Finimize - 💸 Deals are back

What’s going on here?

Roche announced on Monday that it’s buying irritable bowel drugmaker Telavant for $7.1 billion, which should give the Swiss pharmaceutical company a dose of calming relief.

What does this mean?

Roche, like many pharmaceutical companies, made more money than usual during the pandemic and its aftershock. But now that those lingering sales are winding down, the firm needs to find new experimental medicines to keep the cash flowing in – and fast. That’s probably why Roche is making its biggest deal since 2014, acquiring Telavant and its unique antibody therapy – designed in partnership with Roivant Sciences and Pfizer – that can tackle both the inflammation and fibrosis that are common symptoms of various diseases.

Why should I care?

For markets: Swipe the card.

That’s just the start of Roche’s shopping spree: the Swiss company’s on the hunt for all sorts of shiny deals, from early-stage testing projects to drugs in their late development. But there’s no guarantee that retail therapy will heal investors’ moods. The company’s shares have fallen 30% this year while Europe’s stock market index, the Stoxx 600, stayed pretty flat. That’s a sign of concern over Roche’s productivity, and those doubts may well hover around until the firm’s internal research gets a makeover too.

The bigger picture: Big Pharma x Big Tech.

Major pharmaceutical companies have their eyes locked on artificial intelligence, believing in its potential to identify new drugs, streamline production processes, and as a result, pull up company stock prices. Mind you, that’s a long-term plan. So for now, they’ll have to rely on big deals to shake up their businesses. They’ll be in good company, though: major oil players like ExxonMobil and Chevron are shelling out on smaller fry, since the rising cost of borrowing has meant only richer firms can afford to graduate from window shopping.

What’s going on here?

On Mondays, we make deals: Californian oil giant Chevron just agreed to buy smaller player Hess. That’s like, totally fetch.

What does this mean?

Dealmaking’s back, baby: after months of tumbleweeds in the usually lucrative world of mergers and acquisitions, Chevron just announced the second mega-deal in the oil industry this month. Both this deal and Exxon’s purchase of Pioneer will be paid in shares, which means Chevron and Exxon will issue $60 and $65 billion worth of extra shares respectively. After all, interest rates have made it more expensive to borrow money, so paying in cash is prohibitively pricey these days. Thing is, shareholders will put a lot more scrutiny on stock-only deals, expecting big results in return for those freshly minted new shares.

Why should I care?

For markets: More is more.

Oil companies have tended to use the money they make from higher-than-normal oil prices to explore and extract as much oil as possible. But if projections that the world will eventually swap fossil fuels for greener alternatives are right, then flooding a declining market with even more oil is probably a bad idea. Big firms have cottoned on, too: instead of investing in more wells, they’re snapping up smaller competitors instead – a bid to command a bigger share of a potentially smaller market.

The bigger picture: Oceans apart.

European and US energy firms have very different plans for dealing with the green transition. European oil firms are shedding their oil assets to lower their carbon footprints and free up funds for cleaner alternatives, while US companies are doubling down on the dirty stuff. Investors have spoken: over the last five years, big American oil stocks have stormed way ahead of their European counterparts.