Ernst & Young: Big pharma under pressure

By Rob Starr, Content Manager, Big4.com

A new report by Ernst & Young, Closing the gap? Big pharma’s growth challenge and implications for deals, estimates that the growth gap will reach approximately US$100b by 2015. In other words, ‘big pharma’ will need an additional US$100b revenue in 2015 just to keep up with overall market growth.

Glen Giovannetti, Ernst & Young’s Global Life Sciences Leader, says:

“While the dynamics of the pharma industry remain fluid, the deal environment in 2013 and beyond will be more complex and competitive. Life sciences companies that are positioned appropriately should benefit from increased competition and see higher premiums. However, the finite resources of many big pharma companies, and the need to make prudent acquisitions to address the immediate growth gap, mean they will likely be even more selective about the targets they pursue.”

Even as big pharma’s deal making ability has shrunk, the firepower of big biotech and specialty pharma (including generics) companies has increased. According to the Index, between 2006 and 2012, the firepower of big biotech increased by 61% while specialty pharma’s firepower also rose by 20%. As a result, big pharma’s share of the combined acquisition capacity of these three segments has fallen from 85% in 2006 to 75% in 2012.