Favorable 1H2011 Biotech M&A Trends

Posted August 11th, 2011 in Exits IPOs M&As, VC-backed Biotech Returns

Our friends at HBM Partners just published their quarterly Biotech/Pharma M&A report.  Its got some good nuggets of data in it about 1H2011.

Although its hard to think about in the midst of the Great August Rollercoaster in the markets, the clear takeaway is that 1H2011 was actually pretty interesting for venture-backed biotech exits, with deals like Plexxikon-Daiichi, Advanced Biohealing-Shire, Biovex-Amgen, Calistoga-Gilead, and Prism-Baxter all with total deal values north of $200M.  A nice chart showing the uptick in the # and $ of M&A deals over the past 2.5 years:

Here are their conclusions (boldface mine), quoted from their report:

  • M&A activity in pharma/biotech further picked up during the first half of 2011. Both the number of deals and the transaction volume were high. Upfront transaction values from biopharma trade sales reached $51.6 billion (compared to $67 billion for the whole year of 2010).
  • 18 companies were sold for an upfront consideration of at least $200 million (of which 8 were private companies). Such a high number of sizable transactions was reached previously only in H2 2006.
  • Deal volume from VC/PE-backed company trade sales jumped to a record $17.2 billion. This high number was driven by the $13.7 billion acquisition of Swiss specialty pharma company Nycomed by Takeda. Even without this transaction, deal volume in this category reached $3.5 billion (and $5.2 billion if one includes contingent milestone payments).
  • Exits in H1 2011 on average produced good returns to venture investors. The ratio of upfront proceeds to invested capital to jumped to 2.7x for venture-backed companies sold (up from a factor of 1.6x in 2010). This good result is partially due to the estimated 15x multiple generated by the sale of Advanced Biohealing.
  • The sale of Nycomed probably returned the highest-ever absolute amount to private equity investors from a private biopharma company: Investors reportedly received €6 billion (or $8.5 billion) from the transaction. The company at the time of the sale had approximately €3.6 billion ($5.1 billion) of debt. This spectacular deal might trigger further interest of buyout funds in the sector.

Despite having some questions about some of their underlying 2011 data (e.g., Taligen didn’t raise and spend $111M, it was more like half that; Synosia-BioTie was more a reverse merger than an acquisition), its an interesting report and worth reading.


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