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Acquisitions Versus Product Development: An Emerging Trend in Life Sciences


Many complex and rapidly changing dynamics – a giant, fast-approaching patent cliff, healthcare reform, uncertainty regarding the intent of the U.S. Congress, and still-dry capital markets – are causing pharmaceutical companies to revaluate their business development strategies. Healthy companies are pursuing later-stage deals that promise faster revenue streams and profits. Cash-strapped companies – particularly smaller firms with rich R&D pipelines – are likely to seek deals rather than go broke.

In such an environment, both buyers and sellers are wise to look beneath the surface for issues that could either reinforce or sour the deal. Although the rationale for acquisitions and pursuing products in the later stages of development is sound – and while later-stage compounds have lower scientific risk – later-stage deals and associated higher deal valuations inherently bring greater risk. This article, based on insights from Deloitte research, can help pharmaceutical and biotech executives understand factors driving the industry to later-stage deals, as well as issues that can arise in later-stage deals, including more complex financial, valuation, operational, tax, and integration issues.

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