The trend of cross-border M&A in the pharmaceutical industry is becoming apparent.
2025-07-08
In recent years, the pharmaceutical and biotechnology sectors have seen a surge in merger and acquisition activity. Pfizer’s $160 billion acquisition of Allergan has become the largest M&A deal in the history of the pharmaceutical industry to date. Domestically, China’s Luye Pharma Group’s acquisition of Healthe Care has also set a new record for the amount spent by Chinese pharmaceutical companies on overseas acquisitions.
Presenting a highly concentrated pattern.
Biopharmaceuticals have become one of the three most active sectors for China's outbound investment and M&A activities—alongside oil and gas and consumer retail. According to publicly available data from the Ministry of Commerce, China’s total actual outbound investment in 2014 amounted to approximately US$140 billion, of which biopharmaceuticals accounted for roughly 12% of the overall market share.
According to information released by the China Council for the Promotion of International Trade, from 2009 to 2013, the total amount of direct overseas investment by Chinese enterprises grew at an average annual rate of 17.5%, and in 2013, it exceeded 100 billion U.S. dollars. Looking at the number and value of transactions involving local Shanghai enterprises, health care and related services accounted for roughly 5% to 10% of the total.
Currently, the global biopharmaceutical market is highly concentrated. According to a report by L.E.K. Consulting, by 2016, pharmaceutical spending in North America, major EU countries, and Japan and South Korea accounted for nearly 60% of total global spending. However, markets in developing countries are growing more rapidly: the BRICS nations experienced a five-year compound annual growth rate (through 2016) exceeding 10%, while the U.S. saw a compound annual growth rate of around 3% during the same period. Meanwhile, the average compound annual growth rate for the five EU countries (Germany, France, Italy, the UK, and Spain) was approximately 1%.
L.E.K Consulting believes that the key investment areas in the U.S. healthcare market include over-the-counter drugs with lower barriers to entry, health and nutritional supplements, various medical devices and equipment, as well as laboratory and imaging equipment closely tied to R&D activities. In the U.S. and other developed markets, biopharmaceutical companies will continue to focus on wearable diagnostic devices, orphan drugs, and biosimilars. Medical technology is a primary investment focus for most private equity firms in the healthcare sector.
The key investment areas in the Indian market primarily include specialized hospitals and specialized day-care service centers, diagnostic and pathology laboratories, biopharmaceutical manufacturing, and customized research and production services. Specifically, India’s pharmaceutical industry—especially the generic drug sector—remains a highly favored market among investors. Meanwhile, Indian healthcare service providers, such as medical logistics companies, have shown rapid growth in recent years and are also attracting considerable investor interest.
Three factors boost M&A and restructuring.
Restructuring and mergers & acquisitions represent the best option for enhancing concentration and scaling up China’s pharmaceutical industry. According to statistics, China has 4,516 pharmaceutical manufacturers—five times the number in the United States—yet the size of China’s pharmaceutical market is only one-third that of the U.S. market. Moreover, the drug approvals held by Chinese pharmaceutical companies are predominantly Type 3 and Type 6 generic drug approvals. All of this clearly demonstrates that Chinese pharmaceutical enterprises are engaged in intense, low-level, homogeneous competition.
For Chinese pharmaceutical companies to grow stronger and bigger, it is urgently necessary to increase industry concentration in order to reduce and avoid low-level, homogeneous competition. There is no doubt that restructuring and mergers & acquisitions among pharmaceutical companies represent the most direct and convenient approach to curbing competition from homogenous enterprises. This also happens to be the best option for boosting industry concentration in the pharmaceutical sector going forward.
Restructuring and mergers & acquisitions are an intrinsic need for the growth of group enterprises. On the one hand, restructuring and M&A activities of group enterprises can fully leverage economies of scale, significantly boosting revenue and reducing costs. On the other hand, they can foster complementary use of internal resource advantages, thereby enhancing the group’s R&D and marketing capabilities.
Mandatory standards and certifications have also spurred restructuring and mergers within the industry. At present, many small- and medium-sized pharmaceutical companies in China have yet to pass the new GMP standards (promulgated in 2011 with a three-year transition period), as well as mandatory certification requirements set by the U.S. FDA and Europe’s COS. As a result, these companies remain in a state of non-compliant growth. Small- and medium-sized pharmaceutical enterprises facing poor profitability lack the financial resources to upgrade their production processes and facilities to meet the requirements of these mandatory standards and certifications. This has created *** opportunities for large pharmaceutical companies in the industry to acquire and merge with smaller firms.
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2026-01-30
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