Pharma Deal-Making Rises: Good News For Stocks

Temperature readings are a favorite pastime for anyone who tracks just about anything. So what did the thermometer say about the Pharma sector in the first half of 2013? Mostly it was hot. Two key metrics, the pharma and biotech stock indices, were up considerably. The value of mergers and acquisitions was strong, as was the number of initial stock sales. But licensing deals were down and venture funding was mixed.

The number of new molecular entities winning regulatory approval is close to matching the pace set last year. Just the same, challenges remain, and high on the list is productivity, reimbursement pricing and proving value to payers. And if macro-economic conditions improve, interest rates could rise, making financing more expensive, of course.

“How well the industry performs during the next 16 months as it seeks to extend the lifecycles of important franchises or build up new classes of medicines will go a long way towards determining whether the current optimism is sustained or if another bust is just beyond the boom,” write the analysts at Evaluate Pharma, the research firm, which conducted the analysis.

^NBI data by YCharts

The Nasdaq Biotech Index jumped 27 percent through June 30, which was nearly equal to its growth for all of last year and the Dow Jones US Pharma Index rose 21 percent. The index has continued to climb steeply in recent weeks, leaving the S&P 500 far behind.

Meanwhile, initial public offerings jumped – 20 companies floated shares in the first half of the year and raised $1.28 billion in total. The tally greatly exceeded the 16 companies that completed IPOs during all of 2012.

There was $29 billion worth of M&A between January and June, which suggests this year will be the best since 2010, excluding mega-mergers. And this does not include such deals that have not yet closed – Perrigo (PRGO) buying Elan (ELN) and Amgen (AMGN) scooping up Onyx (ONXX) Pharmaceuticals. However, there were just 72 deals during the first half of the year, which puts the run rate behind previous years.

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Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor's Business Daily. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.