The total value of mergers and acquisitions in life sciences over the first three months of this year exceeded the total for all of 2014–and it doesn’t look like it will slow down soon.
Life science companies, including firms involved with pharmaceuticals, medical devices and biotechnology, closed 35 deals worth a total of $166.3 billion in the first quarter of this year, surpassing 2014’s $150.1 billion in deals, according to a recent report from PricewaterhouseCoopers. In addition, companies announced another $76 billion worth of deals in the first quarter this year that hadn’t closed by the end of that period.
The PwC report credited the high deal volume in part to increased pressure from insurance companies and doctors for pharma and biotech companies to reduce their prices, especially in light of the rising cost of drugs. That pricing pressure has encouraged some pharma and life sciences companies to consolidate, in an effort to broaden their product ranges and increase their bargaining power. Companies have also pursued acquisitions in order to obtain the rights to patent-protected drugs and other products, which generally command higher prices until the patents expire.
Pharmaceutical companies led the way in new deals, accounting for 82% of the total announced merger and acquisition spending. That’s due to some high-value bids so far this year in the sector, including AbbVie’s (ABBV) $20.8 billion offer for Pharmacyclics (PCYC) and Pfizer’s (PFE) $15.8 billion bid for Hospira (HSP).
While heightened M&A activity is expected to continue, PwC researchers also anticipate that companies will sell certain business units, as those that complete mergers evaluate their newly combined businesses and product portfolios in order to shed parts that no longer fit.
READ MORE: These are the top 10 most overpriced drug deals ever.
For more about M&A involving pharmaceutical companies, watch this Fortune video:
Clarification, May 10, 2015:
This article was updated to provide a fuller explanation of the relationship between pricing pressure and acquisitions.
