been faced with a “patent cliff”, prompting them to buy drugs to fill gaps in their pipelines of treatments under development. For instance, AbbVie’s main drug, Humira, which accounts for more than half its sales, will start losing patent protection by the end of 2016, partly explaining why it was willing to pay so much for Imbruvica, the drug made by Pharmacyclics."
"Deals are not the only way of protecting a drug’s revenue base: some companies have also adopted a more vigorous approach to managing their intellectual property (IP). However, they are encountering fierce resistance from those who fund healthcare systems, who often see 'copycat' generic medicines as one of their best weapons in the fight against rising drug costs."
"Once a patent expires and a drug loses its exclusivity, the market is usually flooded with a wave of generic versions. The makers of these generic drugs are allowed to bring their medicines to market without putting them through lengthy and expensive clinical trials, enabling them to undercut the price of the original version."
Gaps in drugs pipelines spark a flurry of takeover activity – FT.com
The pharmaceuticals sector has been gripped by a mergers and acquisitions frenzy for the best part of two years, with some of the biggest names in the industry fighting over hot new drugs. Last year was a record for dealmaking in the sector and 2015