Pharma M&A: defensive deals - FT.com Another day, another healthcare sector deal. AstraZeneca's purchase of Omthera on Tuesday is small (maximum value: $443m), bolt-on (to an existing cardiovascular business), and necessary (AstraZeneca needs to replenish its drug portfolio). It also maintains the pace of acquisitions in healthcare this year. The sector's valuation, however, suggests that investors are more attracted by Big Pharma's defensive qualities than by the prospect of another bout of industry consolidation. The industry is stalled in the pharmaceutical equivalent of the doldrums. First-quarter results were marked by the stagnation - or worse - of revenues. This is a reflection of the continuing impact of the patent cliff, which is likely to continue to 2015. The rebound after that could come quickly. Morgan Stanley estimates that earnings per share growth could accelerate for US pharma stocks from low single-digits to high single-digits beyond 2015. Since hitting their pre-patent cliff lows in March 2009, Big Pharma's valuations have rebounded. Share prices for Merck and Bristol-Myers Squibb have more than doubled; ditto for Sanofi and Merck KGaA in Europe. The laggards are Novartis, AstraZeneca and GlaxoSmithKline, though they too are moving in the right direction: AstraZeneca's shares are up 16 per cent since new chief executive Pascal Soriot unveiled his turnround strategy in mid-March. Those re-ratings signal more the better outlook for pipelines than any view that consolidation is quickening. So far in 2013, M&A activity has been among midsized companies (Actavis buying Warner Chilcott for $8.5bn including debt), or in the wider healthcare industry (Valeant buying Bausch & Lomb for $8.7bn), or for specific patents or drugs. Pfizer's split-off of its Zoetis animal-health business is interesting, but the industry is already streamlined. Large-cap pharma stocks trade on forward earnings multiples of 14 to 16 times, which are high but are off a low base. At this stage of the re-rating cycle, though, the deal action is has yet to reach the big boys.