Here's what we can learn from the 10 biggest deals in pharmaceutical history

 
Sarah Spickernell
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Pfizer made the biggest acquisition in history (Source: Getty)

The pharmaceutical world is abuzz about a major deal struck between AbbVie and small biotech company Pharmacyclics last night.

The US pharma giant bought Pharmacyclics for a massive $21bn (£13.8bn), after fending off fierce competition from the likes of Johnson & Johnson. Why? To get its hands on the firm's super-successful cancer drug Imbuvrica, whose sales are predicted to increase dramatically over the next few years.
By all accounts, the acquisition huge, but it pales in comparison to some of the M&A activity that took place last year. With deal-making spend reaching nearly $90bn over the 12 month period, 2014 was a good year for big numbers in pharma.
But where does the recent spike in activity fit into the overall pharma M&A picture? When it comes to the biggest deals ever made, today's acquisition falls $10bn (£6.6bn) short of reaching the top 10, but two of last year's deals made it onto the list.

And what can we learn from our top 10? Here are four key takeaways about the billion-dollar deals that have dominated the industry over the last couple of decades.

Pfizer plays the biggest part

Three of the top 10 deals involved US behemoth Pfizer – including the biggest of them all.
In 1999, Pfizer bought Warner-Lambert for a huge $90.3bn. The motive behind this bank-blowing deal was for Pfizer to get hold of cholesterol-lowering drug Liptor, which had shot to success after being launched two years earlier. During its first 12 months on the market alone, sales climbed to $1bn.
Not long after this, Pfizer decided to spend $60bn on Pharmacia. This time it was to gain the rights to best-selling arthritis drug Celebrex.
The $68bn purchase of rival Wyeth came a few years later in 2009. The Philadelphia-based company was attractive to Pfizer because of its huge presence in the areas of biotech and vaccines.
Not all of Pfizer's approaches have worked out, however – last year, the company's endless chasing of British firm AstraZeneca brought it no luck. If it had been successful, Pfizer could have saved a huge sum of money by moving its tax home to the UK.

Both of the UK's biggest pharma companies came from mergers

GSK and AstraZeneca, now with a combined value of £132bn, were both born from mergers at the turn of the century.
First came the joining of Astra and Zeneca in 1998 for $30.4bn. Astra was founded by a group of doctors and apothecaries in Sweden in 1913, while Zeneca was a British pharmaceuticals and agrochemicals business.
Then in 2000 GSK was formed, in the third largest pharma M&A deal in history. Glaxo Wellcome and SmithKline Beecham, each formed from their own separate mergers, came together in a deal worth $72.4bn. GSK has since become so valuable that it is now the fourth biggest company on the London Stock Exchange.

Two of them happened last year

Last year was responsible for one fifth of the world's biggest-ever M&A deals.
One of these was the take-over of US-based Allergen by Actavis of Ireland for $66bn, which has produced one of the 10 biggest pharma companies in the world. The botox-maker had been highly sought after – for seven months, Canadian company Valeant was in the running against Actavis for it.
The acquisition of Covidien by Irish company Medtronic was the other huge deal last year, coming in at $42.9bn. The medical device maker decided to go ahead with the purchase not just to remove one of its main competitors from the market, but also to maximise tax efficiency.

A lot has been to do with tax – but that will change

In the case of Medtronic, the deal gave the company new tax advantages, such as a tax-efficient Irish address.
Similarly, when Pfizer made multiple bids to take over AstraZeneca last year, it was evident that moving its headquarters in the UK would allow Pfizer to exploit the UK's lower corporation tax rate of 21 per cent, compared to 35 per cent in the US.
But now US President Barack Obama has closed this tax loophole, and M&A activity for the purpose of saving on tax looks less likely to continue. If Pfizer doesn't bother coming back to AstraZeneca with another approach later this year, we'll know why.

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