Nearly 300 M&As were initiated and/or completed in 2006, and these deals spanned the gamut – from generics manufacturers to companies that supply the research tools and reagents necessary for drug R&D, from clinical research organizations to medical device makers, from diagnostics developers to firms developing state-of-the-art genetic tests, from big pharma conglomerates to small biotech couplings.

Companies developing next-generation genetic analysis technology were hot items in 2006 – not surprising when you consider that the focus of drug development is slowly shifting towards personalized medicine, where gene-based tests will become essential. Applied Biosystems Group paid $120 million to acquire Agencourt Personal Genomics in July. Illumina Inc. is in the process of acquiring Solexa Inc. for $650 million, creating a company that will be able to offer genome-scale technology for genotyping, gene expression and sequencing. And Fisher Scientific International Inc. shelled out $283 million in the second quarter of 2006 to acquire Athena Diagnostics Inc.

Months later, Fisher Scientific itself became the subject of a merger with Thermo Electron Corp., a $10.6 billion deal that created a behemoth (Thermo Fisher Scientific Inc.) in the laboratory products and services sector. Not to be left behind, bioprocess and bioscience products and services company Millipore Corp. paid $1.4 billion for Serologicals Corp., which offers cell culture services as well as other research products.


Selected M&As In 2006*

*Selected transactions that were initiated or completed in 2006 and whose value was at least $10M. The valuations cited here are based on best-case scenarios, and include not only upfront payments but also all possible future contingent payments (e.g., milestones, earn-outs, royalties). The list does not include M&As that involved business units, divisions, subsidiaries, products, product lines, or facilities. It also excludes medical device-related deals.


Generics companies continued to consolidate their holdings, too – many of them seeking to establish bases in new markets like India, China, Australia and Eastern Europe. Mylan Laboratories Inc., for instance, paid $736 million to acquire a controlling interest in Indian generic company Matrix Laboratories Ltd. And U.S.-based Hospira Inc. is shelling out $2 billion for Australian company Mayne Pharma Ltd., a move it says will create the world’s leading generic injectable pharmaceutical company.

As well, Barr Pharmaceuticals Inc. prevailed over Iceland-based Actavis Group in its $2.5 billion bid to acquire generic drug maker Pliva d.d., which is located in Croatia.

And some of the established European drug firms sought to bulk up, too. For instance, in late December privately held Danish company Nycomed bought Altana Pharma AG, based in Germany, for $5.7 billion. German heavyweights Bayer AG and Schering AG joined forces in a $21.5 billion deal, completed in late December, to create giant Bayer Schering Pharma AG. At about the same time, Belgian company UCB SA finalized its $5.6 billion purchase of Germany-based Schwartz Pharma AG.

On this side of the Atlantic, cardiovascular device maker Boston Scientific Corp. won a bidding war with Johnson & Johnson (J&J) for Guidant Corp., which it purchased for $27 billion in April. J&J may have lost that deal, but in December it won the bid for Pfizer Inc.’s OTC drugs division, which cost it a cool $16.6 billion.

However, the M&As that concern us the most are those that involve companies, large and small, that discover, develop and market branded pharmaceuticals. (The larger deals are described in the tables in this article.)

As we saw in 2005, the major pharmaceutical houses have stepped up their efforts to acquire budding biotech firms with promising drug candidates. That year, there were 23 M&As of this sort – far exceeding the average annual tally of 5-7 biotech/big pharma M&As deals. In 2006, there were 24 such deals – and most analysts predict that this pace will continue as big pharmas search to acquire product candidates (or even approved products) to fill their still-empty pipelines. It seems that many pharma giants now prefer outright acquisitions to partnering deals, too, especially when focused on firms with very early-stage research or even promising technology platforms.


Selected M&As In 2006*

*Selected transactions that were initiated or completed in 2006 and whose value was at least $10M. The valuations cited here are based on best-case scenarios, and include not only upfront payments but also all possible future contingent payments (e.g., milestones, earn-outs, royalties). The list does not include M&As that involved business units, divisions, subsidiaries, products, product lines, or facilities. It also excludes medical device-related deals.


When it comes to biotech acquisitions, big pharma Merck & Co. Inc. won first place in 2006 – a rather surprising outcome for a company that tends to prefer alliances to acquisitions. Given its choices, though, we can clearly see that Merck intends to stay at the leading edge of biotech developments. In 2001, it staked a claim in the burgeoning area of informational genomics (and how it can be used in drug discovery) by acquiring Rosetta Inpharmatics Inc.; in 2006, it tapped into the equally exciting arena of gene silencing (or RNA interference, which won its discoverers the 2006 Nobel Prize in medicine) by paying $1.1 billion for Sirna Therapeutics Inc. RNA interference adds yet another way to discover new drugs, for RNAi-based therapeutics are able to target specific disease-related genes.

Merck also acquired monoclonal antibody specialist Abmaxis Inc., with which it had already established a collaboration under which Abmaxis applied its antibody engineering technology to re-engineer a Merck human monoclonal with 70-fold improved affinity. As well, Merck bought privately held GlycoFi Inc., which specializes in yeast glycoengineering and the optimization of biologic molecules.

Merck & Co. wasn’t the only big pharma interested in enhancing its efforts to develop monoclonal antibody-based drugs: GlaxoSmithKline plc (GSK) is shelling out about $454 million to acquire U.K.-based firm Domantis Ltd., which has a technology for making “next generation” therapeutic antibodies based on the smallest functional binding units of the antibody molecules (so-called domain antibodies). These units are small enough to be administered in inhaled and topical formulations and perhaps even oral formulations, giving them an advantage over the larger “first generation” monoclonals that must be given by injection or infusion.

This acquisition points out two different trends in M&A: First, that big pharma is now willing to take a chance on early stage firms (Domantis’ drug candidates were nowhere near ready to enter the clinic). And second, that everyone finally realizes the significant market opportunity afforded to antibody-based drugs

That includes London-based AstraZeneca plc, which spent $1.1 billion to acquire Cambridge Antibody Technology (CAT) Group plc back in August. CAT, considered by many to be a world leader in antibody development, developed technology that was used to create Abbott Laboratories’ blockbuster arthritis product Humira. AstraZeneca, which already held a 19.2 percent stake in CAT stemming from a 2004 research collaboration on human antibodies for inflammatory disorders, bought out the rest of the company to boost its drive into biological medicines.


Selected M&As In 2006*

*Selected transactions that were initiated or completed in 2006 and whose value was at least $10M. The valuations cited here are based on best-case scenarios, and include not only upfront payments but also all possible future contingent payments (e.g., milestones, earn-outs, royalties). The list does not include M&As that involved business units, divisions, subsidiaries, products, product lines, or facilities. It also excludes medical device-related deals.


The other big pharma acquisitions of note included AstraZeneca’s $210 million purchase of cancer drug developer KuDOS Pharmaceuticals Ltd. and GSK’s $55 million agreement to buy Praecis Pharmaceuticals Inc., a firm that is also developing cancer drugs, including early clinical drug candidate PPI-2458 for non-Hodgkin’s lymphoma and solid tumors. This deal stemmed from an earlier R&D collaboration between the two, under which Praecis used its drug discovery technology to identify small molecule candidates against GSK targets.

Swiss pharma Novartis AG is still a major player in the biotech M&A arena, too. In April, it finalized its $5.4 billion purchase of Chiron Corp., by which Novartis established a presence in the vaccines market. In 2006, Novartis Also bought U.K.-based NeuTec Pharma plc, which specializes in treating hospital-acquired infections, especially the use of antibody fragments in combination with standard anti-infective drugs.

In 2006, Pfizer made two biotech purchases of undisclosed value: It bought PowderMed Ltd. to give it a presence in the area of DNA-based vaccines and it acquired Rinat Neuroscience Corp. to enhance its internal CNS programs by adding protein-based therapies.

As well, Abbott Laboratories paid $3.7 billion to acquire Kos Pharmaceuticals Inc., which is developing drugs for lipid management, especially therapies that raise levels of good cholesterol (HDL). Eli Lilly and Co. is buying out its Cialis partner Icos Corp. for $2.3 billion, and Merck KGaA is poised to acquire big biotech Serono SA for about $13.3 billion.

And Bayer Innovation GmbH, a subsidiary of the Bayer Group, paid an undisclosed amount in January 2006 – before the parent company decided to merge with Schering -- to buy German firm Icon Genetics AG, which has been developing methods to produce pharmaceuticals in engineered plants.


Selected M&As In 2006*