Large biopharma companies will have $1.7T in dealmaking firepower next year: analyst

 Merger and acquisition activity has been rather slow in the biopharma industry so far this year. But, by one team of analysts’ calculations, large drugmakers will have big piles of cash to deploy in 2022.

Eighteen large-cap U.S. and European biopharmas will have more than $500 billion in cash on hand by the end of 2022, SVB Leerink analyst Geoffrey Porges and his team wrote in a Wednesday note. The companies could use the money to strike deals, pay down debt or offer returns to shareholders through dividends or share buybacks, the analysts said.

Because the companies can leverage their assets to borrow additional capital, the theoretical firepower of the 18 drugmakers would be enormous at more than $1.7 trillion, the analysts wrote.

Out of 18 companies Porges's team looked at, 12 are expected to have more than $20 billion in cash by the end of 2022 when excluding existing debt. Even after factoring in debt, Porges expects Pfizer, Moderna, Johnson & Johnson, Novartis and BioNTech to have net cash of more than $20 billion.

Meanwhile, the team expects Regeneron, Vertex, Novo Nordisk and GlaxoSmithKline to have between $11 billion and $18 billion in cash on hand when including debt.

Based on the companies’ cash positions and potential room to take on new debt, Porges said the 18 biopharma majors will have $1.72 trillion in M&A capacity. J&J topped the list with more than $200 billion in M&A firepower. Pfizer and Novartis followed with $175 billion and $154 billion, respectively. AbbVie, GSK, Bristol Myers Squibb and Merck will each boast more than $100 billion in firepower, the team figures.

For the analysis, Porges and team used Wall Street’s consensus estimates to come up with each company’s cash flow by the end of next year. Some companies are benefiting from major one-time events. Novartis is getting $20.7 billion from selling its 20-year investment in Roche. GSK and Pfizer are expected to get an inflow of $27.7 billion and $16.3 billion, respectively, by spinning off their consumer health joint venture, which is planned for mid-2022. The analysis didn’t seem to consider J&J’s planned spinoff of its world-leading consumer health franchise, a process the New Jersey corporation expects could take nearly two years to complete.

For their part, Pfizer, BioNTech and Moderna are getting a major windfall from sales of their COVID-19 vaccines and treatments. Pfizer, for one, could see $84 billion in total sales from its BioNTech-partnered COVID vaccine Comirnaty and its yet-to-be-authorized oral antiviral Paxlovid between 2021 and 2023, according to consensus estimates cited by Porges.

But having cash on hand doesn’t necessarily translate into busy M&A activity. Take 2021, for example: At the end of 2020, PwC estimated the biopharma industry had $1.47 trillion in firepower that it could use for M&A. But the largest buyout announced this year involving two drugmakers was Merck & Co.’s $11.5 billion acquisition of Acceleron. The only other deal that exceeded $5 billion was Jazz Pharmaceuticals' $7.2 billion takeover of GW Pharma.

By contrast, 2020’s largest deal was AstraZeneca’s $39 billion purchase of Alexion. Altogether, three M&A deals last year carried values of more than $10 billion.

https://www.fiercepharma.com/pharma/m-a-large-biotech-pharma-companies-will-have-1-7t-firepower-for-dealmaking-2022