So what is on the horizon for the pharmaceutical industry for 2016? DCAT Value Chain Insights (VCI) highlights 10 key events on the industry’s radar for the upcoming year.

From mergers and acquisitions, to new drug approvals, to innovation in partnership models, what are the top 10 happenings beckoning in 2016? DCAT Value Chain Insights (VCI) takes an inside look.

The 2016 Countdown
1. The $160 billion merger of Allergan and Pfizer. Without question, the number one event in the pharmaceutical industry is the proposed $160 billion merger between Pfizer and Allergan, the largest deal announced in the pharmaceutical industry in 2015 and in the history of the pharmaceutical industry. A combined company would place Pfizer in the number one ranking in the pharmaceutical industry and further strengthen the company’s innovative products. If the deal proceeds, Pfizer would make its corporate headquarters in Ireland, currently the global headquarters of Allergan, keeping New York as its operational headquarters, and giving Pfizer a preferred corporate tax position. Unlike Pfizer’s $119 proposal to acquire AstraZeneca in 2014, which was rebuffed by AstraZeneca and which Pfizer ultimately decided not to pursue, the proposed combination of Allergan and Pfizer is proceeding on friendly terms with the board of both companies approving the transaction. If the deal proceeds as planned, it will close in the second half of 2016.

2. The $40.5 billion acquisition of Allergan’s generic business by Teva. Teva’s proposed $40.5 billion acquisition of the generics business of Allergan was another story topping the headlines in 2015. The deal, a friendly acquisition approved by the boards of both companies, is expected to close in the first quarter of 2016.In seeking to acquire Allergan Generics, Teva will strengthen its already strong generics portfolio. Allergan’s generics pipeline has approximately 230 abbreviated new drug applications pending at the US Food and Drug Administration (FDA), including approximately 70 first-to-file applications, as well as nearly 1,000 marketing authorization applications filed outside of the US, according to company information.

3. The merger of Dow Chemical and DuPont. In the other mega merger announced in 2015, the boards of directors of Dow Chemical and DuPont unanimously approved a definitive agreement under which the two chemical giants will combine in an all-stock merger of equals in a deal valued at $120 billion.. The combined company will be named DowDuPont.. A combined Dow Chemical and DuPont would generate pro forma sales of approximately $83 billion, placing it as the number one chemical company in the world ahead of the current number one global chemical company, BASF.

The plan, however, is to break the company into three separate standalone companies, one specializing in agricultural chemicals, a second in plastics and other materials, and a third in specialty products, which would include electronics, nutrition, and health. The merger transaction is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals, and approval by both Dow and DuPont shareholders. The subsequent separation of DowDuPont, which the companies intend to pursue, would be expected to occur 18-24 months following the closing of the merger. Upon completion of the merger transaction, Andrew Liveris, currently Dow’s chairman and chief executive officer (CEO) will become executive chairman of the newly formed DowDuPont board of directors, and Edward D. Breen, currently chairman and CEO of DuPont, will become CEO of DowDuPont. Key for 2016 is completion of the deal and future integration and plans for cost synergies.The transaction is expected to deliver approximately $3 billion in cost synergies, with 100% of the run-rate cost synergies achieved within the first 24 months following the closing of the transaction. Additional upside of approximately $1 billion is expected from growth synergies.

4. Merck KGaA’s $17 billion acquisition of Sigma Aldrich. Surpassed only by the proposed merger of Dow and DuPont, Merck KGaA’s $17-billion acquisition of Sigma-Aldrich, which closed in November 2015, was one of largest deals among suppliers and was the largest in the history of Merck KGaA. Key for 2016 will be the integration of the two companies. With the acquisition, Merck KGaA will have around 50,000 employees in 67 countries, working at 72 manufacturing sites worldwide. Combined pro forma full-year life science sales amounted to EUR 4.6 billion ($4.9 billion) in 2014. As announced on publication of the results for the third quarter of 2015, Merck KGaA expects sales to amount to between EUR 12.6 billion ($13.4 billion) and EUR 12.8 billion ($13.6 billion) in 2015. The deal was the largest piece of a transformation for Merck KGaA, which has made acquisitions and divestments totaling EUR 38 billion ($40.5 billion) in the past decade, turning the former pharma and chemicals company into a science and technology company with three businesses in healthcare, life science,,and performance materials. With the acquisition of Sigma-Aldrich, Merck KGaA will be able to serve the life science industry with more than 300,000 products. Merck KGaA is progressing integration for the new business, which will be named “MilliporeSigma” in the US and Canada.

5. The new Bayer. Another major move expected in 2016 is the emergence of Bayer AG as a pure-play life sciences company. The German chemical conglomerate first announced in September 2014 that it would demerge its material science business and float it as a separate company, now called Covestro, leaving the strategic focus of Bayer on its life sciences businesses, which include pharmaceuticals, consumer healthcare, and crop science. Bayer intends to float Covestro on the stock market by mid-2016 at the latest. From January 1, 2016, the company’s business will be managed by three divisions: Pharmaceuticals, Consumer Health, and Crop Science. The Pharmaceuticals Division brings together prescription medicines from the general medicine and specialty pharmaceuticals categories and also the radiology business. The Consumer Health Division encompasses consumer brands from the allergy, analgesic, cardiovascular risk prevention, cough, cold and flu, dermatology, foot care, gastrointestinal, dietary supplement, and sun protection categories. The Crop Science Division, Bayer’s agriculture business, is active in the seed, chemical and biological crop protection and non-agricultural pest control markets. Animal Health provides products and solutions to prevent and treat diseases in companion and farm animals.

Dieter Weinand will lead the Pharmaceuticals business and Erica Mann the Consumer Health business. Dieter Weinand was appointed to the Bayer HealthCare Executive Committee as head of the Pharmaceuticals Division on August 1, 2014. Before moving to Bayer HealthCare, he was president, global commercialization & portfolio management at Otsuka Pharmaceutical Development & Commercialization, Inc. in Princeton, New Jersey, United States. Prior to that, he held various responsibilities in commercial, operational and strategic roles at a number of pharmaceutical companies including Pfizer and Bristol-Myers Squibb.

Erica Mann was appointed to the Bayer HealthCare Executive Committee as head of the Consumer Care Division in mid-March 2011. She also chairs the World Self Medication Industry Association. Before joining Bayer, her roles included managing director of Wyeth in Australia and New Zealand from 2003. In April 2009, she became senior vice president for the global nutrition business. Following the acquisition of Wyeth by Pfizer, Mann moved to the United States, where she was president and general manager of Pfizer’s Nutrition Division and a member of that company’s senior management team.

6. Would-be mergers and acquisitions. Another deal, still on hold, is Shire’s proposed approximate acquisition of Baxalta, the biopharmaceutical company spun off from Baxter in 2015. A little more than a month after Baxalta was formed as an independent company in July 2015 following its separation from Baxter, Shire made an approximate $30 billion proposal for Baxalta, a move Baxalta rejected. As we begin 2016, what Shire will do next is a key issue, which may include raising its offer to secure Baxalta. In seeking to acquire Baxalta, Shire is moving forward with a strategic focus formed in 2013, when the company repositioned itself as a specialty biopharmaceutical company with a primary focus on specialized and rare diseases. The company named a new CEO, Flemming Ornskov, on April 30, 2013.

If the deal were to proceed, the combined entity is projected to deliver product sales of $20 billion in 2020 with several $1 billion franchises in rare diseases. It would have more than 30 new product launches planned with approximately $5 billion incremental sales potential by 2020. The therapeutic focus of Baxalta is in hematology, immunology, and oncology .Baxalta’s portfolio includes a variety of additional differentiated therapies for the treatment of bleeding disorders and chronic and acute medical conditions, including hemophilia A, hemophilia B, acquired hemophilia, inhibitor treatments, primary immunodeficiency (PID) and alpha-1 antitrypsin deficiency. Baxalta is also investing in new disease areas, including oncology, as well as emerging technology platforms, including gene therapy and biosimilars. Baxalta said it plans to launch 20 new products by 2020.

7. Pharmaceutical industry growth. In a recent anaylsis, the IMS Institute for Healthcare Informatics projects that total spending on medicines will reach $1.4 trillion by 2020 due to greater patient access to chronic disease treatments and breakthrough innovations in drug therapies. Global spending is forecast to grow at a 4-7% compound annual growth rate in the forecast period of 2016-2020. Total global spend for pharmaceuticals will increase by $349 billion in the forecast period of 2016-2020 on a constant-dollar basis, compared with $182 billion during the past five years (2010-2015). Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes, and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $90 billion, or approximately 25% of the growth forecast through 2020. Spending levels will be driven by branded drugs primarily in developed markets, along with the greater use of generics in emerging markets—offset by the impact of patent expiries. Brand spending in developed markets will rise by $298 billion as new products are launched and as price increases are applied in the US, most of which will be offset by off-invoice discounts and rebates. Patent expiries are expected to result in $178 billion in reduced spending on branded products, including $41 billion in savings on biologics as biosimilars become more widely adopted,

8. New molecular entities. In 2015, the US Food and Drug Administration’s Center for Drug Evaluation and Research (CDER) approved 45 new molecular entities (NMEs), a recent high, surpassing 2014’s level of 41 NME approvals and 2012’s 39 NME approvals. The uptick in NME approvals is positive for the industry and continues an upward trajectory following a low period of NME approval. From 2004 to 2012, CDER averaged 26 NME approvals per year, which was bolstered by approval levels in 2012 and 2013. The period of 2005 to 2010 was a slower period for NME approvals. In 2005, 20 NMEs were approved, 22 in 2006, 18 in 2007, 24 in 2008, and 26 in 2009. Key for the industry in 2016 is whether these upward trends will continue.

9. The rising fortunes of the immuno-oncology market. A key item to watch in 2016 will be the rise of the immuno-oncology market, a rising area in the oncology market, the industry’s largest therapeutic sector. Let by commercial leaders, Bristol-Myers Squibb with Opdivo (nivolumab), a PD-1 immune checkpoint inhibitor, and Merck & Co with Keytruda (pembrolizumab), the company’s anti-PD-1 therapy, both slated as blockbuster drugs, the major pharmaceutical companies are advancing their immuno-oncology candidates and building a web of alliances to advance monotherapies and combination therapies. In 2016, look for continued market penetration and uptick from this new class of drugs.

10. CRISPR: a new technology in drug development. Voted as the breakthrough of 2015 by Science magazine, gene editing as applied through CRISPR, standing for Clustered Regularly Interspaced Short Palindromic Repeats that occur in the genome of certain bacteria is a technology that has potential in drug development. Research has focused on Cas9, a CRISPR-associated endonuclease (an enzyme) known to act as the “molecular scissors” that cut and edit, or correct, disease-associated DNA in a cell. In this technology, a guide RNA directs the Cas9 molecular scissors to the exact site of the disease-associated mutation. Once the molecular scissors make a cut in the DNA, additional cellular mechanisms and exogenously added DNA will use the cell’s own machinery and other elements to specifically ‘repair’ the DNA. This technology may offer the ability to directly modify or correct the underlying disease-associated changes in the human genome for the potential treatment of a large number of both rare and common diseases. Companies such as Bayer and AstraZeneca have partnered with companies and research institutes in this field, and for 2016, look to see if further partnering and advances are made.