Wall Street is holding its breath for the rekindling of mergers and acquisitions across the biotechnology and pharmaceutical sector after 2017 led to a pause in deal-making. Tax reform, particularly a lower levy on US companies’ overseas cash, may be the key to driving the return of M&A in 2018.
“Choppy waters will likely continue, unless M&A saves the day,” RBC analysts led by Brian Abrahams wrote in their look ahead to next year.
Goldman analysts led by Jami Rubin see a lower tax rate on repatriated cash, yielding about $160 billion (Dh587.5 billion) across the health-care sector. That extra cash may be used for “aggressive capital allocation”; in addition to M&A, that cash could also be spent on buybacks and dividends, or a combination of the three Goldman predicted.
Pfizer Inc., instead of announcing a new mega-deal, is ending the year by starting a $10 billion share buyback programme and an increased dividend.
Still, some analysts are hopeful after Roche’s $1.7 billion bid earlier today for Ignyta. JPMorgan’s January health-care conference in San Francisco is often a platform for partnerships and deals to be announced.
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Concern also abound that Democratic wins in midterm elections may once again raise a rallying cry around drug pricing reform, driving a return to uncertainty in the sector similar to years past when Hillary Clinton’s tweets rocked the market.