Biotech Deal-making Is Up – But Will the Trend Continue?
The international biotech and pharmaceutical mergers and acquisitions market has had an extremely busy six months. Analysts, however, claim they are unable to say if the trend will continue due to financial market uncertainty.
The latest figures for global M&A activity in the biotech and pharmaceutical sector have just been published by Switzerland-based HBM Partners. It is clear from the data, which show 31 deals, totalling $51.6 billion completed in H1 2011, that there has been no shortage of activity so far this year. One of the most notable figures to come from this latest report is that 18 of the deals were worth more than $200 million each.
These deals included the $13.7 billion takeover of private equity-backed Nycomed International by Japan’s Takeda Pharmaceutical in May and Ireland-based Shire’s $750 million deal to buy US-based Advanced Biohealing.
The first-half statistics become even more startling when compared with the data from the same period in 2010, when only 26 deals were made. The total value of all deals made over the whole of 2010 was only $67 billion, suggesting that 2011 is on track to deliver a much healthier set of results in terms of M&A activity - providing conditions in the markets remain favourable.
It is this uncertainty, however, that is causing some analysts to doubt whether 2011 will continue to be such a strong year for biotech and pharmaceutical M&As.
HBM’s report states that it is difficult to provide a dependable outlook for the rest of the year due to the current volatile state of the financial markets. The report suggests that a greater number of public companies could become attractive targets if their stocks lose more value in the coming months. With regards to private and venture capital investors, 'trade sales will remain the preferred and possibly the only exit route for the next 6 to 12 months,’ according to the report.
It continued, ‘Cash-strapped companies with ongoing clinical development programmes will thus face a buyers’ market.’
The latest Baird report entitled: ‘Health Care: Then and Now the Best Health Care Ideas’ suggests that the healthcare industry in general is showing signs of improvement and that factors like greater M&A, an increase in funding for health care IT and consolidation in the industry could help to continue the recover from the recession – which could also mean a further boost to M&A activity.
Although 2011 figures to date indicate that this will be a bumper year for deals – most analysts agree that even if the first half activity rate continues, it is highly unlikely to measure up to 2009 in terms of the value of the transactions. A total of $177.1 billion was spent on M&A in the biotech and pharmaceutical industry in 2009. Deals such as Roche Holding’s $46.8 billion purchase of Genentech and Pfizer’s buyout of Wyeth for $68 billion made sure 2009 will be difficult to surpass when it comes to expenditure.
It is, however, worth bearing in mind that this year’s Nycomed sale returned an impressive, and possibly record-breaking, $8.5 billion to private equity investors from the sale of a firm with $5.1 billion of debt. This in itself could be enough to prompt more deals in the sector among private equity investors who want to gain from their involvement in high-value exit deals.
