All the pieces seem to have fallen into place to make 2005 the year that big pharmas mount a massive biotech M&A campaign. Not only are their pipelines still full of holes, but also many blockbuster drugs are about to come off patent – opening the field to generics and drastically reducing revenues. But that’s been the situation for years now, and M&A activity hasn’t picked up much. So what makes it different now? Well, it all comes down to money. For one thing, in-licensing deals are getting so pricy that it’s beginning to make more sense to just buy a company outright. Because there’s no appetite for biotech IPOs these days, backers of private companies find an M&A exit very appealing. And, since the valuations of public firms are depressed, they come at a cheaper price, too. To top it off, U.S.-based big pharmas are flush with cash, thanks to a one-time federal deal that allows companies to repatriate earnings from overseas operations at a tax rate significantly lower than usual. These earnings must be invested in the U.S. – and could very well go towards acquisitions.
The pharmaceutical industry has been in trouble for some time now – and even though every company is acutely aware of the major problems, none has yet to come up with a solution. No matter how much these firms pour into R&D, it seems, they are still faced with woefully thin pipelines. Patents on important blockbusters are expiring right and left, allowing a rapid onslaught of generic drugs and taking a substantial bite out of profits. Moreover, pharma-pharma mega-mergers are difficult to pull off and although they are one way to beef up a pipeline, it’s not clear whether they actually work as intended.
Still, there are plenty of pharma-pharma mergers in the works – particularly in Japan, where legislation that is set to take effect next year will allow greater foreign investment in Japanese firms. This has spurred a wave of defensive mergers, intended to make these firms less attractive acquisition candidates. Just this year, Sankyo Co. Ltd. bought Daiichi Pharmaceutical Co. Ltd. and Fujisawa Pharmaceutical Co. Ltd. joined forces with Yamanouchi Pharmaceutical Co. Ltd. to form Astellas Pharma Inc. Late last year Dainippon Pharmaceutical Co. Ltd. paid $2.2 billion to acquire Sumitomo Pharmaceuticals Co.
Even so, none of these combinations will create a pharmaceutical company larger than Japan’s leader Takeda Pharmaceutical Co. Ltd. – and Takeda is still small on a global basis, ranked 14th in terms of sales.
There have been a few other significant pharma deals recently, too – like Belgium’s Solvay S.A.’s $2 billion bid for Fournier Pharma of Chenove, France and Johnson & Johnson’s $24 billion bid for Guidant Corp.
Analysts predict that the top-tier pharmas in the U.S. may pick up the pace this year, too, especially when it comes to targeting smaller firms that have fat pipelines and/or successful products in specific therapeutic areas. These predictions are based on the fact that the these companies are flush with cash right now – due largely to a one-time federal tax break under the American Jobs Creation Act 2004 that allows companies to repatriate profits from overseas operations at a 5.25 percent tax rate instead of the normal 35 percent tax. These repatriated earnings must be invested in the U.S. – and that, reportedly, includes the acquisition of companies with U.S. assets. Reportedly, Pfizer Inc. will get as much as $38 billion in funds this way and Merck & Co. Inc. has $15 billion in earnings eligible for repatriation.
That’s enough cash to make quite a few acquisitions, certainly, and there are reasons to believe that big pharmas may buy more biotechs than usual this year. Traditionally, they have shied away from buying biotech firms lock, stock and barrel. In 2004, there were seven pharma-biotech deals as compared with 55 biotech-biotech M&As. (2004’s M&A transactions valued at $10M or more are included in the tables in this article.) And, since 1995, the number of pharma-biotech M&As has remained fairly small.
But the situation is a little different this year. Pharmas usually lock onto promising drug candidates by striking in-licensing deals with biotechs. But in-licensing deals are getting pricier all the time and competition is intense, meaning that it’s beginning to make more sense to buy a company outright, especially an early-stage firm with cutting-edge technology and a relatively modest valuation. It’s a gamble, but a cheap one.
Venture capitalists and entrepreneurs who formed these new companies also seem to be much more amenable to exit via acquisition these days, especially because the alternative exit – an IPO – is chancy in the best of times, and downright nonexistent at present.
As well, already public biotechs have seen their stock prices erode over the last year or so, driving down valuations to the point where they become attractive acquisition candidates.
Thus, the balance is shifting somewhat – from licensing deals to outright acquisitions. It could remain this way for the remainder of the year, too.
Pfizer, currently the world’s largest pharmaceutical company, has a history of snapping up small biotech firms, but in recent months it appears to have stepped up the pace. And according to analysts, the pharmaceutical giant could very well keep it up for the foreseeable future.
In January 2005, Pfizer agreed to shell out $527 million to acquire Angiosyn Inc., a fledgling biotech company that is developing a new angiostatic biologic product, still in the preclinical stage, that will be used in ophthalmic diseases such as age-related macular degeneration (AMD), in which uncontrolled blood vessel formation leads to blindness.
This acquisition fits neatly with Pfizer’s plans to build an ophthalmology franchise – which got off to a promising start back in December 2002, when it signed a deal with Eyetech Pharmaceuticals Inc. to jointly finish the development of Eyetech’s AMD drug Macugen (which targets vascular endothelial growth factor) and then co-commercialize it. It was a smart move: When the FDA approved Macugen in December 2004, the product became the very first drug approved for treating all forms of wet AMD – and opened up a huge potential market. Wet AMD affects 1.6 million individuals in the U.S. alone, and 200,000 new cases are reported each year. That’s bound to increase as the Baby Boomers start hitting retirement age. Plus, the companies are also studying Macugen in other eye diseases such as diabetic retinopathy.
Big Pharma’s Biotech Acquisitions In 2005
|
Company Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date
Completed
|
Value
|
Details, Comments
|
|
ActivX Biosciences
|
Kyorin Pharmaceutical
(Tokyo Stock Exchange; Japan)
|
12/04
|
2/05
|
$21M
(cash)
|
Expands Kyorin’s global R&D network; also continues development
of pre-clinical drug for Type II diabetes
|
|
Angiosyn
|
Pfizer
(PFE)
|
1/05
|
1Q:05E
|
$527M
(cash)
|
Angiosyn’s angiostatic drug candidate will extend Pfizer’s research
commitment in ophthalmology
|
|
CTI Molecular Imaging
(CTMI)
|
Siemens Medical Solutions
(subsidiary of Siemens AG; SI)
|
3/05
|
2Q:05E
|
$1.0B
(cash)
|
Positron emission tomography: diagnostic imaging technology for detecting
and treating cancer, neurological disorders and cardiac disease
|
|
Emergent Genetics
|
Monsanto
(MON)
|
2/05
|
4/05
|
$300M
(cash)
|
Completes Monsanto’s strategic cotton germplasm and traits platform
|
|
Genencor International
(GCOR)
|
Danisco
(CopenhagenStock Exchange; Denmark)
|
1/05
|
5/05E
|
$544M
(cash)
|
Danisco acquires 100% stake in Genencor (it had owned a 42% stake,
as did Eastman Chemical); broadens Danisco’s access to area of industrial
enzymes
|
|
Idun Pharmaceuticals
|
Pfizer
(PFE)
|
2/05
|
2Q:05E
|
ND
|
Augments Pfizer’s internal R&D, especially through technology platform
in controlling caspase activity (apoptosis- and inflammation-related)
|
Angiosyn is still a very young company: The La Jolla firm was founded by Scripps Research Institute scientists Karla Ewalt and Paul Schimmel in 2003. Its rapid acquisition speaks, in part, to Pfizer’s need to fill its pipeline and, in part, to changing attitudes among venture capital investors and company entrepreneurs, who realize the value of an early buy-out.
Indeed: Angiosyn’s venture backer Alta Partners reportedly put less than $10 million into the firm in May 2003. A return of $527 million is quite handsome -- even though, admittedly, this money will be paid out over the next 5-10 years on milestones, but includes a modest upfront payment and future royalties, similar to a licensing deal.
In that way, Pfizer actually made a relatively cheap investment in an unproven, risky, product candidate – but one which could become a big hit in the future.
Pfizer is also acquiring Idun Pharmaceuticals Inc., a deal it announced in February 2005. Idun, whose name derives from the mythical Norse goddess of spring and eternal youth, is developing therapies to control apoptosis, or programmed cell death. In particular, the company focuses on controlling the activity of caspases, a group of proteases involved in apoptosis and inflammation.
Terms were not disclosed but analysts have estimated that the deal is worth $400-$500 million.
Idun’s most recent venture financing occurred in June 2004, when it raised $27 million in a series B round, its first since a recapitalization in 2002. But it’s been around since 1993, so its research programs are more mature than those of Angiosyn. In fact, Idun’s lead product candidate, IDN-6556, a pan caspase inhibitor, is in Phase II clinical trials in liver transplantation and in patients infected with hepatitis C virus. The firm’s also got several preclinical programs in cancer and asthma.
Pfizer was obviously interested in Idun’s technology platform in controlling caspase activity, a technology that could have broad applications. Importantly, the clinical trial results demonstrate that “there can be important drugs developed against targets in that pathway,” according to Steven Mento, Idun’s president and CEO.
“2004 was an interesting year for Idun,” Mento said. “In the early part of the year we were focused on getting financing to move our lead compound forward in the clinic.” Next, company researchers presented data on IDN-6556 at a hepatology meeting, he continued, “and Pfizer was there.” The pharma “approached us in March to initiate partnering discussions and we said OK” -- even though Idun’s priority at that point was getting new financing (which it secured in June).
Big Pharma’s Biotech Acquisitions In 2005
|
Company
Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date
Completed
|
Value
|
Details, Comments
|
|
JRH Biosciences
(division of CSL Ltd.)
|
Sigma-Aldrich
(SIAL)
|
1/05
|
2/05
|
$370M
(cash)
|
Strengthens Sigma-Aldrich’s ability to supply cell culture and sera
products to biopharmaceutical industry
|
|
NeoGenesis Pharmaceuticals
|
Schering-Plough
(SGP)
|
1/05
|
2/05
|
$18M
(cash)
|
Strengthens Schering-Plough’s drug discovery capabilities (screening
and chemistry technologies)
|
|
Proligo Group
(subsidiary of Degussa)
|
Sigma-Aldrich
(SIAL)
|
2/05
|
4/05
|
ND
|
Adds to Sigma-Aldrich’s strategy to be leading supplier of genomics
research tools, including an exclusive license to a key MIT patent on
the use of RNA in gene silencing
|
|
Syrrx
|
Takeda Pharmaceutical Co.
|
2/05
|
1Q:05E
|
$270M
(cash)
|
Enhances Takeda’s drug discovery via high-throughput X-ray crystallography;
also adds to clinical pipeline (Type II diabetes)
|
|
TransForm Pharmaceuticals
|
Johnson & Johnson
(JNJ)
|
3/05
|
4/05
|
$230M
(cash)
|
Adds capabilities in superior drug formulations and novel crystalline
forms of drug molecules
|
|
Xcel Pharmaceuticals
|
Valeant Pharmaceuticals International
(VRX)
|
2/05
|
3/05
|
$280M
(cash)
|
Enhances Valeant’s specialty pharma business in CNS diseases; Xcel
has a sales force, 4 marketed products, and 1 in the clinic
|
“We wanted to hunker down for the next year, start a few clinical trials, do some tox studies, and so forth,” Mento explained. “We weren’t thinking about partnering. But Pfizer and multiple other companies approached us for partnering.” That situation put Idun in the driver’s seat: “We were in a position to be aggressive in the terms of a partnering agreement [with each of the potential partners],” he said.
After looking over the terms, Pfizer as well as at least one other suitor came back to Idun wishing to “talk about a more durable relationship,” Mento said. Importantly, when Idun was recapitalized in 2002, the firm decided to “keep all our options open as long as we could. By 2004, we owned essentially everything. There’s no reach-in from earlier pharma partners.” That certainly made Idun an attractive target.
In the end, “Pfizer put numbers on the table that were very, very attractive to our investors, many of whom came in six months ago,” Mento continued. “This was a rich and risk-free return. The numbers dictated the outcome.”
Pfizer has actually been quite busy acquiring small companies to help address its pipeline needs. In 2004, for instance, it paid $125 million to acquire the U.K. drug delivery firm Meridica Ltd. – a company from which it had previously licensed a dry powder inhaler in a deal that also included Pfizer’s purchase of a 10 percent stake.
In late 2003, Pfizer paid out $1.3 billion to acquire Esperion Therapeutics Inc., which was developing high density lipoprotein (“good” cholesterol) targeted therapies for cardiovascular disease. In this way, the pharma giant boosted its own development efforts in this therapeutic arena. It already sells the extremely popular drug Lipitor, which reduces low density lipoprotein (“bad” cholesterol) and racks up $11 billion in sales.
At least Lipitor is safe for the remainder of the decade. But two of Pfizer’s blockbusters – the antibiotic Zithromax and the antidepressant Zoloft – are coming off patent in 2007. The company’s had to halt sales of its pain and arthritis drug Bextra (which reaped $1.3 billion in 2004) and add a new warning label for its other COX-2 inhibitor Celebrex (which brought in $3.3 billion in 2004), which will result, no doubt, in starkly reduced sales going forward.
The pharma appears to be on top of the situation, though, and in earl April the company announced a cost-cutting plan by which it intends to save $4 billion by 2008. The company also has plenty of money ($24.4 billion in cash and investments) and intends to “intensify our efforts to acquire new products and technologies to further strengthen our new product pipeline,” according to prepared remarks by vice chairman David Shedlarz.
That implies more biotech deals – outright acquisitions as well as collaborations. In fact, chairman and CEO Hank McKinnell was even quoted as saying that “the biotech area is a good one [for acquisitions]. Prices are down.”
Other big pharmas, like Merck and GlaxoSmithKline plc (GSK), are in positions similar to Pfizer’s: Their pipelines are far from full and patents on key products are set to expire. (Merck, of course, also will lose a major revenue stream due to its withdrawal of the pain killer Vioxx last fall.)
Neither company has made a move this year to acquire a biotech firm. Other big pharmas, however, are wasting no time. (For a list of 2005’s pharma-biotech M&As to date, see the tables in this article.)
Schering-Plough Corp., for instance, has acquired small molecule discovery firm NeoGenesis Pharmaceuticals Inc., with which it already had a research collaboration, for $18 million. The pharma got quite a deal here: Since its founding in 1997, NeoGenesis had raised $54 million in venture financing.
And Valeant Pharmaceuticals International acquired specialty pharmaceutical firm Xcel Pharmaceuticals for $280 million in cash in a deal that closed in early March. Xcel’s portfolio, which is focused on drugs for central nervous system disorders, includes four marketed products and one in late-stage clinical trials. As well, Xcel had already put together a specialized neurology sales force. Thus, international giant Valeant not only enhanced its neurology franchise but also expanded its presence in North America.
Plus, as we’ve seen with most other recent M&As, this deal offered privately held Xcel’s investors a liquid exit. Xcel raised about $119 million in three rounds of venture financing, giving it a valuation of nearly $171 million at the time of the acquisition. The investors were no doubt relieved, as well, for Xcel tried to go public twice with no success.
Selected M&As In 2004*
|
Company Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date Completed
|
Value
|
|
ACCESS Oncology
|
Keryx Biopharmaceuticals
(KERX)
|
1/04
|
2/04
|
$19.5M
(stock, assumption of liabilities & contingent equity rights)
|
|
Aclara BioSciences
(ACLA)
|
ViroLogic
(VLGC)
|
6/04
|
12/04
|
$200M
(stock & cash)
|
|
Adprotech
(U.K.)
|
Inflazyme Pharmaceuticals
(IZP; Canada)
|
4/04
|
4/04
|
US$14.9M
(stock)
|
|
Aesgen
|
MGI Pharma
(MOGN)
|
9/04
|
9/04
|
$90M
($32M cash upfront & $58M in performance milestones)
|
|
Apogent Technologies
(AOT)
|
Fischer Scientific International
(FSH)
|
3/04
|
8/04
|
$3.7B
(stock)
|
|
Atrix Laboratories
(ATRX)
|
QLT
(QLTI; Canada)
|
6/04
|
11/04
|
$855M
(stock & cash)
|
|
Atto Bioscience
|
Becton, Dickinson
(BDX)
|
-----
|
7/04
|
$25M
(cash)
|
|
Axon Instruments
(AXN)
|
Molecule Devices
(MDCC)
|
3/04
|
7/04
|
$132.7M
(stock & cash)
|
|
Biosyn
|
Cellegy Pharmaceuticals
(CLGY)
|
10/04
|
11/04
|
$28.8M
(stock & cash, including $15M on launch of lead product)
|
*Note: This table highlights selected M&A transactions that were initiated and completed in 2004 and whose value was at least $10M. It does not include M&As that involve business units, divisions, subsidiaries, product lines or facilities. It also does not include medical device transactions.
In February 2005, Takeda announced that it was acquiring Syrrx Inc. in a deal valued at $270 million. By doing so, the Japanese pharma gets access to the San Diego firm’s drug discovery technology, which involves the use of high throughput X-ray crystallography to determine the three-dimensional structures of drug candidates. But Syrrx is also developing drug candidates and already has several compounds for treating Type II diabetes in the clinic – and those compounds attracted Takeda’s eye.
Since its inception in 1999, Syrrx has raised about $135 million in venture capital. That makes Takeda’s cash bid twice as rich – obviously an alluring prospect that the firm’s principals couldn’t turn down. That’s especially true given the fact that the $270 million bid was higher than even the highest pre-IPO valuation for any of the biotech and specialty pharma companies that have completed IPOs in 2005.
Selected M&As In 2004*
|
Company Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date Completed
|
Value
|
|
Celltech Group
(CLL; U.K.)
|
UCB
(Belgium)
|
5/04
|
8/04
|
$2.71B
(cash)
|
|
ChemGenex Therapeutics
|
AGT Biosciences
(AGT; Australia)
|
4/04
|
6/04
|
US$10.4M
(stock)
|
|
Combio
(Denmark)
|
Arpida
(Switzerland)
|
-----
|
10/04
|
$26.8
(stock)
|
|
Concorde Microsystems
|
CTI Molecular Imaging
(CTMI)
|
6/04
|
6/04
|
$41M
(stock & cash)
|
|
Dharmacon
|
Fisher Scientific International
(FSH)
|
2/04
|
4/04
|
$80M
(cash)
|
|
DNA Research Innovations
(U.K.)
|
Invitrogen
(IVGN)
|
-----
|
10/04
|
$65M
(cash; includes $30M in contingency payments)
|
|
Empire Pharmaceuticals
|
Neurobiological Technologies
(NTII)
|
-----
|
7/04
|
$22.8M
(stock & cash)
|
|
Epoch Biosciences
(EBIO)
|
Nanogen
(NGEN)
|
9/04
|
12/04
|
$97.2M
(stock)
|
|
Etiologics
(U.K.)
|
Argenta Discovery
(U.K.)
|
-----
|
10/04
|
$10.5M
(cash)
|
*Note: This table highlights selected M&A transactions that were initiated and completed in 2004 and whose value was at least $10M. It does not include M&As that involve business units, divisions, subsidiaries, product lines or facilities. It also does not include medical device transactions.
Johnson & Johnson, which has always been a major player in the biotech M&A space, made its first acquisition of the year in early March, when it plunked down $230 million to acquire TransForm Pharmaceuticals Inc. This strategic acquisition gives the pharma new abilities in drug formulation technology and the crystallization of pharmaceuticals, technologies that should apply across J&J’s entire pipeline.
The two parties already knew each other, having worked together in two separate alliances – the first of which was formed in 2002 between TransForm and J&J’s Alza Corp. unit. In that deal, the partners worked together to develop a high throughput platform for identifying optimal formulations for products that used Alza’s transdermal delivery technology.
The second alliance, signed in 2003, paired TransForm with Johnson & Johnson Pharmaceutical Research & Development LLC (J&JPRD). In this deal, J&JPRD was assigned all rights to TransForm’s patent on a new formulation of topiramate – an epilepsy drug marketed by another of J&J’s companies, Ortho-McNeil Pharmaceutical Inc. J&JPRD also funded TransForm’s efforts to do further crystallization studies on topiramate, and the Johnson & Johnson Development Corp. bought an equity stake in TransForm.
Through these deals, J&J and TransForm established “a close and very constructive working relationship,” explained Nick Galakatos, TransForm’s co-founder and chairman. Moreover, TransForm “had discussions with 1-2 more divisions of J&J along the way,” he said. And that included talks on formulating drugs for use with devices, such as coated stents – a very important area for J&J, especially now that it’s acquiring Guidant Corp. “The technology lends itself to that as well,” Galakatos said.
“These all kind of aligned,” he continued, and the discussions evolved from doing deals to putting together something that “made good sense in a strategic way.” And going forward, he added, “J&J is a unique organization in terms of being a strategic partner for TransForm,” because its products span everything from small molecule prescription drugs to consumer goods and present a very large number of formulation opportunities.
Here again, the biotech company’s financial backers got a sweet deal. Reportedly, during its short life TransForm raised about $60 million in venture capital from companies such as Polaris Venture Partners and MPM Capital – where Galakatos is a senior partner.
Biotech companies have been known to make some big purchases over the years, too. And this year should prove no different.
In January, for instance, Protein Design Labs Inc. (PDL) agreed to pay a whopping $475 million in cash and stock for ESP Pharma, a specialty pharmaceutical company that has a strong pipeline, marketed products and a hospital-focused sales force.
PDL upped the final purchase price to nearly $500 million, though – because a week after the acquisition was announced, ESP Pharma cleverly bought the clot-busting drug Retavase from Centocor (a Johnson & Johnson company) for $110 million upfront plus $45 million in milestones.
Along with Retavase, ESP Pharma brought to the marriage the U.S. rights to four cardiovascular products it acquired from Wyeth in May 2002 -- Cardene IV, Sectral, Tenex and Ismo – as well as worldwide rights to IV Busalfex (a chemotherapeutic) acquired from Orphan Medical Inc. in June 2003.
Selected M&As In 2004*
|
Company Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date Completed
|
Value
|
|
Genomics Collaborative
|
SeraCare Life Sciences
(SRLS)
|
-----
|
6/04
|
$15.1M
(stock & cash)
|
|
ILEX Oncology
(ILXO)
|
Genzyme
(GENZ)
|
2/04
|
12/04
|
$1B
(stock)
|
|
Inveresk Research Group
(IRGI)
|
Charles River Laboratories International
(CRL)
|
7/04
|
10/04
|
$1.5B
(stock & cash)
|
|
Kali Laboratories
|
Par Pharmaceutical
(PRX)
|
4/04
|
6/04
|
$135M
(cash & warrants; additional $10M on future milestones)
|
|
Laureate Pharma
|
Safeguard Scientifics
(SFE)
|
10/04
|
12/04
|
$29.5M
(cash)
|
|
Meridica Ltd.
(U.K.)
|
Pfizer
(PFE)
|
9/04
|
11/04
|
$125M
(cash)
|
|
MitoKor
|
MIGENIX
(MGI; Canada)
|
4/04
|
8/04
|
$10M
(stock)
|
|
MJ GeneWorks
|
Bio-Rad Laboratories
(BIO)
|
-----
|
8/04
|
$32M
(cash)
|
|
Molecular Staging
|
Qiagen
(QGENF; The Netherlands)
|
-----
|
9/04
|
$28.5M
(cash)
|
*Note: This table highlights selected M&A transactions that were initiated and completed in 2004 and whose value was at least $10M. It does not include M&As that involve business units, divisions, subsidiaries, product lines or facilities. It also does not include medical device transactions.
By culminating this transaction, Protein Design Labs has catapulted itself from an R&D outfit into a company with a rich pipeline, a stable of approved products and the ability to commercialize them.
Once again, investors in the acquired company got a very good deal: ESP Pharma raised about $48 million since its launch in 2002.
According to Mark McDade, PDL’s CEO, the firm’s new management team that came on board in 2002 (of which he was a part) put together a plan to take the company to commercial stage in North America by 2007 – and obviously it’s well ahead of that goal. “There are ways to accelerate the path to commercialization,” he said, and one of those is M&A. “We turned up the heat on that process over the last 12 months.”
“We looked at more than 100 products, companies or licensing opportunities,” he said, and made some bids, lost some bids, and turned down some opportunities in what was apparently a “pretty ruthless” process. ESP Pharma came into focus because it was “already in an auction process facilitated by their bankers SG Cowen,” McDade added. “There was no therapeutic product overlap, but it fit all our other criteria.”
Selected M&As In 2004*
|
Company Acquired
|
Acquired By/
Merged With
|
Date First Announced
|
Date Completed
|
Value
|
|
NeuColl
|
Angiotech Pharmaceuticals
(ANPI; Canada)
|
6/04
|
8/04
|
US$13M
(cash)
|
|
Oxoid Group Holdings
(U.K.)
|
Fisher Scientific International
(FSH)
|
2/04
|
3/04
|
$330M
(cash)
|
|
PharmaNet
|
SFBC International
(SFCC)
|
11/04
|
12/04
|
$248.6M
(cash)
|
|
SciTegic
|
Accelrys
(ACCL)
|
9/04
|
9/04
|
$21.5M
(stock & cash)
|
|
SynX Pharma
(SYY; Canada)
|
Nanogen
(NGEN)
|
2/04
|
4/04
|
US$14.4M
(stock)
|
|
Tularik
(TLRK)
|
Amgen
(AMGN)
|
3/04
|
8/04
|
$1.3B
(stock)
|
|
Upstate Group
|
Serologicals
(SERO)
|
9/04
|
10/04
|
$205M
(stock & cash)
|
|
X-Ceptor Therapeutics
|
Exelixis
(EXEL)
|
9/04
|
10/04
|
$24.4M
(stock & cash)
|
|
Zycos
|
MGI Pharma
(MOGN)
|
9/1/04
|
9/04
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$50M
(cash)
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*Note: This table highlights selected M&A transactions that were initiated and completed in 2004 and whose value was at least $10M. It does not include M&As that involve business units, divisions, subsidiaries, product lines or facilities. It also does not include medical device transactions.
“We didn’t look at ESP as a specialty pharma but rather as a company with distinctive competence in sales and marketing in a hospital setting.” That was the primary consideration. The fact that ESP had a number of approved products meant that the sales force could be expanded rapidly and that these products would provide good growth. Plus, ESP in-licensed several late-stage clinical products that seem promising. One of those, Ularitide, is being tested in acute congestive heart failure. In fact, PDL just reported positive results from a Phase II clinical study called SIRIUS II.
The other, Terlipressin, is in Phase III trials in patients needing a liver transplant. McDade said that “It’s a nice fit with Zenapax,” a humanized monoclonal antibody that is approved for preventing acute kidney transplant rejection.
All in all, the revenue stream coming from ESP Pharma will be “similar in size to PDL’s royalty stream,” he said. We’re projecting 25 percent growth and will be cash flow positive in 2006, two years ahead of schedule.”
That’s the way to grow, all right. It will be interesting to see whether other biotechs that got their start in monoclonal antibodies and other protein-based therapies are ready to propel themselves into profitability by acquiring a specialty pharma firm.
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