When data and

technology expedite
growth, how can
dealmaking power
the value equation?
2019 EY M&A Firepower report
ey.com/lifesciences
Contents
4 Who is building the health systems of tomorrow
while providing care today?

14 In the age of M&A complexity, do you pause

or proceed?

18 As therapeutic depth becomes more important,

are you focused on the right opportunities?

24 How can you use dealmaking today to capture

value from data tomorrow?

30 Innovation or growth? How can you use your

dealmaking firepower to do both in 2019?

36 Methodology

38 Acknowledgments

39 Contacts

2  Firepower 2019
Executive summary
Context Trigger Key question

Life sciences M&A in 2018 was New digitally savvy entrants When data and technology
strong but failed to meet market are disrupting the larger health expedite growth, how can
expectations as companies ecosystem – and life sciences dealmaking power the
focused on portfolio optimization. companies’ business models. value equation?

In 2019, life sciences companies must accelerate

their dealmaking agendas on two fronts:

The creation of focused The acquisition of digital

1 business models 2 capabilities

Pace of change The pace and scale of

At the same time, life
As health care transforms, dealmaking by payers and Ten consumer/tech
sciences incumbents
future value will be created providers put increased companies have more
reported steady multi-
pressure on life sciences than US$2t in firepower
using data and disruptive year declines in revenue
companies to respond for deals, more than all
technologies to fuel growth rates, raising
to new demands with life sciences companies
innovation. questions about future
innovative and affordable combined.
growth.
medicines.

Focused business models

To position themselves for A changing commercial Life sciences dealmaking
Portfolio optimization
the future, life sciences landscape and high reached US$198b
could generate more
fragmentation in therapeutic in 2018. In 2019,
companies must use than US$200b in future
areas create a need to divestitures, bolt-ons
dealmaking to achieve market M&A as companies exit
build scale without adding and asset swaps will
leadership in therapeutic deprioritized areas.
portfolio complexity. continue to be priorities.
areas of interest.

Digital capabilities
Companies also have to Digital dealmaking by life For now, most digital An uncertain return on
increase investments in sciences majors has steadily deals are too small investment and rapid pace
digital capabilities and build increased since 2014 as in size and number to of technology change mean
relationships with key health companies race to access drive transformative companies will emphasize
stakeholders. enabling technologies. change. digital alliances not M&A
in 2019.

Firepower 2019  3
 1

Who is building
the health systems
of tomorrow
while providing
care today?

4  Firepower 2019
Beyond life sciences, 2018 was an active year for dealmaking as delivery in the US market. Indeed, when Amazon announced it
health organizations made critical moves outside their traditional would spend US$1 billion to acquire PillPack in June 2018, US-
business areas to consolidate larger segments of the health value based pharmacies and drug distributors lost tens of billions of
chain. Examples of the trend include the just-finalized merger dollars in market value based on the threat of disruption.1
between CVS Health and the insurer Aetna, and Cigna’s purchase
of the pharmacy benefits manager Express Scripts. Technology players are also investing heavily outside Western
markets. According to Li Ma, Senior Vice President of Strategy
Much of this activity is taking place in the US, where payers and and External Collaboration, Alibaba Health (AliHealth), the
providers are beginning to respond to Amazon’s entry into health company has already moved from selling online health products
care with defensive moves of their own. Although the immediate to providing one million consultations per day to consumers via
revenue implications of Amazon’s partnership with JPMorgan a network of more than 24,000 physicians, pharmacists and
Chase and Berkshire Hathaway are not obvious, the partnership nutritionists. (See Figure 1 and the perspective, “How AliHealth is
represents a significant commitment to reimagining health care creating a consumer-centric health platform for China.”)

1
Sharon Terlap and Laura Stevens, “Amazon Buys Online Pharmacy PillPack for $1 Billion,” The Wall Street Journal, June 28, 2018. Available at: https://www.wsj.com/
articles/amazon-to-buy-online-pharmacy-pillpack-1530191443.

Important definitions
• The growth gap is the difference in the sales growth of • As the name suggests, transformative M&A “transforms”
a biopharma company or biopharma subsector (e.g., big the buyer, providing new market opportunities affecting
pharma) relative to overall drug market sales. It is based multiple business units and therapeutic areas. These deals
on consensus estimates of company sales relative to meet one of two criteria: they are greater than US$10 billion
Datamonitor Healthcare’s global drug market estimates. in deal value or affect more than 50% of either company’s
market share.
• Firepower measures a company’s capacity to do M&A based
on the strength of its balance sheet. Together, a company’s • Megamergers are a subset of transformative M&A with
market capitalization, cash equivalents and debt capacity valuations above US$40 billion.
provide the “firepower” for deals. For instance, when a • Today’s health ecosystem is populated by a number of
company’s market capitalization or cash and equivalents different stakeholders that provide goods or services to
rise, so does its firepower. Deployed firepower is the ratio of consumers in an increasingly networked environment.
capital spent on M&A relative to available firepower. These stakeholders include: providers, who deliver medical
• Bolt-on deals are small- to medium-sized acquisitions care in a range of settings such as the home, the clinic and
that account for less than 25% of the buyer’s market the hospital; payers, which comprise both public and private
capitalization. These deals expand end-to-end capabilities in entities; and a range of businesses, including technology,
an existing therapeutic area or provide access to adjacent, retail, telecom, mobility and life sciences companies.
high-growth areas.

Firepower 2019  5
 While the top-line statistics are eye-catching, they don’t fully illustrate the
transformation underway, a theme explored in Life Sciences 4.0: securing
As the lines between value through data-driven platforms. Consolidation at the payer and
provider level gives these groups more power when determining product
health and technology access. This, in turn, puts more pressure on life sciences companies to
respond with new innovations at affordable prices.
continue to blur, many life The recent and ongoing entry of consumer-focused, digital companies

sciences companies will face into health care also increases the urgency for life sciences companies
to act. Using their connected devices, data analytics skills and deep
consumer relationships, these new entrants are positioned to have
significant challenges to access to important real-world data that could, in part or in full,
determine future product utilization and payment. In mid-September, for
their business models. instance, Apple announced its newest watch incorporates an electrical
heart rate sensor that can take an electrocardiogram (ECG) using an app
that has been granted a De Novo classification by the U.S. Food
& Drug Administration.2

Other technology companies are also developing data-rich platforms

that make it possible to combine data generated in the traditional clinical
context with insights coming from individuals’ daily lives. According to
Jessica Mega, Chief Medical Officer of Verily Life Sciences, a subsidiary of
Alphabet, this was a key reason why Verily initiated the Project Baseline
study, along with Duke University School of Medicine and Stanford
University. “Our goal is to explore the dynamic interplay of biological,
environmental and social systems, as well as changes in these factors over
time. This kind of comprehensive approach is needed to truly improve
health outcomes,” she said in an interview with EY.

As the lines between health and technology continue to blur, many life
sciences companies will face significant challenges to their business
models. Using their biological and chemical know-how to create novel drugs
and devices, these companies have generated unprecedented value over
the past three decades. Will future value be created the same way? Or will
big data and analytics capabilities be essential for success? What if, as Alex
Gorsky, the Chief Executive Officer of Johnson & Johnson, posited at the
September 2018 Wells Fargo investor conference, those data and analytic
skills “become even more critical” than the clinical and development skills
engrained in the DNA of incumbent life sciences companies?

2
Press release. “Apple Watch Series 4: Beautifully redesigned with breakthrough
communication, fitness and health capabilities,” Apple, September 12, 2018.

6  Firepower 2019
Figure 1. The transforming health ecosystem
Outside of life sciences, payers and providers were active dealmakers in 2018. Any one of the deals highlighted here could change
how health care is delivered and paid for in major markets such as the US and China. The pace and scale of these deals increases the
pressure on life sciences companies to adapt to the shifting landscape.

April July
January 2018 February 2018 March 2018 2018 May 2018 June 2018 2018 August 2018

Amazon
(e-commerce) + Amazon Cigna (Insurer) + AliHealth Alphabet
Walgreens (Retail
JPMorgan Chase (e-commerce) + Express Scripts (e-commerce) (Technology) +
pharmacy) +
(Finance) + Perrigo (Pharmacy benefits) + Ali JK Nutritional Oscar Health
Humana (Insurer)
Berkshire Hathaway (Over-the-counter) Products (Pharmacy) (Insurance)
(Investor)
Alliance Alliance Acquisition Acquisition Alliance Investment

Intermountain AliHealth
Healthcare (Health Apple (Consumer) + Amazon (e-commerce) +
system) leads 39 US health (e-commerce) + Guizhou Ensure Chain
formation of systems PillPack (Pharmacy) Pharmacy (Retail
Civica Rx (Generics) pharmacy)

Alliance Alliance Acquisition Investment

Google (Tech) +
Flex (Digital health)

Alliance

Sources: EY, company filings.

Firepower 2019  7
Guest perspective

How AliHealth is creating a consumer-

centric health platform for China

Li Ma
In November 2018, senior professionals from EY sat down with Li Ma,
Senior Vice President of Senior Vice President of Strategy and External Collaboration, Alibaba
Strategy and External Health (AliHealth) to discuss its business model and the most exciting
Collaboration, Alibaba
Health (AliHealth) health care opportunities in China.

EY: What is AliHealth’s near-term focus? where specific expertise is required to make
good decisions and quality control must meet
Ma: Our first area of focus is to further grow national regulations. That’s why we have put
our health care e-commerce business, which, so much effort into creating a team to deliver
within 12 months, already provides a plethora services, including a mechanism to make sure it
of health care products to more than 100 is professional.
million consumers. Our second focus area is
to continue to develop our internet-enabled EY: What are the health care opportunities
health care services. We work with health care that AliHealth is seeking to address?
institutions and have about 24,000 physicians,
pharmacists and nutritionists. We provide Ma: We think of ourselves as a technology
about one million online services daily to our company tackling health care issues. Our
consumers, including registration, checking test vision is to use big data to improve medicine
results, payment and consultation. and the internet to reshape health. We want to
leverage our strengths in internet technology,
AliHealth’s business model is not confined cloud computing and artificial intelligence (AI)
to traditional e-commerce business-to- in our business-to-consumer and business-to-
consumer interactions. In collaboration with business platforms to address the pain points
retail pharmacies, we are exploring what in in China’s health care arena. For example, in
China is known as the “New Retail” business China, going to the doctor means waiting in
model, which integrates offline and online multiple long lines at the hospital, first just to
capabilities. We think it suits health care well. register as a patient, then again for the actual
Unlike a traditional e-commerce platform, an services. Getting results requires a separate
e-commerce health care platform can’t exist visit, often on a different day. Online solutions
only to sell products. Services such as fast can help reshape this difficult process. Using
home delivery, the prescription of medicines a cell phone, consumers can register for a
and information about side-effects are also physician visit and get a confirmed appointment
important. with an accurate estimated wait time. They
can also go online to check their test results or
Health care products are very different from make payments. These internet-enabled tools
consumer products. When consumers buy retail move the health care ecosystem from today’s
products, they have enough knowledge to make provider-centric delivery model to one that is
informed decisions based on price, quality, more consumer-centric.
style, etc. That is not the case in health care,

8  Firepower 2019
EY: How will the technologies you A similar concept applies to health care.
mention help your business model evolve
in the future?
We want to leverage the internet and big
data to build an ecosystem that enables Unlike a traditional
health care institutions, pharmaceutical
Ma: Longer term, intelligent medicine manufacturers and physicians to deliver e-commerce platform,
is our strategic focus. Our goal is to use better and more efficient health care
a big data approach to train AI engines
within health care institutions to increase
services to Chinese consumers. an e-commerce
physician efficiency, save costs and
ensure quality of care. AI is booming in
Here’s a real life example of how we
helped increase vaccination rates for
health care platform
China, but it’s far from mature. Still, we’ve
made progress providing AI-based tools
human papillomavirus (HPV). Historical
uptake of HPV vaccines in China has been can’t exist only
to help doctors improve the efficiency low. Working with two vaccine companies,
or quality of their services, especially in we used our platforms to reach consumers to sell products.
clinics in small villages and towns. As we and increase their awareness of the
get access to more data to train the AI products. We also provided a seamless Services such as
engine, I am confident that the supporting reservation service process, both online
tools will be even more helpful. and offline, for vaccinations.
fast home delivery,
EY: To fulfill your strategic goals, The project was ultimately so successful
how will you collaborate with other that the Chinese Center for Disease the prescription
stakeholders in the market? Control and Prevention (China CDC)

Ma: The Alibaba way is to provide a

recognized its value and signed an of medicines and
agreement to collaborate with us on
platform and build an ecosystem. It is
not about what Alibaba itself can do.
vaccination promotion/education for
children in China, as prevention is viewed
information about
side-effects are
For instance, Taobao and Tmall, our as an increasingly important part of the
consumer-to-consumer and business- Government’s Healthy China 2030 project.
to-consumer new retail platforms, are
now the largest e-commerce platforms also important.
globally, serving more than 600 million
annual active consumers. However, we do
not carry any of the products ourselves.

Firepower 2019  9
In this dynamic environment, it’s very likely that life sciences unproven. In many cases, using data to actually change patient
companies will need access to an array of medical and non- behavior or improve care could require partnering with, or
medical data to demonstrate value to their various payer, provider acquiring, companies outside the traditional health care sphere.
and patient stakeholders. Ultimately, these novel data streams
promise to transform the way health outcomes are delivered and As Kieran Murphy, President & CEO of GE Healthcare, notes in
validated. Indeed, initiatives such as the EY Health Outcomes an accompanying guest perspective, “The future of health care
Platform are already focusing on how to achieve and optimize will see the right data used at the right time in the right way … to
these outcomes-based transactions. enable more predictive, more efficient and more individualized
patient care.” (See Figure 2 and “Building the precision health
As a result of the “datafication” of health traditional life ecosystem” by Kieran Murphy.)
sciences companies must examine how they gain access to new
capabilities, when the return on investment is intuitive but as yet

Figure 2. Value creation is no longer

just about products, but data and Emerging
relationships Traditional Data and relationships
Product/cost leadership
The life sciences companies most likely
to succeed in the future will create Value • Product efficacy vs. placebo • Efficacy vs.
Product efficacy
comparator
vs. placebo
data
personalized and engaging solutions using definition • Reimbursable price achieved • Reimbursable
Improved health
price
outcomes
achieved
data and disruptive technologies. To keep • Number of prescriptions • Number of prescriptions
Real-world evidence
pace with the changing environment, M&A • Health care provider opinion • HCP opinion
Customer trust
• Positive experiences
to acquire new capabilities is essential.
Value • Investing in R&D
creation • Protecting intellectual By owning:
property • Data and algorithms
• Maximizing geographical • The customer relationship
footprint • Engagement platforms
• Diversification or Leading in:
specialization
• Fast follower mentality • Disruptive technologies
• Cross-industry partnerships

Buy and build,

to scale Collaborate,
to scale

By integrating data and analytics effectively across the care

pathway — from diagnostics to therapeutics, monitoring and
throughout care settings — we can offer insights to medical
professionals and staff that enable more predictive, more
efficient and more individualized patient care.
Kieran Murphy
President & CEO, GE Healthcare

10  Firepower 2019
Guest perspective

Building the precision health ecosystem

In a world where life expectancy is growing Analytics are also helping hospitals operationally,
because health care is getting better, large boosting their efficiency so they can continue
numbers of people are now living with diseases to deliver high-quality care as patient volume
that need to be managed. That means more increases. We have installed Command Centers –
people are knocking on the doors of health care like an air traffic control facility – in busy hospitals
Kieran Murphy providers who are simultaneously grappling in North America and Europe. Command Centers
President & CEO, with a shortage of workers and the need to cut use algorithms and artificial intelligence (AI) to
GE Healthcare costs. With global health care expenditures now provide a clear, instant and real-time overview
exceeding US$7 trillion per year, governments across a hospital to help staff make quick and
and hospitals must eliminate wasted spending and informed decisions on how to best manage
deliver better outcomes. GE Healthcare believes patient care. They bring consistency to processes,
that to meet these challenges, health care needs help staff prioritize tasks, eliminate duplication
to become more personalized, more digitally and predict tomorrow’s pressure points. At a
integrated and more collaborative. US hospital, patients from other hospitals are
now transferred 60% faster, emergency room
The average hospital creates 50 petabytes of data wait times have been cut by 25% and time spent
per year – roughly the size of 10 million iCloud waiting in the operating theater for a post-surgical
storage accounts. This includes clinical notes, lab bed has decreased by 70%.
tests, medical images, sensor readings, genomics
and operational and financial data. Yet less than As a world leader in health care imaging
3% of the data is used. technology and the largest generator of phenomic
data – humans’ physical and biochemical
The future of health care will see the right data information – we see ourselves at the heart of
used at the right time in the right way. By the global health care ecosystem, supporting
integrating data and analytics effectively across our customers in the pursuit of precision health,
the care pathway — from diagnostics to health care that is integrated, highly personalized
therapeutics, monitoring and throughout care to each patient’s needs and that reduces waste
settings — we can offer insights to medical and inefficiency.
professionals and staff that enable more
predictive, more efficient and more individualized
Delivering future growth
patient care.
GE has publicly announced its strategy for GE
That’s why we are partnering with Roche, the
Healthcare to become a standalone company.
leading in vitro diagnostics company in the
While the exact structure of the transaction is still
world. In vitro tests, whether genetic screens
to be determined, becoming a separate company
or metabolomics or epigenetic analyses, each
would allow us to be faster in our decision-
individually play an important role in disease
making, with the scale and portfolio to continue
diagnosis. But they’re a lot more powerful when
delivering for customers around the world. As is
they’re combined with in vivo imaging data. The
the case now, we continue to look at partnerships,
combination of those two modalities, in vitro and
alliances and small, bolt-on acquisitions that align
in vivo, allows us to offer a much more integrated
to our strategic priorities.
analysis of a person’s health. We are focused on
integrating and embedding this data into devices This is a very exciting time to be working in
and workflows already in use today. Busy medical the global health care industry. The demands
practitioners and caregivers will not readily adopt and challenges are huge, but our technologies,
technology that disrupts their workflows. partnerships and customer relationships position
us well to deliver increased capacity, better
productivity and improved patient outcomes.

Firepower 2019  11
Looming questions about future growth prospects
At the moment, there is little evidence that life sciences EY defines this dealmaking capacity as firepower. Simply put,
companies have suffered meaningful valuation declines by it is the ability to do M&A based on the strength of a company’s
adopting a wait-and-see approach as it relates to accessing balance sheet, including its market capitalization, cash
digital or other disruptive capabilities. However, there is growing equivalents and debt capacity. (See the text box “Important
evidence that companies are overly focused on short-term definitions” on page 5 and “Methodology” on page 36.) To
growth metrics, potentially at the expense of longer term and understand how much of this firepower is being used to make
sustained value creation. acquisitions, it’s instructive to calculate deployed firepower, the
ratio of capital spent on M&A relative to available firepower, over
Since the 2000s, median year-over-year percentage revenue time. As of 4 December 2018, life sciences companies used just
growth has slowed for the market leaders in all life sciences 16% of their US$1.2 trillion in available firepower for acquisitions.
subsectors. The slowdown is most acute for big pharma and That’s a steady decline from 2014, when companies spent more
big biotechs. According to analysis by EY professionals, in than 27% of their nearly US$1.4 trillion in firepower on M&A.
2017, the median growth rates of big pharma and big biotechs (See Figure 3.)
actually declined five percentage points compared with pre-
financial crisis growth rates. The metrics shown in Figure 3 raise important questions about
the growth prospects of life sciences incumbents, especially if
Moreover, since the 2001-2007 era there’s also been a drop in biosimilars and the shift to hyper-personalized therapies shrink
the rate of R&D spending and an acceleration in the cash returned market sizes in important therapeutic areas such as oncology.
to shareholders. Big biotechs have been particularly focused
on repurchasing shares. Through the third quarter of 2018, big In this environment, the imperative is mounting to use M&A to
biotechs have deployed around 20% of their capital to share foster growth potential. Among the topics that should be at the
repurchases, a 6 percentage point increase from the 10-year top of the C-suite agenda are which kinds of deals – and which
average. At the same time, an analysis of the industry’s M&A partners – position companies for maximum growth in 2019 and
activity relative to its capacity to do deals suggests incumbents the future.
are using less of their available capital to make acquisitions.

The imperative is mounting to use M&A to foster growth

potential. Among the topics that should be at the top of
the C-suite agenda are which kinds of deals – and which
partners – position companies for maximum growth in
2019 and the future.

12  Firepower 2019
Figure 3. Key metrics raise questions about the life sciences industry’s long-term growth prospects
As companies bolster short-term earnings by returning more cash to shareholders, are they investing enough in the future growth
activities that will secure their futures?

Cash returned to shareholders increases relative to R&D spending Firepower deployment

16%
2.5
Ratio >1 means Available
2.0 companies are
investing more in
firepower
1.5 cash to shareholders used for M&A
1.0 than in R&D
In 2018, companies tapped
0.5
just 16% of their available
0
2014 2015 2016 2017 firepower for acquisitions,
down from 27% in 2014.
Big biotech Big pharma Medtech

Sources: EY, Capital IQ. See “Methodology” on page 36 for an explanation of the firepower calculations.

Firepower 2019  13
 2

In the age of
M&A complexity,
do you pause or
proceed?

14  Firepower 2019
Take a look at 2018’s life sciences M&A data and it is clear that 50% of that spend. After two major transactions in early 2017
biopharma and medtech companies have not rushed to acquire, (BD’s purchase of Bard and the Essilor-Luxottica combination),
even though they have the capacity to do so. This more M&A in the medtech space also slowed in 2018, with companies
restrained M&A environment is surprising given expectations – by prioritizing bolt-ons over megamergers.
almost all market analysts – that new US tax legislation would
result in increased deal activity in 2018. Divestitures were another area of increasing focus in 2018,
as companies took advantage of the liquidity in the public
Each year since 2015, EY professionals have predicted life markets to sell business units to private equity buyers or create
sciences M&A would reach or exceed an annual total of US$200 freestanding companies through spin-outs. (See Creating
billion. In 2018, the total aggregate deal value approached this capital efficiency and shareholder value through divestment
figure. However, the aggregate deal value through 4 December in the life sciences sector. ) Johnson & Johnson, for instance,
2018 is nearly US$90 billion less than the average M&A total sold its Advanced Products Sterilization and LifeScan businesses,
value from 2014 to 2016. One reason for the more restrained while Sanofi divested its European generics business as
climate may be because dealmakers focused on smaller, less competition in that arena accelerated.
transformative deals. In 2018, bolt-on acquisitions comprised 81%
of the deal volume and 43% of the total deal value for the year. At the same time, Eli Lilly and Siemens sought to create value
by floating their respective Elanco Animal Health and Siemens
The one notable exception in 2018 was Takeda’s pending US$62 Healthineers divisions on the public markets. (Each initial public
billion acquisition of Shire. When finalized, this transaction will offering generated more than US$1 billion.)
position that Japanese pharma as one of the top 10 biopharma
companies by revenue. Outside this megamerger, however, big Looking ahead to 2019, we believe that divestitures and spin-
pharma companies spent cautiously in 2018, signing M&A deals outs will be key components of the evolving M&A story. Indeed,
with a total value of only US$42 billion. management teams from General Electric and Novartis have
already signaled publicly their plans to float the GE Healthcare
Big biotech companies were even more restrained, investing only and Alcon divisions if the market conditions remain favorable.
US$34 billion in deals, with Celgene’s moves to acquire Juno
and Impact Biomedicines in January 2018 making up nearly

In 2018, dealmakers focused on smaller,

less transformative deals. Bolt-on
acquisitions comprised 81% of the deal
volume and 43% of the deal total.

Firepower 2019  15
Figure 4. 2018 life sciences M&A trends and implications

335

The 2018 M&A total was nearly

253
265
US$90b less than the 2014–16
(US$b)

average despite total firepower

198
178 of more than US$1.2t.

2014 2015 2016 2017 2018*

Geopolitical uncertainty and high prices for assets are two key
reasons there wasn't more dealmaking in 2018.

Percentage of executives who responded

Digital
Biotech Medtech Overvalued
health
Undervalued

More than 60% of executives surveyed by an EY team cite the high valuations
of biotech and digital health companies as reasons not to do deals.

78%
Increase in market valuations of
15%
Decline in firepower of
biopharma companies since 2014 biopharma acquirers since 2014

Companies that wait for less frothy markets may have trouble acquiring
growth targets in the future because market valuations of those companies
are rising faster than acquirers’ firepower.

Sources: EY, Capital IQ.

* Unless otherwise specified, analyses used data as of 31 December. M&A data in 2018 current through 4 December 2018. The date of 31 October 2018 was used to
calculate the average firepower of biopharma and medtech acquirers and the average valuations of target companies in 2018. Specific names of target companies and an
explanation of the firepower calculation are provided in the “Methodology” section. From 4 September 2018 to 31 October 2018, EY conducted a survey of life sciences
business leaders in Asia, Europe and the US to understand future dealmaking trends.

16  Firepower 2019
Understanding the 2018 dealmaking environment
With US$1.2 trillion in available firepower for deals, the quieter- kinds of transactions will be similar. Small- to medium-sized
than-anticipated M&A climate wasn’t due to cash constraints. acquisitions valued at up to US$10 billion garner the greatest
To better understand why the M&A observed in 2018 failed to interest; seventy-one percent of respondents believe product-
live up to industry expectations, an EY team surveyed business focused innovations and portfolio optimization will be the
executives from 22 life sciences companies in the third quarter primary motivations for deals. Only 3% of individuals surveyed
of 2018. These executives represent medtechs, biotechs and listed megamergers or digital acquisitions as their high priorities.
pharmas headquartered in the US, Europe and Japan with
combined annual revenues of more than US$300 billion. Based One caveat to this forecast – continued volatility in the stock
on survey responses, many acquirers de-emphasized acquisitions market, which could presage a larger market correction in the
due to concerns about the ability to generate potential returns on future. On the plus side, this retrenchment should make
available assets. (See Figure 4.) acquisition targets more affordable. On the negative side,
ongoing drug pricing discussions in the US continue to
When asked about factors negatively affecting dealmaking, disproportionately affect the valuations of bigger biopharmas,
the top two issues cited by respondents were high prices/ and thus, their firepower. As a result, even with the recent
valuations (68%) and geopolitical and trade uncertainties (62%). correction, the gap between acquirers’ firepower and target
Unpredictable and potentially disruptive recent events include the valuations continues to close. Since the beginning of 2014, for
UK’s eventual Brexit from the European Union, as well as the rise instance, average valuations of biotech targets have increased
in protectionist trade policies in the US. 78%; during that same period, the average firepower of
biopharma acquirers has declined 15%.
Rising valuations, meanwhile, have driven industry firepower to its
current levels. But they have also inflated the price tags for likely As life sciences incumbents struggle to satisfy investors’
acquisition targets, making them prohibitively costly at current near-term expectations, they may redeploy even more of their
deal multiples. Furthermore, after five years of unprecedented available cash from future growth to share repurchases. If that
market liquidity, many startups, especially biotechs developing behavior persists, it could further limit M&A totals, making the
curative or genetic therapies, are so well capitalized that they are M&A totals of more than US$200 billion achieved in recent years
under no immediate pressure to be acquired. the exception rather than the rule.

Based on the survey data, some of the themes that played out in
2018 seem likely to apply in 2019. Forty-two percent of
respondents expect to do more deals in 2019 than 2018 and the

When asked about factors negatively affecting

dealmaking, the top two issues cited by respondents
were high prices/valuations (68%) and geopolitical
and trade uncertainties (62%).

Firepower 2019  17
 3

As therapeutic
depth becomes
more important,
are you focused
on the right
opportunities?

18  Firepower 2019
Life sciences companies that want to use M&A to drive revenue For now, oncology stands apart as the largest and fastest-
growth in 2019 must take into account the complexities of growing therapeutic area. Overall, the global market for oncology
today’s market when setting their strategies. (See Figure 5.) therapeutic medicines is predicted to reach US$150 billion by
2022, according to Datamonitor Healthcare. But oncology is also
Even therapy areas with high unmet need – for instance, the most crowded therapeutic area, and biosimilars and generics
infectious disease and central nervous system disorders – have will increasingly compete with brands for market share. As a
low compound annual growth rates because of pricing pressures result, not all the companies developing therapies in this lucrative
and the difficulty of identifying next-generation therapies that market are going to be winners, especially the companies with
offer significantly better health outcomes. smaller, less differentiated pipelines.

Figure 5. Biopharmas in fast-growing therapeutic areas have a growth advantage – for now
Oncology stands apart as the largest and fastest-growing therapeutic area. Even companies in this space will face pressure due to
biosimilar competition and the rise of new treatment modalities.

140
Oncology

120

100 Immunology and

Infectious inflammation
diseases
Market size 2017 (US$b)

80

Metabolic and
60
musculoskeletal

CNS Cardiovascular
40
Genitourinary
Hematology
Respiratory
20

Gastroenterology Ophthalmology
0

-20

-4% -2% 0% 2% 4% 6% 8%

Five-year compound annual growth rate (2018-2022E)

Sources: EY, Capital IQ, Datamonitor Healthcare.

Firepower 2019  19
The importance of focus in the companies that want to differentiate themselves based on the
outcomes their innovative products deliver, these digital tools
digital age will become disproportionately more important. So, too, are
digital tools that accelerate costly aspects of drug development,
For companies that want to use M&A to drive revenue growth, especially clinical trial recruitment and monitoring. In contrast,
there is growing evidence that businesses with more focused the digital tools most important to companies developing
portfolios are more likely to outperform their less focused products for chronic diseases such as heart disease, diabetes or
counterparts. The discussion about focused versus diversified asthma may be those that improve the consumer experience and
business models is hardly new. But, as outlined in the Life adherence to therapy.
Sciences 4.0: securing value through data-driven platforms,
the potential impact of digital technologies – and the urgency to To keep pace in the current climate, it’s likely that diversified
invest at sufficient scale in new data and analytics capabilities – businesses will need to make large scale, but different, digital
makes the debate more pertinent than ever. investments simultaneously across their various businesses. As
digital technologies become the status quo, companies that have
In the past, diverse portfolios offered a hedge against the already made their therapeutic bets will be better positioned to
vagaries of an unpredictable R&D cycle. With comparatively accelerate revenue growth using these new skills.
little pressure on reimbursement, the path to revenue growth
was more straightforward – bring in new products regardless of
the therapeutic area. As commercial pressures have grown, we Companies with more therapeutic focus
believe success is no longer simply about selling more products.
It now also requires demonstrating improved patient outcomes in outperform less focused peers
the real world.
To understand the linkage between therapeutic focus and overall
Companies hope to use new technologies such as AI to reduce performance, EY researchers analyzed the financial results of 25
the uncertainty or to identify and interpret patterns across top biopharma companies across six different metrics. Companies
the life sciences value chain. But as companies embed these that generated at least 50% of their biopharmaceutical revenues
digital technologies into their organizations, several issues have from one therapeutic area were classified as more focused;
become clear. First, acquiring these skills is expensive; second companies that didn’t meet this threshold were less focused. In
in the short-term, it may be difficult to quantify the return on order to make meaningful revenue comparisons, EY researchers
investment using traditional metrics; third, depending on the did not account for further diversification outside the biopharma
actual business model, some capabilities are significantly more setting (e.g., contributions of a consumer health or animal health
important than others. business).

We believe that digital tools that enable more efficient real-world Across every indicator, the EY analysis shows that the 10
data capture, analysis and interpretation will give all stakeholders more focused companies outperformed the 15 less focused
greater clarity on which products deliver optimal outcomes. For organizations. Indeed, more focused companies reported average

As digital technologies become the status quo,

companies that have already made their therapeutic bets
will be better positioned to accelerate revenue growth
using these new skills.

20  Firepower 2019
five-year historical compound annual growth rates that were 7 Recent history supports this notion. In 2008, Novartis sought
times higher than their less focused peers; the average return on to diversify its portfolio, purchasing first a stake in Alcon and
invested capital, which helps benchmark how well companies use then the entirety, to build revenue growth through products sold
their money to generate returns, was 4.5 times higher for the direct to consumer and private-pay channels. But it was never
more focused group than the less focused one. In addition, less obvious how the more traditional pharmaceutical business and
focused companies are more likely to encounter larger growth Alcon, when combined, would add strategic value to the greater
gaps. Indeed, the total growth gap in 2018 of the less focused global organization. Novartis’ announcement in June 2018 of
cohort is US$57.4 billion, compared with just US$18 billion for its intention to unwind the Alcon transaction and spin it out
the more focused group. (See Figures 6 and 9.) suggests the complexities of running two diverse businesses
under one organization now exceeds the value that can be
These data are an important counterargument to the claim created from such diversity. Biogen went through a similar
that megamergers are the logical and easiest path to improved process when it merged with Idec in 2003, acquiring an oncology
performance. Indeed, the analysis suggests that the industry’s portfolio that it then divested in 2010 in order to refocus on its
current focus on bolt-ons and portfolio optimization is not only core central nervous system (CNS) business.
rational, but the best possible use of M&A dollars.

Figure 6. In 2019, dealmaking to create focused business models will remain an imperative for biopharmas
When the operational and market performance of 25 leading biopharmas were analyzed, more focused companies, on average,
outperformed less focused companies on all six metrics evaluated.

EBITDA margins (Five-year average)

More focused
40%
Less focused
28%

Historical revenue growth (Five-year compound annual growth rate)

14%

2%

Return on invested capital (Five-year average)

14%

3%

Total shareholder return (Five-year average)

99%

98%

Average valuation (Enterprise value to revenue multiple)

5x

4.1x

Average growth gap (US$b)

1.8 99%

3.8

Sources: EY, Capital IQ and Datamonitor Healthcare. Companies were classified as more focused or less focused based on the following criterion: if one therapeutic
area contributed more than 50% of a company’s biopharma revenue, it was classified as more focused. If 50% of a company’s biopharma revenues came from two or
more therapeutic areas it was classified as less focused.

Firepower 2019  21
Market fragmentation likely to drive additional deals
With large-scale dealmaking resulting in the consolidation of In oncology, for instance, only Roche holds more than 20% of
life sciences companies’ major customer groups, there’s been the market, and, according to Datamonitor, its share is projected
a shift in power away from life sciences companies to payers to drop below this threshold by 2022 as competition from
and patients. At the same time, it’s become more difficult for biosimilars and new modalities grows.
companies to engage busy physicians, their historic customers,
about the value of new drugs and devices. Indeed, the ability to In immunology and inflammation, AbbVie and Johnson &
use data to engage stakeholders across multiple channels is one Johnson command 41% of the total market currently, but their
of the primary reasons driving life sciences companies’ interest in combined share will drop to 38% in 2022 based on Datamonitor’s
digital today. forecasted sales growth.

For these reasons, the current fragmentation of the life sciences In addition, it’s highly likely that these percentages understate
companies is worth noting as another potential driver of M&A. the actual current level of fragmentation in the market since
Consider the following statistics: they are calculated using market estimates that may not capture
the entirety of pharmaceutical sales across all life sciences
• N
► o single company holds more than 5% share of total
companies and geographies. (See Figure 7.)
market revenues
• T
► he top 20 companies together hold only 51% of the total
market share
• T
► his fragmentation is observed across multiple individual
therapeutic areas, especially oncology

22  Firepower 2019
 Figure 7. Market fragmentation could create more than US$200b in M&A opportunities

The biopharma industry remains highly fragmented. As therapeutic focus becomes more important
for commercial success, companies may need to use dealmaking to build dominant positions
in strategic therapy areas. Modeling using conservative asset valuations suggests portfolio
optimization could result in more than US$200b M&A if companies were to divest assets
associated with just four therapeutic areas.

Share of total biopharma market (2017) US$491b

Roche Sanofi AbbVie Amgen AstraZeneca BI

5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2%1%1% 49%

Pfizer Merck Novartis Gilead Eli Lilly Daiichi Sankyo Others

GSK BMS Novo

Nordisk
Johnson & Johnson Takeda Teva Bayer Allergan
and Shire

US$1t

Immunology and Infectious Cardiovascular

Oncology
inflammation disease disease

Aggregate revenues of
US$18.5b US$13b US$8b US$14b
divestiture candidates

Potential revenue
5x 5x 3x 4x
multiple

Potential asset
US$93b US$65b US$24b US$56b
value

US$238b
Potential M&A value from portfolio optimization

Sources: EY, IQVIA and Datamonitor Healthcare. Revenues at Johnson & Johnson and Takeda include revenues from recently acquired Actelion and Shire respectively. Modeling
assumes assets are divestiture candidates if owners’ revenues total 3% or less of total therapy area revenues.

Firepower 2019  23
 4

How can you

use dealmaking
today to capture
value from data
tomorrow?

24  Firepower 2019
For now, there is little evidence suggesting that life sciences Figure 8. “Digital” deals could provide additional growth,
companies have fully embedded digital collaborations into but biopharmas need to accelerate their efforts
their overall strategies. John Carlson, President of Flex Health
Solutions, a division of Flex that is creating infrastructure to

347
safely share medical data, believes some companies are trying
to take a more holistic approach, but most efforts remain pilot
programs. In part, the reluctance to invest in efforts that will
transform business models stems from what Carlson says “is a
belief that the historic product-centric business model, in which
companies sell a device or a drug rather than an outcome, will The number of digital deals signed by life
continue to drive significant profit.” (See “Building a digital sciences incumbents between 1 January 2014
backbone for health data.”) and 16 November 2018
An EY analysis of digital deals by life science incumbents supports
the assertion that, with a few exceptions, life sciences incumbents
are not focused enough on building their digital capabilities.
Acquisitions remain the rarity as companies focus on creating The percentage of digital deals

50%
product–specific solutions instead of embracing a fundamental driven by the need to improve
belief that data and evidence will make their businesses more disease management and R&D
successful. In addition, the lack of disclosed deal terms suggests efficiency
the overall level of investment is more limited as well, at least
relative to traditional sources of innovation.

That doesn’t mean life sciences companies are completely

ignoring the disruptive possibilities of digital health. (See Figure
8.) Johnson & Johnson, for instance, is actively partnering with The percentage of biopharma

40%
new organizations via its JLABS incubators. digital deals in oncology,
central nervous system
“This is an important area for us and we therefore need to deepen
disorders and diabetes
our technological and data science capabilities. We also need
to continue to do what we are good at. By working closely with
innovators, we continue to learn and can help accelerate solutions
that enable better, more preventative care,” says Melinda Richter,
Global Head of Johnson & Johnson Innovation, JLABS.
The percentage of total
And Johnson & Johnson is hardly the only company surveying
25%
digital deals signed by the two
the landscape for digital technologies. In 2019, EY professionals
biopharma leaders, Novartis
anticipate that digital dealmaking will continue to accelerate as
and Roche
the opportunities to combine and use data to improve health
outcomes become more obvious.

Sources: EY, Capital IQ, Informa's Strategic Transactions and company filings.

Firepower 2019  25
Guest perspective

Building a digital backbone for

health data
In today’s health environment, new spent exploring data connectivity and sensor
opportunities to improve health for individuals technologies, as well as the creation of
are being created as consumer and medical branded apps and education portals. While
John Carlson technologies intersect. These opportunities are those apps and portals provide important
President, Flex data-driven. By combining traditional medical patient information, the material can’t easily
Health Solutions data with data that aren’t health related, it’s be incorporated into the doctor’s workflow.
possible to paint a more complete picture of a Because of this, the likelihood that a physician
person’s health. It’s also possible to personalize will use the information is almost zero.
the care experience for that individual, using the
data that are most meaningful to drive actual These brand-specific solutions create
behavior change. Diabetes and congestive challenges for patients too. It’s rare that a
heart failure are two conditions where rich data patient has a single condition. The proliferation
streams are beginning to have an impact. As of different digital tools requires patients to
the number of medical-grade connected devices enter information across as many as four or
grows, there will be even more opportunities to five apps. There’s good evidence suggesting
use data to improve outcomes. the first time you ask a patient to use a tool,
engagement will be about 50%. If individuals
Life sciences companies are well aware that are required to input information multiple times,
future success depends on access to meaningful that engagement drops off completely.
health data. However, it’s been difficult for
them to understand which technologies will What’s required for health data to flow more
actually generate the data that will drive action freely is a digital backbone that is capable of
on the part of the patient or the provider. moving data from a connected device to the
That has resulted in a lot of time and money cloud for analysis and back to physicians and

To understand how digital deals will evolve, pay attention to what’s happening in
oncology and diabetes
For now, most of the digital activity is linked to developing brand- Germany and Palantir, Syntropy, to create a collaboration
specific solutions in the diabetes and oncology areas. In the platform for research and discovery.
intensely competitive diabetes field, existing market leaders have
all turned to digital platforms to defend their market territory. Specific financial details of Syntropy, which is a collaboration
The goal is to combine smart algorithms with intuitive design between the Merck KGaA, Darmstadt, Germany affiliate EMD
to improve the patient experience and inspire brand loyalty. At Digital and Palantir, remain undisclosed. The collaborators aim
the same time, digital diabetes treatments such as Welldoc’s to create a data integration platform that will speed research and
BlueStar have shown that applied behavioral science can be as improve care. The two organizations realized that health systems
clinically effective as drugs, reducing blood glucose levels by an are generating vast amounts of data but most of it goes unused,
average of two points within three to six months of use. according to Simon Sturge, Executive Vice President and Head of
Business Operations and Strategy, Healthcare Business of Merck
Given that oncology is driving an ever-greater proportion of life KGaA, Darmstadt, Germany.
sciences revenue growth, it’s no surprise that companies are
beginning to invest in digital platforms, both open and closed, “We felt there was value — for both science and ultimately
to access relevant data. In 2018, two of the most important patients — in building a system that could make those data
signposts of the digital future were Roche’s acquisition of Flatiron accessible and usable to research groups within health
Health and the joint venture between Merck KGaA, Darmstadt, organizations,” says Sturge. (See “Embracing the real-world
data opportunity.”)

26  Firepower 2019
patients to inform care. This backbone Jumpstarting the business For now, the marketplace still supports
needs to be robust; data transport with data the old business model: companies
needs to be rapid and secure. That can sell their individual devices or their
means building a system that complies Increasingly there are massive data pharmaceutical products and make a
with current regulatory standards for streams that aren’t specifically health significant profit. It’s an open question as
both cybersecurity and patient privacy. related that could be used to improve to how long the old business model will
This need became the genesis for our patient outcomes. One of the challenges hold. What happens when life sciences
BrightInsight platform, which can be for life sciences companies is tapping companies have to sell outcomes and not
thought of as medical grade infrastructure into these different data streams. Think products? If they are going to move in that
for data transport and sharing. about a patient who has recently had knee direction they need a broader set of data.
replacement surgery. Motion detectors
BrightInsight is an open system – the that passively measure the person’s As technology companies move into
goal is to aggregate data from multiple activity levels provide important data that health care, they aren’t focused on
sources, analyze it and then feed informs a care team of the individual’s protecting the old business model. And
the information back to patients and post-surgery recovery. they can move more rapidly into this
providers, while still meeting all the space given their scale and existing
security and regulatory requirements. Medtech and biopharma companies capabilities. One priority for life sciences
At Flex, we have had the opportunity believe technology can help them build companies near term is opening their
over the past two decades to partner a better relationship with the individual eyes to what’s happening outside of the
with a range of life sciences clients on consumer. But in many cases, the ultimate medical realm.
the design of medical products. Why goal is to achieve greater utilization and
should they spend time developing higher compliance of a specific product.
infrastructure when the differential That’s not what patients want, however.
value they bring is their understanding Patients want a personal experience. The
of the clinical meaning of the data? Our life sciences industry is going to have to
aim is to solve the technology problem respond to this demand in the future.
and enable life sciences companies and
physicians to solve the clinical problems
more seamlessly.

Roche’s acquisition of Flatiron Health, meanwhile, gives the big As Flatiron Health’s data set deepens and new provider and
pharma access to two different capabilities: first, technologies payer stakeholders contribute to it, the platform itself becomes a
and services that matter to oncology care providers; second, linchpin for how the wider oncology ecosystem functions. In this
data to accelerate development and commercial efforts. way, Roche can use the Flatiron Health platform to position itself
at the center of a data-rich network that will grow even more
The US$2 billion Roche spent on Flatiron Health might seem valuable as the number of users grows.
hefty given Roche’s ability to use the platform to differentiate
its products relative to competing medicines remains unproven. Over time, competitors will face the hard choice of spending
However, compared to the decade of development time and the money to build a competing network or joining forces with Roche
billions required to bring a drug to market, the acquisition price to take advantage of its existing network. As a first mover, Roche
appears quite reasonable, especially when considering possible will be uniquely positioned to become the oncology partner of
upsides. Indeed, naysayers who view the deal purely in terms of choice – for payers, providers, patients and biopharmas with
Roche’s ability to drive use of its own products are missing an cutting-edge therapies. Cast in those terms, the price tag for
important potential driver of the deal. Flatiron Health begins to look less exorbitant.

Firepower 2019  27
Guest perspective

Embracing the real-world

data opportunity

Simon Sturge I am most excited about our ability to use new that other companies may be better placed to
Executive Vice President technologies to change behavior and improve build the infrastructure. Instead, we want to
and Head of Business individual outcomes. By using connected collaborate with these external parties in the
Operations and devices and apps that monitor peoples' behavior areas of disease and health that are our core
Strategy, Healthcare in real-time, we can collect data on a daily basis, priorities, in order to become a digitally enabled
Business of Merck not just when patients visit their physicians. health care company.
KGaA, Darmstadt, Advances in machine learning, meanwhile, allow
Germany us to correlate these emerging data with disease The partnering principle
progression long before symptoms become
visible. As a result, there is an opportunity to It’s very early days for digital collaboration. At
intervene much earlier, and give individuals Merck KGaA, Darmstadt, Germany, we have
greater control of their health. had dialog with a number of potential partners.
Those conversations have resulted in a few
Some biopharma companies may find these pilot programs, some of which we’ve expanded
technologies threatening. I think technology as the benefits in health outcomes become
and health care have always been interlinked. more apparent.
Whether we are talking about a stethoscope or
a wearable device, the practice of medicine has For instance, several years ago we began working
always relied on technologies that capture data with the big data firm Palantir on a number of
to inform diagnoses and treatment plans. different programs, including understanding
primary prescription sales in China. As the
We shouldn’t be afraid of the changes that are relationship developed over time, both sides
coming to our business as more data becomes gained confidence in what the two organizations
available – in fact it’s absolutely the opposite. could achieve working together. That confidence
Within the Healthcare Business of Merck KGaA, resulted in Syntropy, which is a joint venture
Darmstadt, Germany, we believe it is essential between the Merck KGaA, Darmstadt, Germany
to embed the use of data analytics across every affiliate EMD Digital and Palantir.
aspect of our business. More specifically, the
growing volume of real-world data is relevant to Announced in November 2018, Syntropy is an
three of our core functions: first, interacting and extension of our belief that analyzing data is
educating patients about disease symptoms; a core capability for science and technology
second, using data to become a trusted partner companies. In discussions with hospitals and
to physicians; and third, improving internal research organizations, we realized that these
research and development efforts. institutions generate significant amounts of data
that are of huge value if shared.
Today it isn’t a question of whether we, as a
pharmaceutical company, need real-world data. Most of the time, however, these data are
But there is a difference between accessing never used, because they aren’t accessible for
and using the data and owning the digital analysis. Palantir and EMD Digital believe there is
technologies that allow us to fully understand value in building a data integration platform that
and leverage the data in a meaningful way. allows the scientific community to structure and
We don’t necessarily see ourselves becoming analyze data from different sources to identify
a digital health care company. We believe new research insights that advance patient care.

28  Firepower 2019
Because there are strict governance requirements for how that uses a smart phone app to provide remote coaching and
pharmaceutical companies treat patient data, we have created peer support to help individuals with prediabetes make lifestyle
defined boundaries between Syntropy and our existing health changes and avoid the onset of Type 2 diabetes.
care business. As Syntropy’s capabilities expand, our Healthcare
business is interested in becoming a customer of the joint- Digital tools are adopted faster if they are brand neutral. We
venture, leveraging data from the platform to accelerate our own don’t create them to sell more of a specific product. Instead,
research efforts. we benefit by getting access to real-world data and by building
patient awareness. It’s very important to us that patients
understand their disease.
The platform opportunity
As platform-based business models emerge, there is an
As a pharmaceutical company, we are continually looking at
opportunity to do even more. But it’s important to have a
where our role in care delivery ends and the role for physicians
clear endpoint. Within the Healthcare business of Merck KGaA,
begins. Diabetes and fertility are two areas where we feel
Darmstadt, Germany, we believe we can differentiate ourselves
significant responsibility not simply to treat disease, but to keep
and our products by better understanding cause and effect,
individuals healthy. We see an opportunity to help facilitate
e.g., what causes a disease to advance and what interventions,
important care interactions using digital tools such as our
whether behavioral or pharmaceutical, might prevent this
prediabetes solution, which we’ve deployed outside the US using
progression. Our participation in platforms should focus on how
Blue Mesa Health’s platform. This solution is a year-long program
to achieve this knowledge.

Today it isn’t a question of whether we, as a

pharmaceutical company, need real-world data. But there
is a difference between accessing and using the data
and owning the digital technologies that allow us to fully
understand and leverage the data in a meaningful way.

Firepower 2019  29
 5

Innovation or
growth? How can you
use your dealmaking
firepower to do both
in 2019?

30  Firepower 2019
As we outlined in Life Sciences 4.0: securing value through In truth, the most successful companies are already pursuing
data-driven platforms, it’s not clear which organizations will all three options to create end-to-end capabilities. To optimize
build and control the digital health ecosystems of the future. revenue performance in the future, it will be even more
If life sciences companies want to play a central role in that important to invest in the data and analytics capabilities that
process, we believe they should consider three different align with their actual business models.
dealmaking options in 2019. These options are:
Currently, most major life sciences companies or business units
1. Continue to seek scale in their target therapeutic areas can be described by one of four broad business models:
through focused M&A and alliances
1. Breakthrough innovator: Developer of best-in-class products
2. Partner with other health care stakeholders to access and use
that command high prices and are primarily paid for by
data to improve outcomes
health insurance
3. Partner with, or acquire, digitally focused, data-centric 2. Disease manager: Developer of products and solutions to
companies to improve the efficiency of R&D and better
manage chronic conditions end to end
differentiate marketed products with evidence
3. Efficient producer: Developer of lower cost products that
These are not mutually exclusive options. Indeed, focusing on perform as well as the competition
fewer therapeutic areas is a necessary first step to creating 4. Lifestyle manager: Developer of products aimed at prevention
agile, more competitive businesses and building deeper and overall health maintenance sold directly to the consumer
relationships with key health stakeholders. Moreover, partnering
with health care stakeholders won’t be very efficient if life For each of these business models, companies must differentially
sciences companies choose not to use dealmaking to bolster invest in the tools and disruptive technologies that allow them to
their data capabilities as well. respond to the changing demands of their patients, payers and
health provider customers. (See Figure 9.)

Figure 9. Value creation opportunities by business model

As companies respond to evolving customer demands their total market value will shift in ways that depend on their chosen
business models. They will increasingly need to use data to predict future customer demands so they can adapt to the dynamic
health care landscape.

Customer
understanding Disease Lifestyle
manager manager
and relationships

How is Efficient operations

Efficient
value and supply chain producer
created?

Highly innovative
Breakthrough
products and services innovator
High dollar Low dollar
value value
capture capture
Wealthy individuals Institutional health care Mass market consumers
systems
Who demands value?

Source: EY. Concept developed from an initial idea first profiled by Prof. Brian D. Smith in his book, The Future of Pharma, published by Gower Publishing in 2011.
Three different parameters define value creation (y-axis): innovative products, efficient operations and customer understanding. The x-axis corresponds to which health
stakeholders are defining the value: wealthy individuals, health care systems and mass market consumers. The area of the ellipse corresponds to dollar value of the total
addressable health services market captured by companies employing a particular business model. The color gradient correlates with the increased opportunity for value capture
(US$). The darker the color, the greater the opportunity for value capture.

Firepower 2019  31
 Consider Merck & Co. Inc’s ambition to leverage its blockbuster The modeling suggests portfolio optimization in just four
anti-PD1 therapy Keytruda to become a powerhouse in oncology. therapeutic areas – oncology, immunology, infectious disease and
According to Datamonitor Healthcare, Merck had about 3% of cardiovascular disease – could generate more than US$200
the total oncology market in 2017 and should see that share billion in M&A, with no megamergers required. Divesting
increase to 5% in 2022 as the use of Keytruda expands. deprioritized businesses such as animal health, women’s health
and consumer health could liberate tens of billions of additional
In recent years the company has partnered with or acquired a M&A as well.
number of biotechs to expand its therapeutic arsenal. It has also
deepened its access to data by genetically profiling clinical trial This modeling is based on 2017 revenues of companies
participants. Additional investments in oncology-specific data with therapy area market shares of 3% or less, and excludes
and customer engagement capabilities could further strengthen companies that are currently forecasted to exceed this revenue
its position in the oncology market. threshold in 2022. Deal multiples are conservative and calculated
using median values of publicly disclosed transactions in the four
The road map to future growth therapeutic areas. (See Figure 7.)

As networks of relationships and therapeutic focus become more When those deals will happen is an open question. If regulators
important for commercial success, we believe it will become (or payers) require greater use of outcomes-based pricing
increasingly more difficult for companies with market share in the arrangements, for instance, that reimbursement shift would likely
low single digits to differentiate their products to payers and increase demand for real-world data, creating additional drivers
providers. In 2019 and 2020, these companies should consider for the creation of therapeutically focused, data-rich networks.
using divestitures and asset swaps to unlock value now before the Those changes could alter and further accelerate portfolio
competitive bar for success is raised even higher. optimization similar to the way that new emissions standards led
to new innovations in the auto industry.

Figure 10. 2019 biopharma dealmaking needs by company

More focused and less focused companies need to do deals, but the need is most acute for those biopharma companies with the
largest growth gaps. Quadrant mapping demonstrates which deals should be high priorities based on therapy area focus and
forecasted compound annual growth rate.

High Divest non-core, AstraZeneca Celgene Future growth

slower growing (disruptive
assets US$57.4b technology,
Biogen
Growth gap for less digital deals)
focused companies
Alexion
Five-year forecasted compound

AbbVie
Regeneron
Novo Nordisk
annual growth rate

Takeda
Bayer
Johnson & Johnson
Allergan
Lilly
Bristol-Myers Squibb
Eisai Roche US$18b
Boehringer Ingelheim Growth gap for more
Sanofi GlaxoSmithKline focused companies
Merck and Co.
Novartis
Gilead

Astellas

Divest non-core Pfizer Bolt-ons to

assets; bolt-ons add near-term
Daiichi Sankyo
for growth growth
Low

Less focus More focus

Therapy area focus

Sources: EY, Datamonitor Healthcare. Analysis is based on company biopharma revenues only, not total revenues.

32  Firepower 2019
Implications for 2019 biopharma dealmaking • Companies with high focus and low growth prospects: Having
identified therapeutic areas that are “must win,” companies in
Looking ahead, it’s possible to sketch out the broad outlines of this quadrant must further solidify their market positions with
biopharma dealmaking at the company level using two different bolt-on acquisitions and digitally based partnerships. Gilead
parameters: the degree of therapeutic focus associated with Sciences, for example, has built an industry-leading position in
a company’s marketed biopharma products; and a company’s infectious diseases and has invested heavily in oncology. What
five-year projected compound annual growth rate. In order to its new management will do in oncology following the 2017
make meaningful comparisons, this analysis does not account for acquisition of Kite Pharma, remains an open question.
further diversification into non-biopharma businesses. As such,
• Companies with high focus and high growth prospects:
it is based only on a company’s biopharma revenues, not total
Companies in this quadrant have the luxury of investing for
sales. (See Figure 10.)
future growth (for example, via partnerships) without the
Applying these two metrics lets us map companies into four urgent need to divest. They cannot, however, afford to do
broad areas based on their dealmaking imperatives: nothing: the potential disruption from new entrants leaves no
room for complacency.
• Companies with low focus and low growth prospects: These
companies face a total growth gap of more than US$50 billion
based on EY calculations. To close their gaps, companies in
Figure 11. The rising firepower of disruptors relative to life
this quadrant need to divest non-core assets and add scale in
sciences companies creates dealmaking urgency
therapeutic areas through bolt-on deals. This is the one group
that might want to consider megamergers if large deals can Technology and consumer companies have the data analytics
provide therapeutic focus and cost synergies without adding too skills, the connected devices or the consumer relationships to
much complexity. potentially influence health care delivery. These 10 organizations
have nearly US$1 trillion more firepower to do deals than the
• Companies with low focus and high growth prospects:
entire life sciences industry combined.
These companies should focus on divesting non-core assets
and redeploying capital into their faster-growing businesses. 2,500
Five-year CAGR forecasts look promising for these companies,
though pipeline failures that dent these projections would
increase the need for them to accelerate their M&A and 2,000
partnering agendas.

Consider AstraZeneca, where the growth of the oncology

Firepower (US$b)

1,500
business, fueled by products such as Tagrisso and Lynparza,
is offsetting the revenue decline of the company’s larger
cardiovascular and respiratory portfolios. In November 2018, 1,000
AstraZeneca announced the sale of multiple deprioritized
respiratory assets for US$2 billion. That cash can now be
repurposed to continue to solidify the oncology franchise. 500

Companies with low focus and high growth potential face some
of the highest cultural hurdles to divesting deprioritized assets, 0
largely because these mature products still generate significant 20
0
20
0
20 2 2 2 2 2 2 2 2
10 011 012 013 014 015 016 017 018
8 9
near-term revenues. Investors may challenge a company’s
decision to divest such “cash cows” to redeploy the capital
in higher growing but riskier assets. In addition to creating a Disruptors’ firepower
Includes: Facebook, Amazon, Alphabet, Apple, Microsoft, Intel, IBM,
strategy to optimize the portfolio, another key focus area for
Qualcomm, Alibaba, Comcast
the management teams of these companies is to create the
business case for why planned divestitures are able to unlock Life sciences industry’s firepower
more value than continuing with the status quo. Includes: big pharma, big biotech, specialty pharma and medtech

Sources: EY, Capital IQ. Firepower analysis calculated through 31 October 2018.

Firepower 2019  33
Embracing the upside of transformation
In the near term, life sciences companies are most likely to use Medicine and Juno, respectively. In the latter two instances,
alliances to acquire growth capabilities for a number of reasons. these equity stakes eventually led to full-scale acquisitions,
The hard-to-quantify return on investment for innovative providing a new model for staged acquisitions that might be
technologies may keep many companies on the sidelines; it also useful to hedge scientific and capital risk.
raises important questions about whether current valuation
methodologies are outdated. Whether they want to bring new technologies in-house or
remain in partnering relationships, we believe companies must
In addition, the risks of buying and integrating an innovative emphasize digital deals that align with their therapeutic focus.
biotech or digital startup may be too high, especially if acquirers They will need to learn to connect, combine and share data
worry that it will be difficult to incentivize key talent to remain quickly and at scale to create secure solutions that deliver
following a deal’s closure. It is better in this case to structure clinical and economic benefits across the ecosystem. As shown
an alliance that keeps the smaller company independent, able in Figure 12, this future value (FV) for all stakeholders will come
to innovate and its culture intact, but not resource constrained from innovations (I) powered by data (D) to deliver personalized
thanks to the financial support of the larger organization. health outcomes.
Finally, any further slowdown in top-line growth resulting from
macroeconomic factors (e.g., trade or pricing reforms) is likely to Above all, as companies develop their M&A and partnering
boost the importance of partnerships even more. strategies to build future value and counter the threat of new
entrants, they must remain agile and move fast. As Harvard
Given the high prices for late-stage assets, those partnerships Business Review’s classic 2002 study of patterns of consolidation
may happen even earlier in the R&D life cycle, when assets across industries warned: “Slower firms eventually become
are relatively more affordable. Companies may also want to acquisition targets and will likely disappear. Most companies
prioritize minority investments, as GlaxoSmithKline has done won’t survive to the endgame by trying to stay out of the contest,
with 23andMe, and as Roche and Celgene did with Foundation or worse, by ignoring it.”3

3
Graeme Deans, Fritz Kroeger and Stefan Zeisel, “The Consolidation Curve,” Zeisel et al., Harvard Business Review, December 2002.

34  Firepower 2019
Figure 12. A new equation for delivering value

Building Life Sciences 4.0

Data
Future Innovation (Connect + Combine + Share)
value Outcomes x Personalization

For people Participatory Data Traditional Platforms

For physicians Precise streams and of care
For payers Predictive non-traditional
For policymakers Proactive partners

Above all, as companies develop their M&A

and partnering strategies to build future
value and counter the threat of new entrants,
they must remain agile and move fast.

Firepower 2019  35
Methodology
Dealmaking analysis EY teams measure “firepower” trends across the big pharma, big biotech,
medtech and specialty pharma/generics subsectors, as well as a subset
Life sciences M&A activity was analyzed from 1 January 2014 to of technology and consumer companies. This year’s EY Firepower Index
4 December 2018 using data from Capital IQ. Deals were categorized includes 74 life sciences companies. While some life sciences companies
according to the acquirer’s subsector (e.g., big biotech, big pharma, have made acquisitions that extend beyond the upper threshold defined
specialty pharma/generics and medical device and life sciences tools in the firepower methodology, the goal is to create a uniform approach to
companies) and by rationale as follows: measure relative changes in firepower.

• Financial deal: Characterization used when the acquirer is a financial Unless otherwise noted, 31 December data were used to calculate annual
buyer (e.g., private equity) outside the life sciences industry. firepower results; for 2018, results were analyzed through 31 October. In
instances where transactions by companies in two different subsectors
• Asset swap: Transaction in which the companies participate as
took place (e.g., Takeda’s acquisition of Shire), firepower calculations
both acquirers and sellers, negotiating the exchange of assets
were performed for the separate entities until closure of the transaction.
with each other.
To assess the ability of biopharma and medtech buyers to acquire
• Geographic expansion: Acquisitions by a life sciences company
potential growth targets, EY researchers compared the market valuations
specifically designed to access capabilities in a new geography. This
of a select group of publicly traded medical device, biotech and digital
does not include cross-border transactions that are part of larger,
health companies as of 31 October 2018 to the average firepower of
transformative transactions.
biopharma and medtech buyers. The biotech and medtech companies
ranged in market valuations from US$500 million to US$30 billion;
• Transformative M&A/megamerger: Deal meets one of two criteria:
Rock Health’s Digital Health Public Health Company Index was used to
deal is greater than US$10 billion in deal value or affects more than
benchmark digital health valuations.
50% of either company’s market capitalization. Megamergers are a
subset of transformative M&A with valuations of at least US$40 billion.
Biotech acquisition targets included in the analysis were ACADIA
Pharmaceuticals Inc., Acceleron Pharma Inc., Aimmune Therapeutics
• Bolt-on: Small- to medium-sized acquisitions that account for less than
Inc., Alkermes PLC, Alnylam Pharmaceuticals Inc., Amarin Corporation
25% of the buyer’s market capitalization.
PLC, AnaptysBio Inc., Audentes Therapeutics Inc., BioMarin
As part of the dealmaking analysis, EY researchers tracked the digital Pharmaceutical Inc., Bluebird Bio Inc., Clovis Oncology Inc., Esperion
alliances and acquisitions signed by leading life sciences companies Therapeutics Inc., Galapagos NV, Heron Therapeutics Inc., Incyte
by therapeutic area, technology capability (e.g., sensors or artificial Corp., Intercept Pharmaceuticals Inc., Ionis Pharmaceuticals Inc., Loxo
intelligence) and strategic purpose. Direct investments in digital health Oncology Inc., Neurocrine Biosciences Inc., Nektar Therapeutics, Sage
companies were excluded from this analysis. Therapeutics, Inc., Sarepta Therapeutics Inc., Seattle Genetics Inc.,
Tesaro Inc. and Ultragenyx Pharmaceutical Inc.
Firepower and valuation analyses
Firepower is defined as a company’s capacity to fund transactions based
on its balance sheet. It has four key inputs: 1. Cash and equivalents;
2. Existing debt; 3. Debt capacity, including credit lines; and 4. Market
The life sciences companies included in the 2019 EY Firepower Index are:
capitalization. The following assumptions underpin the analysis:

• A company will not acquire targets that exceed 50% of its existing Big pharma Big biotech
market capitalization. AbbVie Inc. Alexion Pharmaceuticals Inc.
Astellas Pharma Amgen Inc.
• When a transaction results in a new company, the debt-to-equity ratio AstraZeneca PLC Biogen Inc.
of the combined entity cannot exceed 30%. Bayer AG BioMarin Pharmaceutical Inc.
Bristol-Myers Squibb Co. Celgene Corp.
• Equity is measured on a market value basis. Daiichi Sankyo Co. Ltd. Gilead Sciences Inc.
Eisai Co. Ltd. Incyte Corp.
• The methodology does not calculate the ability to perform M&A via Eli Lilly and Company Novo Nordisk A/S
GlaxoSmithKline PLC Regeneron Pharmaceuticals Inc.
stock-for-stock transactions. However, increases in a company’s stock
Johnson & Johnson Seattle Genetics Inc.
price do increase a company’s firepower because increased equity Merck & Co. Inc. Vertex Pharmaceuticals Inc.
enables companies to borrow more to finance transactions. Novartis AG
Pfizer Inc.
Roche Holding AG
Sanofi
Takeda Pharmaceutical Company Ltd.

36  Firepower 2019
Medtech acquisition targets included in the analysis were AngioDynamics, Industry fragmentation and portfolio optimization
Inc., AtriCure Inc., AxoGen Inc., Bio-Rad Laboratories Inc., ConvaTec
Group PLC, Glaukos Corp., Haemonetics Corp., Inspire Medical Systems To understand how consolidation in therapeutic areas might drive
Inc., Insulet Corp., Integra LifeSciences Holdings Corp., Intersect ENT Inc., future dealmaking, EY researchers calculated the percentage of the
iRhythm Technologies Inc., LivaNova PLC, Masimo Corp., Nevro Corp., total biopharma market captured by the top drugmakers in 2017. Data
NuVasive Inc., Orthofix Medical Inc., Penumbra Inc., QIAGEN NV, Quidel for total market size were supplied by IQVIA. Datamonitor Healthcare
Corp., STERIS PLC, Tandem Diabetes Care Inc., TransEnterix Inc., Varian estimates were used to determine company revenues and market sizes
Medical Systems Inc. and Wright Medical Group NV. for individual therapeutic areas. The revenues of Johnson & Johnson
and Takeda Pharmaceutical Company include revenues from respective
acquisitions, Actelion and Shire.
Performance analysis of biopharma incumbents
The pharmaceutical portfolios of 25 biopharma incumbents To model the potential M&A activity that could result from portfolio
were categorized as more focused or less focused based on the optimization, EY first analyzed the market fragmentation in four
following criterion: companies that generated at least 50% of their therapeutic areas: oncology, immunology and inflammation,
biopharmaceutical revenues from one therapeutic area according to cardiovascular disease and infectious disease. The analysis is based on
Datamonitor Healthcare were classified as more focused; companies that the following assumptions:
didn’t meet this threshold were less focused.
• Assets were presumed to be candidates for portfolio optimization
The financial and operational performance of the more focused (n=10) if company revenues in this therapy area totaled 3% or less of
and less focused (n=15) cohorts were analyzed across six metrics: EBITDA the total therapy area revenues based on 2022 Datamonitor
margin (five-year average); five-year compound annual growth rate; Healthcare forecasts.
return on invested capital (five-year average); five-year total shareholder
return; average valuation; and average growth gap. • To determine potential revenue multiples in each of the four
therapeutic areas, precedent transactions since January 2015 were
The growth gap is the difference in the sales growth of a biopharma used to calculate average and median revenue multiples. To avoid
company relative to overall drug market sales. It is based on IQVIA’s skewing the results, the following types of transactions were excluded
global drug market forecast and Datamonitor Healthcare’s estimates of from this analysis: deals involving less than a 50% ownership stake;
company sales. For the purpose of this analysis, only aggregate growth deals with enterprise value to revenue ratios of more than 25-fold.
gaps for more focused and less focused groups were reported.
• To establish the base case for deal values in each therapeutic area,
To understand the dealmaking implications for more focused and less median revenue multiples were rounded down to the lower whole
focused biopharma companies, EY researchers segregated the two number. For example, the median multiple for oncology assets was
cohorts based on the forecasted five-year compound annual growth calculated to be 5.4, resulting in the 5x multiple used to assess
rates of biopharma products from 2018-2022. Unless otherwise noted, the potential aggregate value of all oncology assets that might be
Datamonitor Healthcare’s estimated drug forecasts were used as the divestiture candidates.
source for all sales figures.

Specialty pharma/generics Medical device and life sciences tools companies

Alkermes PLC Abbott Laboratories Hologic Inc. Stryker Corp.
Allergan PLC Baxter International Inc. Illumina Inc. Sysmex Corp.
Bausch Health Companies Inc. BD Integra LifeSciences Holdings Corp. Teleflex Inc.
Endo International PLC bioMerieux SA Intuitive Surgical Inc. Thermo Fisher Scientific Inc.
Indivior PLC Bio-Rad Laboratories Inc. Medtronic PLC Varian Medical Systems, Inc.
Jazz Pharmaceuticals PLC Boston Scientific Corp. Myriad Genetics, Inc. Veracyte Inc.
Mallinckrodt Public Limited Company Bruker Corp. OPKO Health Inc. Waters Corp.
Merck KGaA, Darmstadt, Germany DexCom, Inc. OraSure Technologies, Inc. Zimmer Biomet Holdings, Inc.
Mylan NV DiaSorin PerkinElmer Inc.
Perrigo Company PLC Edwards Lifesciences Corp. QIAGEN N.V.
Shire PLC Genomic Health Inc. Quidel Corp.
Teva Pharmaceutical Industries Ltd. Haemonetics Corp. Smith & Nephew PLC
UCB SA Hill-Rom Holdings Inc. Sonic Healthcare Ltd.

Firepower 2019  37
Acknowledgments
Project leadership Data analysis and quality assurance
Ellen Licking, EY Global Health Sciences and Wellness Harish Kumar from EY Global Delivery Services Group
Lead Analyst, was the managing editor and first author of oversaw a team of analysts that not only collected, organized
this year’s report, including the main narrative, four guest and analyzed the research included in this report but also
perspectives and the industry trend analysis. James Evans, made important editorial contributions. He was ably assisted
EY Global Health Sciences and Wellness Senior Analyst, by Saurabh Dua, Shivam Jaitly, and Stavita Bali. This team
assisted in the writing of the report and guest articles. Ed also conducted a review of the numbers presented in the
Phippen, EY Global Transactions Advisory Services Sector publication, while Ankur Sadhwani, Kim Medland and Cecile
Resident, provided project management and assisted in the Guiot reviewed the publication for quality and consistency.
data analysis and quality review. Scott Chapski was the publication’s copy editor and
proofreader. His attention to detail was unparalleled.
Ellen, James and Ed would like to recognize the following
individuals for their strategic guidance and critical editorial
contributions: Pamela Spence, EY Global Health Sciences Design
and Wellness Leader; Peter Behner, EY Global Life Sciences Dennis Ryan was the lead designer for this project. This
Transactions Leader; Ambar Boodhoo, EY Americas Life publication would not look the way it does without his
Sciences and Health Care Transactions Leader; and Rolf creativity and artistic judgment.
Fricker, EY-Parthenon EMEIA Life Sciences Strategy Leader.

PR and marketing
Alan Duerden, Cecile Guiot and Katie Costello led the public
relations and marketing efforts.

Focusing on fewer therapeutic areas is a

necessary first step to creating agile, more
competitive businesses and building deeper
relationships with key health stakeholders.

38  Firepower 2019
Contacts
Pamela Spence Matthew Bartell
EY Global Health Sciences EY UKI Life Sciences
and Wellness Industry Leader Transactions Advisory Leader
pspence2@uk.ey.com mbartell@uk.ey.com
+44 207 951 3523 +44 20 795 11771
Twitter: @pamelaspence_EY

Peter Behner Klaus Ort

EY Global Life Sciences EY GSA Life Sciences
Transactions Leader Transactions Advisory Leader
peter.behner@de.ey.com klaus.ort@de.ey.com
+49 30 25471 12467 +49 6196 996 14977

Ambar Boodhoo Takayuki Ooka

EY Americas Life Sciences EY Japan Life Sciences
and Health care Transactions Transactions Advisory Leader
Leader takayuki.ooka@jp.ey.com
ambar.boodhoo@ey.com +81 90 5792 3901
+1 212 773 9567

Ed Phippen Krishnakumar Vaidyanathan

EY Global Transaction Advisory EY India Life Sciences Transactions
Services Sector Resident, Life Advisory Leader
Sciences krishnakumar.v@in.ey.com
ephippen@uk.ey.com +91 22 61920950
+44 2079 514 119

Ellen Licking
EY Global Health Sciences
and Wellness Lead Analyst
ellen.licking@ey.com
+1 408 283 5022
Twitter: @EllenLicking

Firepower 2019  39
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust
and confidence in the capital markets and in economies the world
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How EY’s Global Life Sciences Sector can help your business
As populations age and chronic diseases become commonplace,
health care will take an ever larger share of GDP. Scientific progress,
augmented intelligence and a more empowered patient are driving
changes in the delivery of health care to a personalized experience
that demands health outcomes as the core metric. This is causing a
power shift among traditional stakeholder groups, with new entrants
(often not driven by profit) disrupting incumbents. Innovation,
productivity and access to patients remain the industry’s biggest
challenges. These trends challenge the capital strategy of every link in
the life sciences value chain, from R&D and product supply to product
launch and patient-centric operating models.

Our Global Life Sciences Sector brings together a worldwide network

of 17,000 sector-focused professionals to anticipate trends, identify
their implications and help our clients create competitive advantage.
We can help you navigate your way forward and achieve sustainable
success in the new health-outcomes-driven ecosystem.

© 2018 EYGM Limited.

All Rights Reserved.

EYG no. 012838-18Gbl

1810-2911688 US CSG
ED none

This material has been prepared for general informational purposes only and is
not intended to be relied upon as accounting, tax or other professional advice.
Please refer to your advisors for specific advice.

The views of third parties set out in this publication are not necessarily the views
of the global EY organization or its member firms. Moreover, they should be
seen in the context of the time they were made.

ey.com/firepower