According to data compiled by ComprarAcciones, M&A deal activity in the pharma sector rose by 17% during the first half of 2020.
To many, this would appear to be a positive shift, given the economic impacts of the pandemic. However, the rise in pharma industry deals might not come as a surprise to some, and it is worth noting that the deals being done, were less audacious than those completed during previous years.
Though a total of 41 deals were done during H1 2020, the total deal value during the second quarter – $3.3 billion – was the lowest quarterly sum since the first quarter of 2018.
Similarly, PwC reported that the pharma subsector saw a 56% drop in deal value between the second half of 2019 and H1 2020. For pharma, biotech and medical devices sectors as a whole (PLS), deal value fell by 87.2% during the same period comparison.
Top pharma deal H1 2020, PwC data, compraracciones graphic
While those numbers might appear drastic, the comparison is only amplified when we look at year-on-year trends. During the first half of 2019, the total deal value for the pharma subsector was $100.1 billion. In contrast, ComprarAcciones reported that the total value of pharma sector deals was $7.7 billion, down by over 92% year-on-year.Similarly, combined pharma and life sciences M&A deal value fell from $272.9 billion, to $35 billion. During the same periods, the number of deals fell from 119, to 99, while deals in H2 2019 stood at 129.
According to S&P Global, the healthcare industry as a whole started off the second half of 2020 with 13 deals, valued at more than $1 billion.
Speaking on declining deal volumes and value in the pharma sector, the ComprarAcciones report added:
“On the other hand, based on a report from Global Data, the global M&A deal value started on a downtrend in Q1 2020. It went from $151.2 billion to $129.9 billion from February to March. Another study from S&P Global shows that the decline carried into Q2 2020, with a 35% drop in deal volume. Similarly, total transaction value dropped by 40%, the highest drop since 2015.”“Comparing H1 2020 to H2 2019, the total deal volume sank by 32% year-over-year (YoY) from 10,155 deals to 6,938 according to Merger Market. Deal values sank by 53%, from $1.9 trillion to $901.6 billion during the same period.”
Driver Group shares (LON: DRV) surged over 11% on Monday as the group said it expects pre-tax profit to be £2.5m for the year to September 30.
Due to challenges around the pandemic, profit will be a 16% decrease from last year’s £3m total.
“Since January 2020 Driver Group has been managing the impact of Covid-19 on the business and by adopting a flexible home working model has continued to service its clients effectively and sustainably with the minimum of business interruption. Activity levels overall have been broadly consistent with those achieved in the first half, with a strong performance in the UK and Europe offset by a weaker result in the Middle East and Asia Pacific regions,” said the group in a statement.
Driver Group has opened a new office in New York which will enhance the group’s ability to service its clients in North America and provides improved access to the important South American markets.
The firm has also restructured the Middle East and the Asia Pacific operations so it can meet the changing business demands in those regions.
Mark Wheeler, chief executive of Driver Group, said: “I am pleased to be able to report that Driver Group has performed well during the year and has managed the uncertainty caused by the Covid-19 pandemic to ensure the business remained profitable and cash generative throughout the year in spite of a reduced level of activity.
“I am confident that the reduced cost base and renewed focus on our core business of higher margin expert witness and dispute resolution in both APAC and the Middle East will deliver improved operating performance. Alasdair and Stefan have proven track records in our business and I look forward to working with them and with our new colleagues in our operations in America and South Africa over the next few years to deliver significant progress,” he added.
Driver Group shares (LON: DRV) are 8.09% higher at 48,10 (1054GMT).
New aircraft orders have hit a record low over September.
No new orders were placed during the month of September and just 13 orders were made over the whole quarter – a 91.4% fall compared to the same period last year.
July saw four orders, whilst in August there were nine. It is the worst three-month since records began.
ADS chief executive Paul Everitt said: “The aerospace and aviation industries have invested in robust health and safety measures as part of aircraft design which makes the risk of transmission when travelling aboard an aircraft extremely low.
“We need to continue to work together internationally to improve consumer confidence and encourage a return to the skies.
“The quarantine period that passengers face when they return home is one of the main barriers to UK aviation’s recovery and testing can play a major role in reducing this.
“The government should rapidly implement a testing regime so that the 14-day quarantine period can be shortened. This will help improve confidence amongst travellers and in turn put the aviation and aerospace sectors on a path towards recovery.”
Ministers have said that are looking at reducing the UK quarantine period from 14 days to between 10 days and a week.
Shares in airline groups have plummeted over 2020 as the sector has been hit by travel restrictions and a fall in journeys amid the Coronavirus pandemic.
The union, Unite, estimated that in June 12,000 jobs had been lost in the sector, which supports around 110,000.
United Carpets shares (LON: UCG) surged +15% on Monday’s opening after posting a 24% increase in sales for the 19 weeks to 1 October 2020.
The specialist retail carpet and floor covering retailer said that despite no revenue generated during the eight weeks over lockdown, strong sales since have kept the group in a strong financial position.
United Carpets expects further challenges to arise from the pandemic and Brexit, which may deter demand.
The group warned that a “no-deal” Brexit may result in additional import tariffs on flooring products, and the longer-term impact from Covid-19 on unemployment and economic recovery may lead to a challenging retail environment in the next year.
Paul Eyre, the chief executive of United Carpets, said, “Since our stores were allowed to re-open, we have been encouraged by a strong period of trading. Customers appear to have been making up for the purchases they would have made during lockdown, with an increased focus on home improvements.
“Looking ahead, however, there are a number of significant, potential headwinds facing our sector and the UK economy in general strong demand for home improvement products combined with disrupted production due to Covid-19, have led to raw material shortages and, consequently, increased input prices across our sector.”
United Carpets had cash and cash equivalents of £5m from the end of September. Of this, £2m was received under the Coronavirus Business Interruption Loan, and the group also gained from the deferral of £1m of tax payments.
“Accordingly, the Board believes that the Group has sufficient capital to support the business through the current challenges, and is well placed in the event of any further restrictions due to the ongoing Covid-19 crisis,” said the group in its trading update.
United Carpet shares (LON: UCG) are currently trading +19.69% at 3,89 (1017GMT).
Tighter restrictions across Europe led to stock markets opening significantly lower on Monday morning.
UK’s FTSE 100 index down 0.8% at 5,812, Germany’s Dax fell 2.7%, France’s CAC was down 1.3%, and Spain’s Ibex fell by 1.3%.
“Restrictions are continuing to tighten around the world, especially in Europe, where Spain just entered a state of emergency, and Italy has introduced its most severe measures since the end of its national lockdown in May,” said Connor Campbell from Spreadex, commenting on stock markets across Europe.
“And the pace of the virus is showing no signs of slowing down, with a new record number of daily cases in the US, and confirmation of 137 local cases in China,” he added.
Markets also fell in response to US stimulus talks – where an agreement has still not been reached.
“Time is fast running out, if it hasn’t already – why would either side want to get a deal done, especially blue wave-praying Democrats, when the country’s political landscape could’ve completely shifted in a week and a half’s time?” said Campbell.
In Asia, China’s SSE composite index fell 0.8% while Japan’s Nikkei was down by 0.1%.
The price of oil has also fallen. Brent crude 2.27%, to $40.82 a barrel whilst the price of US light crude fell 2.43% at $38.88 a barrel.
“Oil is under pressure on the back of concerns that supply from Libya will rise as rival factions have called a ceasefire and that should pave the way for an increase in output. The worries about rising coronavirus cases in Europe and the US has sparked demand concerns,” said David Madden, market analyst at CMC Markets UK.
Yourgene Health Plc shares (LON: YGEN) plunged 11.54% on Monday’s opening bell after the group shared results for the half-year ended 30 September 2020.
Revenues for the half-year were up 5% to £8.2m with “strong European revenues offsetting the headwinds from COVID-19 on international sales.”
Impacts from the pandemic were offset by the strong UK and European growth. UK growth was primarily driven by Corona related products and services.
Revenue across Europe surged by 80% to £2.9m from the £1.6m in the same period a year previously.
International markets were affected by the enforced lockdowns, which inhibited cross-border shipments and in-country non-COVID-19 testing, especially in Japan and India.
Lyn Rees, Chief Executive Officer of Yourgene, commented: “I am pleased to report continued year-on-year growth in the first half in the most challenging of circumstances, and it goes to show the core resilience that Yourgene has developed through its greater geographic and business diversity.
“With the US and Japan now reopening for business, I expect to see International revenues growing rapidly around our core products and we are busy recruiting commercial resource to support the growth in activity from existing customers and to drive the on-boarding of new ones. In our UK service laboratory we have successfully achieved our initial capacity objective of 10,000 COVID-19 tests per month and are now focussed on delivering 20,000 tests per month, which we hope to have in place by January 2021.
“Furthermore, our acquisition of Coastal Genomics in this period demonstrates our continued ability to execute on select, highly attractive inorganic growth opportunities. Our full year outlook remains in line with management expectations and we look forward to updating investors again when we publish our half-year results in December,” added Rees.
Yourgene Health Plc shares (LON: YGEN) are currently 7.54% down at 18,03 (0836GMT).
The Hut Group shares (LON: THG) opened higher on Monday morning after the group’s trading statement for the three months ending 30 September 2020.
The online retailer listed on the stock exchange last month +38.6% year-on-year revenue growth for Q3 with a +51.3%, year-on-year growth in online revenues to £320.2m.
The Hut Group has raised full-year 2020 revenue guidance to between £1.48bn and £1.52bn.
Matthew Moulding, the group’s chief executive and executive chairman commented:
“I am pleased to report a strong period of trading in our first quarterly update as a public company, including an upgrade to revenue growth guidance for 2020. I would like to thank all our colleagues for their huge contribution to date. Our strong organic revenue growth across all divisions, numerous THG Ingenuity partnership deals, and the recent acquisition of luxury skincare brand Perricone MD, demonstrates our strategic direction and progress in the period.
“Our decision to list on the London Stock Exchange provides us with a strong platform to raise the profile of both Ingenuity and our Brands, and further supports their strong organic growth. Our acquisition strategy remains unchanged, with a focus to complement organic growth with brand IP and Ingenuity infrastructure additions.
“THG has a very strong balance sheet, enabling us to further invest across each of our growth pillars. THG’s core competencies leave it exceptionally well placed and we are witnessing increased opportunities, in scale and volume, for selective acquisitions across all our divisions and geographies.
“I am delighted to announce the establishment of our Advisory panel with the first three appointments made to provide additional counsel and support to THG’s Board sub-committees. This is a transformational step for THG and we look forward to making additional appointments over the medium term,” he added.
Floorcoverings and tiles manufacturer Victoria (LON: VCP) is getting rid of a share overhang and bringing in a new investor that is injecting cash into the company so it can make more acquisitions in the European floorcoverings sector.
Invesco owns nearly 20% of Victoria, but this stake has been an overhang for more than one year. New investor Koch Equity Development will buy just below 10% of Victoria from Invesco at 350p a share – the level at which the shares were trading when the deal was agreed. Spruce House Partnership will buy a 2.87% stake from Invesco and the rest of the stake will be...
Having bounced back from a five-month low on Thursday, the FTSE decided it would spend Friday in full rebound mode, thanks to banking stocks.
Enjoying a financial sector surge, the FTSE 100 gleefully watched Lloyds, HSBC, and Standard Chartered all rally more than 4% apiece. The real winner, though, was Barclays (LON:BARC), having booked a £1.1 billion profit, the bank watched its shares jump 7%.
These gains saw the FTSE add 1.29% on Friday, pushing it up from 5,723 on Thursday morning, to 5,860 points as trading came to a close on Friday – the biggest one-day gain seen since the start of September.
Likewise, the Eurozone equities joined in on the fun, with the CAC posting a 1.20% rise, up to 4,909 points, while the DAX rose by a hardly shabby margin of 0.82%, up to 12,645.
The gains across Europe were sorely needed after a week of lockdown fears hampering market sentiment. And while FTSE equities likely rallied off of a mixture of positive summer performance data and a weak pound, today’s rally was impressive, given that it required European equities to ignore the sluggish start of the Dow Jones during the afternoon.
Speaking on the Dow’s performance, and the uncertain outlook for the US index, Spreadex financial analyst, Connor Campbell, stated:
“A negative start in the US failed to dent Europe’s gains this Friday, while the Dow Jones [struggled] following the latest stimulus update.”
“Despite Nancy Pelosi stating that she and Treasury Secretary Steven Mnuchin are ‘just about there’ regarding a covid-19 relief plan, Trump’s economic advisor Larry Kudlow has claimed ‘the ball’s not moving much right now’, once again casting doubt on the chance of a pre-election package.”
“The concern is that, though a Joe Biden victory would potentially lead to a larger stimulus bill, it would also leave tight-fisted Republicans with little impetus to do anything that might help the incoming President during the ‘lame-duck’ period between November and January. And that could mean no economic relief until the New Year.”
As reported by the BBC and many other major outlets, UK retail sales increased for the fifth consecutive month in September, with sales volumes rising by 1.5% mon-on-month, according to the ONS.
While fuel sales remained down, the growth was led by higher-than-average consumer spend on groceries, DIY goods and garden supplies.
According to the latest statistics, retail sales are now 5.5% higher than pre-pandemic levels in February, with the three months to September illustrating the biggest jump, up 17.4% versus the previous quarter.
The problem with this positive way of thinking is that retail sales aren’t actually experiencing exponential growth, Instead, September’s growth was lower than the previous month, there appear to be challenges ahead, and the growth is not being experienced by retailers across the board.
Indeed, new lockdown restrictions will have the double-edged-sword effect. The first half of this will be a reduction in customers and potential closure of some shops. As stated by Kingswood CIO, Rupert Thompson:
“Retail sales posted an unexpectedly strong gain in September, rising 1.5% m/m to be up 4.7% from a year earlier. However, this is only encouraging up to a point as this strength was prior to the introduction of the new lockdown/social distancing measures. Business confidence fell back in October with the decline led by the services sector, the area the most vulnerable to the latest restrictions. This fall highlights the need for the new package of support measures announced by the Chancellor yesterday.”
The second consideration will be a change in consumer behaviour, with customers focusing on outlets perceived to be selling essential and cut-price goods, as will as outlets offering online retail opportunities. As said by Mark Lynch, Partner at Oghma Partners:
“While these figures highlight British stoicism in supporting a fragile economy, it is important to note that these retail sales figures might be slightly misleading in terms of giving an impression of the strength of the consumer economy as a whole. UK shoppers have been buying more food and drink at supermarkets because they have been spending less on eating out. The Government’s lockdown restrictions have re-emphasised earlier trends that we saw around Spring which showed positive sales growth for direct to consumer and supermarket companies. We have already seen a significant shift in consumer behaviour which has boosted growth for those companies in Q2 and to a lesser extent in Q3 but which now look to boost growth again in Q4.”
“We are sadly seeing more and more long term problems for Food to Go and food service providers that are unable to service clients as per normal. The fact is that more end user businesses will go bust, including pubs, restaurants and the more food service manufacturing capacity and, to a lesser extent, Food to Go capacity we will see taken out of the market.”
The problem with this positive way of thinking is that retail sales aren’t actually experiencing exponential growth, Instead, September’s growth was lower than the previous month, there appear to be challenges ahead, and the growth is not being experienced by retailers across the board.
Indeed, new lockdown restrictions will have the double-edged-sword effect. The first half of this will be a reduction in customers and potential closure of some shops. As stated by Kingswood CIO, Rupert Thompson:
“Retail sales posted an unexpectedly strong gain in September, rising 1.5% m/m to be up 4.7% from a year earlier. However, this is only encouraging up to a point as this strength was prior to the introduction of the new lockdown/social distancing measures. Business confidence fell back in October with the decline led by the services sector, the area the most vulnerable to the latest restrictions. This fall highlights the need for the new package of support measures announced by the Chancellor yesterday.”
The second consideration will be a change in consumer behaviour, with customers focusing on outlets perceived to be selling essential and cut-price goods, as will as outlets offering online retail opportunities. As said by Mark Lynch, Partner at Oghma Partners:
“While these figures highlight British stoicism in supporting a fragile economy, it is important to note that these retail sales figures might be slightly misleading in terms of giving an impression of the strength of the consumer economy as a whole. UK shoppers have been buying more food and drink at supermarkets because they have been spending less on eating out. The Government’s lockdown restrictions have re-emphasised earlier trends that we saw around Spring which showed positive sales growth for direct to consumer and supermarket companies. We have already seen a significant shift in consumer behaviour which has boosted growth for those companies in Q2 and to a lesser extent in Q3 but which now look to boost growth again in Q4.”