This “datafication” of health care means traditional life sciences companies must examine how they position themselves for the future. Among the topics that should be at the top of the C-suite agenda are which kinds of deals – and which partners – position life sciences companies for maximum growth in 2019 and the future.
We believe that a necessary first step to sustainable growth is to focus on achieving dominance in fewer business and therapeutic areas through M&A and partnerships. Indeed, life sciences companies should prioritize smaller, mid-sized bolt-on deals and divestitures, which create scale in their strategic therapeutic areas while reducing portfolio complexity.
Longer term, partnering or acquiring digital capabilities will also be key. This is an area of growing interest to life sciences companies. However, in the near term, when the return on investment can be difficult to measure, let alone prove, companies are playing it safe, often prioritizing alliances rather than digital acquisitions. As alliances bear fruit, they could set the stage for more digital acquisitions in 2020 and beyond.
What we learned from 2018’s deals
As highlighted in the 2019 EY M&A Firepower report, life sciences companies in 2018 took a business as usual approach to dealmaking, buying assets in must win therapy areas and divesting non-core products or less strategic businesses. In aggregate, M&A activity was strong, but didn’t quite fulfill the expectations of market analysts, who predicted that new tax legislation would result in even more deal activity.