Deal activity in the generics sector is expected to continue being robust as companies utilise M&A as a tool to achieve their objectives. In the developed markets, the commodity generics segment is highly competitive, and companies will be forced to improve margins by expanding geographically, getting into new higher complexity products, adding product to leverage the distribution infrastructure, and try and become more innovative to benefit from barriers to entry and higher margins. Vertical integration may also serve the purpose of allowing companies to have better control of the intermediate materials and keeping more of the margins.
In developing economies such as those in the Asia Pacific region, there is a great demand for branded generic products, but the overall generics market will continue to play an important role as they offer government authorities an avenue to control pharmaceutical drug costs.
Looking at 2020 and beyond, we expect a continuation of the active M&A environment for the participants in the segment, and this view is supported by a number of current opportunities in the market that are going to begin or in various stages of execution.
The current COVID-19 induced-situation is slowing processes down for the moment, but industry participants realise that the new normal may be with us for a while and everyone will need to adapt to the new deal-making environment. The use of technology and the measured relaxation of some restrictions in the coming weeks and months should serve to jumpstart deal activity again.
After all, the fundamentals within biopharma have not changed, while M&A options may be something to consider if the equity and debt markets are no longer viable lifelines.
2020
2019
