Pharma fever grips dealmakers despite M&A spike and a frenzy IPO year

Several high-profile investment bankers opted to stay out of the dealmaking business to join more strategic roles in the last 12-18 months, despite record M&A volumes and a frenzy IPO year that resulted in record fee collection for dealmakers.

The move was more evident in the pharma sector, where the pandemic opened up a plethora of consolidation and fundraising opportunities.

More than a dozen top bankers moved to strategic and M&A roles in pharmaceutical companies, spearheading mergers and acquisition as well as fundraising plans. They included Nitin Tandon, who joined as head business development, Asia Pacific, at Johnson & Johnson from Credit Suisse. Moelis & Co's Ashish Mukkirwar joined Glenmark to head its strategy and M&A team, while very recently, a prolific pharmaceuticals banker at O3 Capital, Gawir Baig, moved to play the role of chief financial officer at Anthem Biosciences, a drug discovery platform in which True North recently invested. V Krishnakumar was another high-profile move; he left EY after a long tenure of consistent healthcare M&A closures to join Eris Life Sciences as its chief operating officer.

"Pharma is seeing a lot of M&A and fundraise activity, leading to demand for I-banking talent in these companies," said Anshul Lodha, regional director at recruitment firm Page Group. "I-bankers are also keen to switch to the corporate side to get more well-rounded exposure than just fundraising. They get actively involved in the operational side of business with corporates which is a great role enhancement for them," Lodha said.

"At the same time, a lot of bankers don't see deal making as a long-term sustainable career option due to hectic lifestyle, number pressure, etc. Corporates become a logical long term sustainable career option for them."

Improving healthcare infrastructure, increasing per capita income, higher government spending and positive policy changes are expected to help bring larger investments into the Indian pharma and healthcare space. Companies with excess cash reserves often pursue M&A as a growth driver.

"Being a part of a corporate M&A team vis-a-vis an M&A banker, there is a lot more business depth and thoughtfulness," said Rahul Saikia, head of global M&A & strategy at Rising Pharmaceuticals, which recently partnered with private fund HIG Capital.

Saikia started his career at Pfizer's strategy & business development team and spent nearly two decades as an investment banker across ANZ Investment Bank, SSKI, PwC, Standard Chartered and ENAM before returning to the pharmaceuticals industry.

"As an internal M&A professional, there is a lot which goes into understanding enough of these disparate parts to be able to put together a sound strategic rationale for the buy case, get the pricing right, structure efficiently, put in the necessary risk allocation framework in the legal documentation process," he said.

Indian arms of global advisory firms also have seen exits at the senior level, with executives moving to the pharma & healthcare industry.

In 2019, Sagar Oak, who was director - deal advisory at KPMG, moved to contract research firm Rubicon as its director, corporate development & strategy; while Yogesh Hede, former director at EY, joined as head-global M&A at Intas Pharmaceuticals in 2018.

India’s pharmaceutical market remains one of the most attractive globally, with a consistent 10-11% compounded annual growth rate and high profitability. Top global pharma companies have more than $170 billion in M&A dry powder, or excess reserves — $76 billion in excess cash and around $94 billion in debt capacity, according to McKinsey & Co.

“The Indian pharma industry is poised for exciting growth in chronic and wellness segments. The pandemic has resulted in an uptick in chronic ailments and heightened awareness around good health and immunity. API self-sufficiency (as a country) is another important theme that has attracted investor interest. Digital health is an interesting theme that has scaled up rapidly during the pandemic. Specialty generics have always been in vogue with investors. I expect pharma deal activity to be primarily focused on these four segments,” said Krishnakumar, who joined Eris Lifesciences from EY.