Life Sciences M&A Activity Heats Up in April, Says Burrill & Company
Published: May 01, 2012
SAN FRANCISCO, CA--(Marketwire - May 01, 2012) -
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Nestlé's $11.6 billion agreement to acquire Pfizer's nutrition business was the largest transaction of the month. The Swiss food company fended off rivals Danone and Mead Johnson by pushing the price higher than analyst's estimates of $9 billion to $10 billion. The deal represents the largest acquisition ever for Nestlé, expanding its presence in emerging markets where 85 percent of Pfizer Nutrition's sales come from.
April also saw Watson Pharmaceutical's $5.6 billion agreement to buy the privately-held generics powerhouse Actavis Group. Actavis had about $2.5 billion in sales with more than 1,000 products in more than 40 countries. Other transactions in April include Hologic's $3.7 billion agreement to buy the diagnostics company Gen-Probe, AstraZeneca's $1.3 billion agreement to buy Ardea Biosciences, Takeda Pharmaceutical's $800 million agreement to acquire URL Pharma, and Amgen's $700 million deal to acquire Turkish company Mustafa Nevzat Pharmaceuticals, a maker of injectable generic drugs, as the biotech giant continues its push into emerging markets.
"The Amgen acquisition is seminally important for the biotech industry," says G. Steven Burrill, CEO of Burrill & Company, a diversified global financial services firm focused on the life sciences industry. "This not only reflects the strong move into emerging markets for the company, but an initial move into small molecule injectable generics, a first for the industry leader, and a follow-on to their earlier deal with Watson Pharmaceuticals, moving them into the biosimilars space too."
In April, agreed upon M&As of publicly traded companies commanded an average premium of 44 percent. However, typically, the purchase price of the companies averaged nearly 19 percent less than the 52-week high on the trading price of the shares of the targets, according to a Burrill & Company analysis. In the case of GlaxoSmithKline's $3.4 billion bid for Human Genome Sciences, though it represented an 81.3 percent premium to the closing price prior to the offer, it was 56.2 percent below the stock's 52-week high.
Though M&A activity took a sharp jump in April reaching $29.1 billion compared to just $6 billion in announced transactions in March, activity still lags the pace from a year ago. Overall, M&A activity through April lagged the pace of M&A activity through April a year ago as activity involving U.S. targets fell 25.1 percent and global activity fell 43.4 percent. That's attributable to outsized acquisition made during the first four months of 2011 including Sanofi's $20.1 billion purchase of Genzyme and Johnson & Johnson's $21.3 billion acquisition of Synthes.
"Despite the appetite acquirers have for products and access to new markets, there is still a gulf between buyers and sellers for some of the higher profile targets," says Burrill. "Nevertheless, M&A activity is picking up and this should continue as the pharmaceutical industry seeks to replace revenue from products losing patent protection. At the same time, in the absence of a vibrant IPO market, there are willing sellers to be had."
The IPO market in April remained unwelcoming to life sciences companies. Osprey Medical, an Eden Prairie, Minnesota-based medical device company, bypassed U.S. exchanges to go public on the Australian Stock Exchange. The company raised $20.8 million through the sale of Chess Depository Receipts. It's the third U.S. medical device company in the past year to look to the Australian market to go public in part because of a more welcoming regulatory environment for medical devices than in the United States. Life sciences companies that went public since January 2011 are down 10.9 percent as a group through April 30, 2012.
On the venture front, U.S. companies raised a total of $698 million in April with bioindustrial financings leading the way with $261 raised. Algae-based biofuels developer Sapphire Energy raised $144 million, the largest venture financing of the month. The therapeutics sector was a close second with $251 million. Argos Therapeutics, which withdrew an $86.3 million IPO in March because of an unwillingness to cut its share price as steeply as public market investors demanded, completed a series D venture financing for $25 million to begin late-stage clinical testing of its personalized immunotherapy to treat kidney cancer.
April also saw the signing of the Jumpstart our Business Startups Act, or JOBS Act, legislation intended to provide easier access to public markets for emerging growth companies. The law lowers the cost and regulatory burdens these companies face in raising capital and being public by providing exemptions to existing securities regulations.
On the partnering side, activity still is off the pace of 2011, but April did see a number of notable transactions including Merck's potential $1 billion deal with Endocyte for its late-stage ovarian cancer therapy. Other transactions reflected the high prices early-stage therapeutic candidates are commanding today. This includes Celgene's potential $250 million deal with Epizyme for its pre-clinical epigenetic experimental cancer therapy and GSK's $223.5 drug discovery collaboration with FivePrime Therapeutics focused on respiratory diseases.
Life Sciences Scorecard in USD M YTD YTD 4/30/12 4/30/11 Change Global Venture Capital 3,842 3,128 22.8% U.S. VC 2,679 2,285 17.2% IPOs (14 in 2012 v. 24 in 2011) 928 2,256 -58.9% U.S. IPOs (7 in 2012 v. 10 in 2011) 499 684 -27.0% Global PIPEs 1,524 1,157 31.7% U.S. PIPEs 564 567 -0.5% Global Follow-ons 2,531 3,352 -24.5% U.S. Follow-ons 2,313 1,864 24.1% Global Other Equity 807 299 169.9% U.S. Other Equity 744 123 504.9% Global Debt Offerings 7,373 22,162 -66.7% U.S. Debt 4,513 8,842 -49.0% Global Other Debt 4,793 1,783 168.8% U.S. Other Debt 3,522 222 1486.5% Total Global Public Financings 17,956 31,009 -42.1% Total U.S. Public Financings 12,155 12,302 -1.2% Global Partnering 12,043 13,375 -10.0% U.S. Partner/Licenser 6,766 9,805 -31.0% Global M&A 45,611 80,614 -43.4% M&A, U.S. Target 35,221 47,045 -25.1%
The M&A activity helped drive stock prices higher with Human Genome Sciences (up 78.5 percent) and Ardea Biosciences (up 46.5 percent) among the sector's biggest movers in April. Aeterna Zentaris (down 70.6 percent) and Keryx Biopharmaceuticals (down 68.1 percent) were among the biggest decliners as a late-stage trial of Keryx's experimental colorectal cancer drug in-licensed from Aeterna Zentaris failed to meet its endpoints. Overall, the Burrill Mid-cap index posted the strongest returns for the month gaining 6.80 percent. The Burrill Biogreentech Index was the biggest decliner as it fell 3.5 percent.
The industry in April also marked the passing of George Rathmann, the first CEO of Amgen and one of the builders of the industry. He was 84.
"George was among a rare group of people with vision and conviction who helped forge the biotech industry," says Burrill. "His legacy extends well beyond the walls of Amgen."
Burrill Indices Month Year BURRILL INDICES 12/30/2011 3/31/2012 4/30/2012 Change Change Burrill Select 432.49 521.7 536.16 2.80% 24.00% Burrill Large Cap 529.22 639.42 650.53 1.70% 22.90% Burrill Mid-Cap 295.33 329.72 352.24 6.80% 19.30% Burrill Small Cap 88.26 99.18 102.67 3.50% 16.30% Burrill Diagnostics 175.42 196.6 193.1 -1.80% 10.10% Burrill Personalized Medicine 100.62 112.41 111 -1.20% 10.30% Burrill Biogreentech 149.36 160.13 154.52 -3.50% 3.50% Canadian Biotech 59.17 62 61.6 -0.60% 4.10% NASDAQ 2605.15 3091.57 3046.36 -1.50% 16.90% DJIA 12217.56 13212.04 13213.63 0.00% 8.20% S&P 500 1257.6 1408.47 1397.91 -0.70% 11.20% Amex Biotech 1091.42 1412.97 1480.9 4.80% 35.70% Amex Pharmaceutical 332.94 341.96 344.27 0.70% 3.40%
*Burrill & Company is an investor in Endocyte.
About Burrill & Company
Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: www.burrillandco.com.
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