While other industry CEOs may be holding out for signs of greater global  prosperity, tech companies can’t afford to wait. Broadly speaking, the  technology industry, perhaps more than any other, is in the vortex of profound  change where companies must innovate and grow or face obsolescence. One of the  key tools to survive in such a dynamic climate is to buy — that is, M&A.

Unfortunately, M&A in tech has often gone awry, more so arguably than in  other industries. In January, McKinsey & Co. published an M&A  study looking at the past decade of dealmaking among top global companies. It  found that among eight major industries, tech companies did the worst job by far  of delivering shareholder returns (excess total returns to shareholders, or  TRS), especially in big transactions. No single measure tells the whole story,  of course. M&A metrics are notoriously tricky because M&A itself makes  up only part of a company’s overall performance and few companies break out  results from deals. Still, shareholder returns do provide circumstantial  evidence as to how well acquisitive companies perform over time and, by  extension, how much value investors are getting from dealmaking.

For tech companies, those returns look discouraging. McKinsey’s corporate  finance practice team found that of eight major global industries, high-tech  companies underperformed their indices by a dismal 6.7% from December 1999  through December 2010. Consumer discretionary was a distant second,  underperforming by 2.8%. Moreover, high tech underperformed in other growth  strategies as well — “programmatic” (serial purchases), “selective” (occasional  purchases that make a cumulative difference to market cap) and “organic” –  except for tactical deals, where it outperformed by 1.2%. Tactical deals are  done occasionally, tend to be small and don’t make a significant difference to  market cap.

Executing M&A is difficult in every industry, including those in which  the underlying technology is stable. But trying to do larger-scale M&A in  tech is like shooting arrows in a hurricane. The pace of technological change,  the sheer number of global competitors and the complexity of products and  markets create tremendous uncertainties. Traditional technology incumbents, in  particular, are finding it tougher to pursue strategies mapped out a decade or  more ago. They’re running as fast as they can over a shifting landscape as  consumers toss away landlines and PCs for newer, portable technologies –  smartphones, tablets — and look to the cloud to connect all their gadgetry.

As fast-developing technologies become essential for dreaming up new products  and winning new customers, companies are caught up in patent wars. Last year  Google Inc. bought more than 1,000 patents from IBM Corp. for an  undisclosed price to protect itself from legal assault. Nonetheless, Oracle is  currently suing Google for $1 billion over claims it violated its Java-related  intellectual property in developing Android, Google’s popular operating system  for smartphones.

The pressure to grow affects every tech company. For that, M&A remains  the favored growth lever. Take Round Rock, Texas-based Dell, a traditional  hardware manufacturer and marketer, and a classic example of a tech company  under intense pressure to change as the market rapidly evolves. “Dell now wants  to be the owner of intellectual property, not just a reseller. On the PC side,  for more than a decade they’ve been reselling other people’s IP,” says Morningstar Inc. analyst Michael Holt. “But in terms of who holds the  value in the PC chain, it’s the Intels, Microsofts, the memory manufacturers.  Dell does a really good job putting it all together, but they don’t own all that  intellectual property, so they’re taking a markup on competing on operational  efficiencies.”

In response, Dell has been revving up its deal machinery, which was largely  dormant before hiring IBM dealmaker David Johnson in 2009. This year alone, Dell  has made five small to midsized acquisitions — its M&A haul for all of  2011. Most of these transactions have been in higher-margin networking, storage  and services businesses. Dell, like other tech companies, doesn’t break out  results for acquisitions. But Johnson is upbeat about the growth of storage  company Compellent Technologies Inc., which Dell acquired for $820 million in  2010. Dell, he says, has expanded Compellent’s physical presence from 1-1/2  buildings to three in less than a year. “We’re taking midsize companies and  leveraging Dell’s distribution and scale, and it seems to be working,” he says.

While Johnson has won plaudits for his M&A acumen and integration skills,  some analysts think it’s too early to say whether a strategy of serial small  deals will give Dell the scale it needs to compensate for a slowing PC business  and new competitors.

“The landscape of players in the marketplace continues to change dramatically  as companies become very big and realize that to achieve growth objectives, they  need to make much bolder moves to move the needle more than before,” says Marco  Sguazzin, principal for mergers, acquisitions and divestitures at Deloitte  Consulting LLP in San Francisco. “The competitive lines between these  companies have been redrawn. Where there were once strong partners, they are now  often competitors in the same space. You now have [new] competitive  battlefronts.”

A good example: the 10-year partnership between Dell and storage giant EMC  Corp. Late last year, Dell said that  it was ending its agreement to resell  EMC storage products two years early — turning the two companies into  competitors as Dell builds out its presence with deals like Compellent.

At the other end of the spectrum are companies such as Apple Inc.,  which is reshaping competition not so much because it’s good at M&A — it’s  not particularly acquisitive — but because it has created scalable products  snapped up by consumers. In fact, Apple has been developing strategies so  transformative that it really belongs in a class by itself — for now, anyway.

Read the full article at The Deal

High praise, but indeed Burrill, head of Burrill & Company, has arguably been the leading guru and visionary within biotech in the past few decades. Not surprisingly, Burrill’s talk—delivered at an iBIO event at the University of Illinois at Chicago—was befitting of that label. His pronouncements and predictions were bold and sweeping. As usual, he was a font of juicy quotes (see list below).

All of the world’s biggest problems—from climate change to energy sufficiency to food security—have biotech as their solution, Burrill began. “One thousand years from now, we’ll look back and see this as mankind’s greatest moment . . . Shame on us if we don’t take advantage of this opportunity.”

“The good news is, the ball’s in our hands,” he said. “The bad news is, we don’t want to fumble it.”

Burrill believes that today’s health care system is essentially the same as 2,000 years ago. It is “episodic” in that we wait for disease to occur and then wait for doctors (today’s “tribal healers”) to tell us what to do. Too often the advice is wrong and the care doesn’t work.

Read the full article at pharmaQbD

The review

The past week saw a significant number of partnering deals, many involving bigpharma, including Pfizers and Quark partnering for development of AtuRNAi for open-angle glaucoma, Abbott‘s asset purchase of Action Pharma’s AP214 for acute kidney injury, and Novo Nordisk‘s partnership with Caisson for development and licensing of heparosan-based drug delivery technology.

In addition, there was a settlement agreement between Pfizer and Brigham Young University for Celebrex, where Pfizer paid Brigham $100 million in settlement of long standing litigation.

M&A also saw a number of significant deals including Novartis‘ acquisition of dermatology specialist Fougera Pharmaceuticals for $1.525 billion, and Hologic’s acquisition of Gen-Probe for $3.7 billion.

Other significant M&As include DSM’s acquisition of Kensey Nash, Omnicell’s acquisition of MTS Medication Technologies, and Ansells’ acquisition of Trelleborg’s Protective Products.

Finally, financings slowed this week, although there were several financings of note including Castlights $100 million series D, Oxford Nanopore Technologies’ $51 million private placement, and Pacira Pharmaceuticals’ $27.5 million debt refinancing.

The numbers

Partnering deals: 66 (down on last week: 75)

M&A deals: 15 (up on last week: 13)

Financing deals: 14 (down on last week: 25)

Deals of note

1. Royalty financing agreement for Fumaderm assets

Headline value: $761 million

Royalty Pharma, Fumapharm – Pharmaceutical – CNS > multiple sclerosis, Dermatology > Psoriasis

Royalty Pharma acquired an interest in the earn-out payable to the former shareholders of Fumapharm AG for $761 million in cash.   The Fumapharm earn-out primarily represents an indirect interest in Biogen Idec‘s BG-12 (dimethyl fumarate), an oral therapeutic candidate for the treatment of relapsing-remitting multiple sclerosis (RRMS).

The earn-out also includes an interest in Fumaderm, a therapeutic approved in Germany for the treatment of moderate to severe plaque psoriasis.

2. Development agreement for AtuRNAi for open-angle glaucoma

Headline value: $165 million

Pfizer, Quark Pharmaceuticals – Bigpharma, pharmaceuticals – Ophthalmics

Quark Pharmaceuticals has announced it has amended its existing exclusive Licensing Agreement with Pfizer.

This amendment will enable Quark to perform a Phase 2a clinical study to assess the effect of PF-655 in a new indication, looking at visual function in patients with moderate and advanced Open-Angle Glaucoma (OAG).   PF-655 incorporates Silence’s AtuRNAi technology and was sub-licensed to Pfizer by Quark in 2006, and on which Silence is entitled to receive a share of milestones and royalties that may be earned by Quark in the future on this compound.   The OAG study will be conducted in parallel with a Phase 2b study of PF-655 in diabetic macular oedema.   Silence has previously announced that it stood to receive up to $95m from Quark in relation to its licensing agreement with Pfizer.

As a result of this amendment to the Quark/Pfizer license, Silence anticipates its share of these payments could now reach $120m.

3. Collaborative R&D and license agreement for BTK inhibitors

Headline value: $130 million

MannKind, Tolero – Pharmaceutical – Oncology > luekemia, lymphoma, Hematology, Inflammatory

Tolero Pharmaceuticals and MannKind announced a license agreement granting Tolero exclusive worldwide rights to develop and commercialize compounds from MannKind’s novel BTK (Bruton’s tyrosine kinase) program, which are currently being developed for the treatment of hematological malignancies and inflammatory diseases.   Under the terms of the agreement, Tolero will pay MannKind upfront and milestone payments linked to the development, approval and commercialization of products, for total potential upfront and milestone payments of approximately $130 million.

MannKind will also receive tiered royalties on sales of products and a percentage of sublicensing revenue.   In addition, MannKind has an option to re-acquire the rights to the program at pre-specified terms until 60 days after the conclusion of the first Phase 1 study.

If MannKind exercises this option, then MannKind would assume responsibility for developing and commercializing products and Tolero would become entitled to receive the milestone payments, royalties and sublicensing revenues specified in the agreement.

4. Acquisition agreement for Gen-probe for $3.7 billion

Headline value: $3.7 billion

Hologic, Gen-Probe – Pharmaceutical – Infectives

Hologic and Gen-Probe announced that their Boards of Directors have unanimously approved a definitive agreement under which Hologic will acquire all of the outstanding shares of Gen-Probe for $82.75 per share in cash, or a total enterprise value of approximately $3.7 billion.

The all-cash transaction is expected to be funded through available cash and additional financing of term loans and high yield securities.

The transaction is expected to be completed in the second half of calendar 2012.   The transaction delivers a strong growth profile with attractive economics and is expected to be $0.20 accretive to Hologic’s adjusted earnings per share in the first fiscal year after close and significantly more accretive thereafter.   Hologic also expects the transaction to accelerate top and bottom line growth rates.

The combined company expects to realize approximately $75 million in cost synergies within three years following the close of the transaction.

5. Acquisition agreement for Fougera

Headline value: $1.525 billion

Novartis, Fougera – Bigpharma, Pharmaceutical – Dermatology

Novartis is buying specialty dermatology generics firm Fougera Pharmaceuticals for $1.525 billion in cash.   The Swiss drug giant says adding Fougera to its Sandoz generics business will transform the latter into the world’s biggest generic dermatology medicines operation, with estimated annual global sales approaching $620 million.   Fougera was previously part of Nycomed but has operated on a standalone basis since the sale of Nycomed to Takeda Pharmaceuticals in 2011.

The firm made net sales of $429 million in 2011 and employs about 700 people across its two primary sites in New York.

In addition to its U.S. dermatology generics business, the firm operates a branded specialty dermatology pharma business, PharmaDerm, with in-house expertise and facilities for formulation development, clinical development, manufacturing, distribution, and sales and marketing.

Dealtalk

In addition to deal announced there is always gossip and speculation of potential deals – here is just some of the Dealtalk from the last seven days.

Current Agreements Deals Update: May 2012

Can portfolio theory save lives?

Pharma tries to avoid falling off ‘patent cliff’

Warner Chilcott Luring Drug Buyers With Most Free Cash: Real M&A

Biotech IPOs Start to Show Some Modest Signs of Life

Even If Bills to Hasten Drug Approvals Pass, Investments May Remain Dry Longer than Stakeholders Claim

Is Covidien buying hypertension treatment firm Maya Medical?

GSK rejects idea of buying AstraZeneca

J&J New CEO’s Takeover Watch Spans Edwards to St. Jude: Real M&A

Warner Chilcott to explore sale of company

Medtronic will likely acquire another hypertension therapy firm

Pfizer Says Animal Unit May Be Divested in IPO, Share Swap

Warner Chilcott Said to Consider Options After Interest

What’s Really Driving The Pharma M&A Frenzy

The growth of synthetic royalty financing

Steve Poile

Related links:

Partnering Scorecard 2012

M&A Scorecard 2012

Financing Scorecard 2012

View all deals of the past week at Current Agreements (subscription required)

Request a trial to Current Agreements now.

Subscribe to Current Agreements for access to every deal announced in the life sciences since 2000.

Those decisions should be guided by “financial portfolio theory,” argues a paper published Wednesday in the science journal PLoS ONE. Applying portfolio theory to how the National Institutes of Health (NIH) allocates its $30 billion annual budget could cut the total years of life lost by patients by anywhere from 28 percent to 89 percent, the researchers calculate.

“We need a framework for deciding how to make allocations for biomedical research that is transparent, objective, rational and reproducible,” Andrew Lo of the MIT Sloan School’s Laboratory for Financial Engineering said in an interview. Lo, considered a leading authority on financial theory, co-authored the paper with MIT’s Dimitrios Bisias and surgeon James Watkins of Brigham and Women’s Hospital in Boston.

“What we’re hoping is that scientists and policy makers collaborate on measuring success” and use portfolio theory as a guide for how much to invest in research into various diseases, he said.

The paper’s basic concept was dismissed by patient advocates contacted by Reuters. Some pointed out that under the criteria the new analysis proposed, research into chronic diseases, rare disorders and illnesses like Alzheimer’s that have eluded a cure would be deemed nearly worthless. NIH officials were not available for comment.

Broadly speaking, portfolio theory provides guidance on how much to allocate to different investments – stocks, bonds, oil futures, real estate – based on their risks and expected rates of return, or reward.

Just as investing in U.S. Treasuries poses different risks and promises different rewards than investing in coffee futures, government investments to combat one disease versus another yield different results.

Ordinarily, when portfolio theory is used to optimize risk/reward trade-offs, the rewards are dollars. The new paper argues that in biomedical research the rewards that count are reductions in years of life lost to disease.

The most efficient allocation of biomedical research dollars is that which maximizes years of life saved per dollar spent, the researchers argue. This means that curing a 2-year-old’s brain tumor is worth 70-some years of life, while curing an 85-year-old’s arthritis is worth essentially zero.

The researchers are quick to caution that the emphasis on years of life saved is only the first step. Once the application of portfolio theory to biomedical spending decisions is refined, additional criteria — such as whether a given line of research reduces pain and suffering — would also be factored in.

Read the full article in Reuters

Read the full article at Financial Times

Several bills promising fast relief for biopharma are pending in Congress. Chief among them is the fifth authorization of the Prescription Drug User Fee Act (PDUFA V). Faster action on drug applications is the goal of the Faster Access to Specialized Treatments (FAST) Act introduced in the House of Representatives; the Transforming the Regulatory Environment to Accelerate Access to Treatments (TREAT) Act introduced in the Senate; and another Senate bill, the Advancing Breakthrough Therapies for Patients Act of 2012.

Among the claims made in support of the measures is that they will help draw venture capitalists and other traditional investors back to biopharma companies, thawing the long-chilly investment climate knocked cold by the Great Recession and weak recovery of the past five years. Maybe so, but it won’t likely be as quickly as startups are hoping for.

Bills Pending in Congress

First the good news. Several bills before Congress hold the promise of faster arrival-to-market of new medicines. Most important of these and also most likely to be approved is PDUFA V. It requires more communication between FDA and companies and is intended to smoothen the path to approval.

Senate changes to PDUFA included the Generating Antibiotic Incentives Now (GAIN) Act, which extends the exclusivity period for new antimicrobial drugs by five years. Supporters say this provision should stimulate development of more such treatments.

On April 25, the Senate’s full Health Education Labor and Pensions Committee voted to approve PDUFA V reauthorization by voice vote with only Sen. Bernie Sanders (I-VT) opposed.  The House Energy and Commerce Committee’s health subcommittee will mark up PDUFA on May 8.

The TREAT Act (S.2113), introduced by Sen. Kay R. Hagan (D-NC), directs FDA to accelerate reviews and approval processes for treatments for diseases that have unmet medical need, that “significantly” advance the standard of care, or that are “highly targeted therapies for distinct subpopulations.”

The FAST Act (HR 4132), introduced by Reps. Cliff Stearns (R-FL) and Edolphus Towns (D-NY), allows FDA to expedite reviews of a fast-track product, defined as drugs that are “intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition,” as well as drugs demonstrating “the potential to address unmet medical needs for such a disease or condition.”

Most recently, the Advancing Breakthrough Therapies for Patients Act of 2012 (S.2236) was introduced by Sens. Michael Bennet (D-CO), Orrin Hatch (R-UT), and Richard Burr (R-NC). The measure would allow FDA to speed up review and development of a “breakthrough therapy” intended for “a serious or life-threatening disease or condition,” where preliminary clinical evidence indicates that the drug “may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.”

Read the full article at Genetic Engineering News

Recently, Cowen Healthcare closed a second fund of $1 billion, which was earmarked for revenue financing investments.

Royalty asset purchase deals are increasing in prevalence as smaller companies and academic institutions are seeking new revenue streams and mitigation of risk.    Companies generally seek to dispose of a royalty asset in order to raise funds to invest in others parts of its business, or to bridge a shortfall in the company’s finances.

Historically this type of deal has been low in prevalence, primarily due to the very strict criteria imposed by royalty financing companies when selecting prospective investment targets. However recent years have seen an increase in royalty financing deal popularity, and it is anticipated that the current financial climate will induce more companies to seek monetization of royalty assets.

Royalty financing provides an alternative to equity financing that provides a lower cost-of-capital source of funding.

Royalty financiers are a keen group but are reluctant in the amount of risk they are willing to take. However, the increased number of players in the royalty financing play will increase competition and drive up deal prices.

Royalty financing, revenue financing or synthetic royalties…?

As in any sector, terms are required to differentiate between different types of financing, so here goes…

Royalty financing – A sale of rights to royalties for sale of the product which would have otherwise been due to the licensor, in return for a lump sum investment.

Revenue financing – A royalty created where none had previously existed. The royalty stream is generated from future sales of a product or business, in return for a lump sum investment.

Synthetic royalties – Another name for revenue financing

Reasons for entering into a royalty/revenue financing arrangement

There are many reasons for entering into a royalty financing agreement. In the majority of cases a royalty financing takes place between a buyer seeking to sell an asset and a buyer willing to acquire the same asset.

There are numerous reasons why an organization might monetize a royalty asset:

• Access to needed capital, especially in a difficult funding raising climate   Alternative to diluting company equity
• Alternative fund-raising mechanisms to PIPEs, mezzanine financing, traditional bank and venture debt
• Activist investors seeking to monetize assets
• Less dilutive than equity funding
• Less punishing than payback terms of debt
• Replacement of eschewed upfront or milestone payments
• Generate funds for current R&D
• Provide funds for acquisitions
• Fund launch costs for a product
• Spread risk of product development with another party
• Spread risk that future royalty streams may reduce or stop
• Diversify their portfolio
• Management of earnings stream
• Receive additional recognization for value of their research from investment group

Monetizing royalty assets has increased in recent years with both corporate and academic licensors electing to sell all or partial royalty assets in return for lump sum investments for their organizations.

The primary reason for this increase in interest is due to companies seeking alternative investment streams now that more traditional investment channels have frozen due to the credit crisis across the globe.

A recent study by Cowen reports that the royalty market reached record levels in 2011, with 24 publicly-announced deals valued at around $2.5 billion. (Primack, 2012)

Recent deals of note

Royalty financing agreement for dipeptidyl peptidase IV (DPP-IV) inhibitors

Jun 2011 – Royalty Pharma, Prosidion – Pharmaceutical – Metabolic > Diabetes

Prosidion’s patent estate and associated royalty stream relating to the use of dipeptidyl peptidase IV (DPP-IV) inhibitors for the treatment of type 2 diabetes has been sold to Royalty Pharma for a total cash payment of USD 609 million.

The transaction is expected to close in July 2011.

Prosidion was acquired as part of Astellas‘ acquisition of OSI Pharmaceuticals in June 2010.

Royalty Pharma will be entitled to receive 100% of royalty payments and milestones related to the DPP-IV asset.

Additionally, Royalty Pharma will take over administration of the DPP-IV patent estate currently owned by Prosidion.

Royalty financing agreement for Victrelis

Dec 2011 – Dendreon, CPPIB Credit Investments – Pharmaceutical – Infectives > Hepatitis C

Dendreon Corporation has agreed to sell for $125 million in cash its royalty interest related to intellectual property licensed to Schering-Plough Ltd. and Schering Corporation (collectively Schering, each now a wholly owned subsidiary of Merck & Co., Inc.) and associated with VICTRELIS (boceprevir), a treatment for chronic hepatitis C.

The royalty interest was acquired by CPPIB Credit Investments Inc., a wholly-owned subsidiary of CPP Investment Board (CPPIB).

Revenue financing agreement for $100 million

Jun 2008 – Deerfield Management, Zymogenetics – Biotech – Hospital care, hematology

ZymoGenetics has received a $100 million funding commitment from Deerfield Management.

The funds can be drawn at any time over the next 18 months at ZymoGenetics’ discretion.

Funds drawn, together with accrued interest, will be repayable five years from entering into the funding arrangement and can be repaid without penalty at any time at the company’s sole discretion.   Deerfield has committed $100 million that can be drawn by ZymoGenetics in $25.0 million tranches.

Each tranche will entitle Deerfield to a royalty equal to 2% of RECOTHROM net sales.

The future

Moving forward, we expect to see an ongoing interest in this form of financing from the academic and biotech sectors.

The requirement for the copany to have a revenue stream in order to be eligible for financing will limit access to this type of financing, but for those fortunate enough to be eligible, it offers an attractive alternative to dilutive financing rounds.

Steve Poile

Related items:

Purchase the report: Royalty financing terms and Agreements

Search Current Partneirng for royalty financing, revenue financing, and synthetic royalty articles.

The review

M&A activity showed a big uplist in activity in the past seven days. Nestle won its battle with Danone to acquire Pfizers nutritions business for $11.85 billion, Watson confirmed its long-rumoured acquisition of Actavis for $5.9 billion, and AstraZeneca’s acquisition of Ardea for $1.26 billion.

Additional M&A deals of note included Amgen‘s acquisition of MN Pharmaceuticals for $700 million, providing ready access to the Turkish market.

Jazz also continued its acquisition spree with the purchase of Eusa for $700 million, providing the company with an expanded portfolio of specialty pharmaceuticals.

On the partnering front, the past week saw 75 deal announcements, higher than previous weeks.

Several deals of note were announced. Celgene and Epizyme entered into a collaborative R&D and marketing agreement for HMT inhibitors for genetically defined cancers, AstraZeneca and The Medicines Company entered a co-promotion agreement for Brilinta and other acute ischemic heart disease compounds.

Finally, the past week saw several financings of note: PhotoMedex completed a public offering for $40 million, Accelr8 announced a private placement for $35 million, and Argos Therapeutics announced a series D financing for $25 million.

To view all deals from the past week, request a trial of Current Agreements, providing immediate access to all deals since start 2011.

The numbers

Partnering deals: 75 (up on last week: 61)

M&A deals: 13 (up on last week: 2)

Financing deals: 25 (up on last week: 14)

Deals of note

1. Asset purchase agreement for nutrition business

Headline value: $11.85 billion

Pfizer, Nestle – Consumer health

Nestlé has prevailed in the steeplechase for Pfizer’s ($PFE) nutrition unit.

The price was $11.85 billion, rather than the $10 billion estimated by analysts.

All the more cash for Pfizer to share with investors and invest in its core pharma business.   The nutrition-unit sale comes as Pfizer is readying a spinoff of its animal health business.

The drugmaker announced its plans to shed both units last summer as part of a restructuring designed to streamline the company and focus attention on its branded-drug nucleus.

2. Asset purchase agreement for blood collection, filtration and processing product lines

Headline value: $550 million

Pall, Haemonetics – Research tools, services – Hematology, genitourinary

Pall Corporation announced it has entered into an agreement to sell certain assets of its blood collection, filtration and processing product lines to Haemonetics Corporation for approximately $550 million.   Assets included in the transaction are Pall’s portfolio of blood collection, processing and filtration systems and equipment for transfusion medicine.

The transaction will involve the transfer of manufacturing facilities in Covina, California; Tijuana, Mexico; Ascoli, Italy and a portion of Pall’s operations in Fajardo, Puerto Rico.

Separate from these manufacturing facilities, Pall will also transfer related blood media manufacturing capability to Haemonetics.

The transfer of the related media lines is expected to be completed by 2016.

3. Acquisition agreement for Actavis

Headline value: $5.9 billion

Watson, Actavis – Pharmaceuticals

Watson Pharmaceuticals and Actavis Group jointly announced that Watson has entered into a definitive agreement to acquire privately held Actavis for an upfront payment of EUR4.25 billion.

As a result of this acquisition, Watson will become the third largest global generics company with 2012 anticipated pro forma revenue of approximately $8 billion.   Actavis, which as a stand-alone company was positioned for strong growth, has a commercial presence in more than 40 countries and markets more than 1,000 products globally.   Watson will acquire Actavis for an upfront payment of EUR4.25 billion.

Actavis stakeholders could also receive additional consideration, contingent upon Actavis achieving negotiated levels of certain 2012 performance targets.

The contingent payment, if fully earned, would result in the delivery of up to 5.5 million shares of Watson common stock in 2013.

4. Acquisition agreement for Ardea Biosciences

Headline value: $1.26 billion

AstraZenenca, Ardea – Pharmaceuticals

AstraZeneca and Ardea Biosciences have entered into a definitive merger agreement, pursuant to which AstraZeneca will acquire Ardea.

Ardea’s clinically most advanced product candidate, lesinurad (formerly known as RDEA594), is currently in Phase III development as a potential treatment for the chronic management of hyperuricaemia in patients with gout.   AstraZeneca will acquire Ardea for $32 per share which represents a total cash value of approximately $1.26 billion.

This represents a premium on the value of Ardea’s stock of 50% based on the one month volume-weighted average price and 54% based on the closing price on Friday, 20 April 2012.

5. Public offering for common stock for $40 million

Headline value: $40 million

Photomedex – Specialty pharma

PhotoMedex announced the closing of concurrent registered offerings of 3,023,432 shares of its common stock at $13.23 per share.

The gross proceeds to PhotoMedex from the offerings are expected to be approximately $40.0 million, before deducting underwriting discounts, commissions and other offering expenses.   PhotoMedex intends to use the net proceeds from the offerings for general corporate purposes, including capital expenditures, continued product development, sales and marketing initiatives and working capital.

Dealtalk

In addition to deal announced there is always gossip and speculation of potential deals – here is just some of the Dealtalk from the last seven days.

Onyx Pharmaceuticals Shares Rally Amid Rumor of Bayer Acquisition

GSK says it the only obvious owner for Human Genome

Human Genome Most Lucrative on Record Biotech Premiums

Watson may announce $6 billion deal for Actavis

J&J Open to Expanding Hepatitis C Cooperation With Vertex

OrbiMed Launches $222 Million Fund Focused on Israel Life Sciences

Australia’s Biota, Nabi Pharmaceuticals Plan Merger

Amylin Said to Seek Buyers After Rejecting Bristol-Myers

Steve Poile

Related links:

Partnering Scorecard 2012

M&A Scorecard 2012

Financing Scorecard 2012

View all deals of the past week at Current Agreements (subscription required)

Request a trial to Current Agreements now.

Subscribe to Current Agreements for access to every deal announced in the life sciences since 2000.

The review

The past week has seen a significant number of partnering deals, with the leading deals by value led by bigpharma.

Merck and Endocyte signed a development and marketing agreement for vintafolide valued at $1 billion. GSK disposed of a number of OTC brands in a $263 million deal with Aspen Pharmacare. GSK also entered a collaborative R&D pact with FivePrime Therapeutics for utilization of a drug discovery platform to discover respiratory compounds. Finally, Lilly entered a development and licensing deals with Vanda for a neurokine 1 receptor antagonist for the treatment of a number of indications, in a deal valued at $100 million.

On the M&A front, it has been very quiet. The only potential deal of significance is the rejected $2.6 billion offer to acquire Human Genome Sciences by GSK. The bid has however prompted Human Genome Sciences to put itself up for sale.

Financing activity has been fairly stready, with the lead deals by value being Ventus Medical’s public offering for $40 million, Alder Biopharmaceutical’s series D financing for $38 million.

The numbers

Partnering deals: 61 (up on last week: 52)

M&A deals: 2 (down on last week: 10)

Financing deals: 14 (same as last week: 14)

Deals of note

1. Development and marketing agreement for Vintafolide

Headline value: $1,000 million

Merck, Endocyte – Bigpharma, pharmaceutical – Metabolic, oncology

Merck have entered into an agreement to develop and commercialize Endocyte’s novel investigational therapeutic candidate vintafolide (EC145).   Vintafolide is currently being evaluated in a Phase III clinical trial for platinum-resistant ovarian cancer, (PROCEED trial) and a Phase II trial for non-small cell lung cancer (NSCLC); both studies are also using Endocyte’s investigational companion diagnostic agent, etarfolatide (EC20).

Under the agreement, Merck, through a subsidiary, will gain worldwide rights to develop and commercialize vintafolide.

Endocyte will receive a $120 million upfront payment and is eligible for milestone payments of up to $880 million based on the successful achievement of development, regulatory and commercialization goals for vintafolide for a total of six cancer indications.

In addition, if vintafolide receives regulatory approval, Endocyte will receive an equal share of the profit in the United States (U.S.) as well as a double digit percentage royalty on sales of the product in the rest of the world.

Endocyte has retained the right to co-promote vintafolide with Merck in the U.S. and Merck has the exclusive right to promote vintafolide in the rest of world.

2. Asset purchase and licensing agreement for OTC drug brands

Headline value: $263 million

GlaxoSmithKline, Aspen Pharmacare – Consumer health

GlaxoSmithKline has agreed to sell a clutch of international over-the-counter healthcare brands for 164 million pounds ($263 million) to South Africa’s Aspen Pharmacare.   Net cash proceeds from the transaction are expected to be approximately 135 million pounds and will be returned to shareholders during 2012.

3. Acquisition agreement for Human Genome Sciences (rejected)

Headline value: $2,600 million

GlaxoSmithKline, Human Genome Sciences – Bigpharma, biotech

Human Genome Sciences has received an unsolicited proposal from GlaxoSmithKline to acquire HGS for $13.00 per share in cash.   The HGS Board of Directors, in consultation with independent financial and legal advisors, has carefully reviewed and considered the GSK offer and has determined that the offer does not reflect the value inherent in HGS.

HGS also announced that its Board of Directors has authorized the exploration of strategic alternatives in the best interests of shareholders, including, but not limited to, a potential sale of the Company.

4. Public offering of common stock for $40 million

Headline value: $40 million

Ventus Medical, De Novo Ventures, Mohr Davidow Ventures

Ventus Medical has lodged a prospectus to raise $40 million and list on the Australian Securities Exchange.   The US-based medical device company claims its “proven” product can treat sufferers of sleep apnea, a sleeping disorder.   Ventus is asking investors for $3 a share, with expectations the company will list on the ASX by the end of next month.

Two main shareholders from the US, De Novo Ventures II and Mohr Davidow Ventures, said they intended to take up $US6.2m ($6m) worth of shares.

Dealtalk

In addition to deal announced there is always gossip and speculation of potential deals – here is just some of the Dealtalk from the last seven days.

Australia’s Biota, Nabi Pharmaceuticals Plan Merger

Amylin Said to Seek Buyers After Rejecting Bristol-Myers

Amgen To Assume Certain Pfizer Sales Duties For Enbrel In US

GSK pounces on Human Genome with $2.6 billion bid

Merck KGaA to abstain from major deals until 2013

Uncertain Outlook for Pharma and Biotech Deals Following ‘Turbulent’ 2011

Roche Decides Against Extending Illumina Bid on Data Lack

NeurogesX seeks partners for pain drugs

Nestle near buying Pfizer’s baby formula – sources

XTL Biopharmaceuticals Signs Letter of Intent to Acquire a Drug Development Company

Samsung eyes generic biological medicines

Steve Poile

Related links:

Partnering Scorecard 2012

M&A Scorecard 2012

Financing Scorecard 2012

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