Life sciences M&A update: H2-2017

Baker Tilly Capital, LLC’s Life sciences M&A newsletter provides an overview of the current marketplace while also highlighting key trends impacting performance and U.S. M&A activity. The core subsectors covered in this report include: (i) medical devices and products, (ii) pharmaceutical, (iii) life sciences tools and services and (iv) biotechnology.

Industry insights

Throughout recent years, technological innovation, pricing pressures being driven by changes in consumer behavior and regulatory uncertainty – along with many other factors – have impacted the way businesses operate amongst their respective industries. As a result, companies are being pressured to alter legacy business models, explore non-traditional growth initiatives and seek out innovative ways to remain competitive in today’s marketplace. 

The life sciences industry has experienced numerous transformational changes, and while many businesses are benefiting from advancements, others continue to be challenged by the subsequent headwinds being created. Witnessed throughout the second half of 2017 (H2-2017), some of the key catalysts driving disruption for industry participants include, but are not limited to:

  • Heightened levels of competition forcing companies to seek out innovative products and services in an attempt to enhance product portfolios, generate new opportunities for scale and strengthen their market position
  • Development costs for new products remain at or near historical highs, and in order to alleviate strain on the business, companies are increasingly outsourcing key operational tasks to contract manufacturing organizations (CMOs), contract research organizations (CROs) and other third-party support services
  • Modifications to taxes and healthcare reform have and will continue to cause uncertainty for companies seeking to acquire inorganic growth via M&A alternatives
  • Expiring patents are creating opportunities for smaller companies to acquire additional market share and opening the door for new industry participants
  • Patent cliffs accompanied by consumer and regulatory pricing pressures are allowing generic brands to increase market share and threaten the future of mature brands

M&A remains essential to strategic growth and provides opportunities for companies to access innovative products, implement new strategic initiatives and enhance legacy business models.

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