Insight journal - Deals and alliances

Life science M&A deal making cools in 2012

Posted on 25 February 2013

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Last year has seen a slower frequency in life science, pharma and biotech M&A deal making with 507 deals in 2012 in comparison to 585 deals in 2011 according to Current Agreements.

The top ten life science, pharma and biotech M&A deals in 2012 saw 65% involvement from big pharma. One reason for this is the rise of generic pharma which has led big pharma companies to look out for generic firms to maximize profit.

This focus on generic pharma has been driven by the more challenging regulatory environment around the world with governments trending towards cheaper generic medicines unless a compelling case existing for prescribing a premium price branded product.

The total value of the top 10 life science, pharma and biotech M&A deals in 2012 is $4.25 billion which is low when compared to $11.09 billion in 2011, according to the deal records at Current Agreements, the leading life sciences partnering, M&A and financing deals database – www.currentagreements.com.

This could be as a result of companies going for smaller targeted deals which are easier to finance than megamergers in the current economic climate.

Smaller targeted deals also allow companies to strategically build product pipeline with key asset acquisition, rather than large megadeals that result in significant effort on restructuring, often resulting in loss of momentum.

Despite the lack of multiple mega M&A deals during 2012 in the life sciences sector, there was continued speculation that such deals were imminent. It will be interesting to witness whether any mega M&A rumors from last year actually taking place this year. For rumor mill and deal talk updates in life sciences, pharma, biotech, diagnostics visit Current Partnering, the leading resource for the latest life science partnering, M&A, financing and deal talk updates.

A notable big pharma M&A deal in 2012 would be the acquisition of Actavis by Watson Pharmaceuticals  valued at $5.5 billion, marking a megamerger deal between generics companies racing to achieve economies of scale.

Below is a list of the top 10 life science, pharma and biotech M&A deals of 2012 in reverse order, as listed at Current Agreements, the leading life sciences partnering, M&A and financing deals database.

10. Valeant Pharmaceuticals acquires Medicis

Deal value: $2,600 million

Deal outcome: Valeant expansion into dermatology sector

Valeant Pharmaceuticals, a top pharmaceutical company, and Medicis Pharmaceutical have entered into a definitive M&A agreement under which Valeant will acquire all of the outstanding common stock of Medicis for $44.00 per share in cash.

The transaction, which values Medicis' common stock at approximately $2.6 billion, was unanimously approved by the Boards of Directors of both companies. The pro forma net revenue for the combined company's dermatology and aesthetics businesses for 2012 is expected to exceed $1.7 billion within the United States.

View the full deal record at Current Agreements

9. Dainippon Sumitomo Pharma acquires Boston Biomedical

Deal value: $2,630 million

Deal outcome: Dainippon Sumitomo Pharma expansion into oncology sector

Dainippon Sumitomo Pharma (DSP), has a top pharmaceutical company, reached an agreement to acquire Boston Biomedical (BPI).

Dainippon Sumitomo Pharma will make an upfront payment of US$200 million to the shareholders of BBI and BBI on closing of the acquisition of its shares, and thereafter it will make development milestone payments up to US$540 million related to the compounds (BBI608 and BBI503) currently being developed by BBI.

Furthermore, after the launch, DSP will also make milestone payments up to US$1,890 million, based on the achievement of various net sales targets with the last milestone being paid upon net sales of greater than US$4 billion in any fiscal year. DSP currently aims to commercialize BBI608 and BBI503 in 2015 or later.

View the full deal record at Current Agreements (subscription required)

8. GlaxoSmithKline acquires Human Genome Sciences

Deal value: $3,000 million

Deal outcome: GSK’s strong hold into autoimmune sector

GlaxoSmithKline, a top pharmaceutical company, and Human Genome Sciences, a leading biotech company, have entered into a definitive agreement under which GSK will acquire HGS for US$14.25 per share in cash.

The transaction values HGS at approximately US$3.6 billion on an equity basis, or approximately US$3 billion net of cash and debt, and represents a premium of 99% to the HGS closing price of US$7.17 per share on 18 April 2012, the last day of trading before HGS publicly disclosed GSK's initial private offer.

View the full deal record at Current Agreements

7. Hologic acquires Gen-probe

Deal value: $3,700 million

Deal outcome: Hologic expansion into molecular diagnostics market

Hologic and Gen-Probe announced 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.

View the full deal at Current Agreements

6. Baxter Healthcare acquires Gambro

Deal value: $4,000 million

Deal outcome:Baxter expansion into gastrointestinal market

Baxter International, a leading pharmaceutical company, agreed to buy Swedish Gambro AB for about $4 billion.

Baxter will fund the deal with $1 billion in cash generated by the company's overseas operations and roughly $3 billion in new debt.

View the full deal at Current Agreements

5.UnitedHealth and Amil enter merger agreement

Deal value: $4,000.9 million

Deal outcome: Expand and improve healthcare

UnitedHealth Group and Amil Participações have agreed to merge, bringing together two leading organizations with the broad scale, distinctive resources and advanced technology to help modernize the performance of the health systems and serve the health care needs of consumers in their markets in the Americas.

UnitedHealth Group intends to acquire 90 percent of the 359 million outstanding common shares of Amil for approximately $4.9 billion in cash.

This includes realizable Brazilian tax benefits worth an estimated present value of $600 million, bringing the effective equity purchase price to approximately $4.3 billion.

View the full deal at Current Agreements

4. DaVita and Healthcare Partners enter merger agreement

Deal value: $4,420 million

Deal outcome: Expand and improve genitourinary care

DaVita and HealthCare Partners announced that they have entered into a definitive merger agreement.

The two companies expect to close the transaction early in the fourth quarter of this year.

Upon closing, the combined company will be named DaVita HealthCare Partners Inc.

The purchase price to be paid by DaVita is approximately $4.42 billion, subject to post-close adjustments and contingent consideration.The purchase price consists of $3.66 billion in cash and approximately 9.38 million shares of DaVita common stock (which had a value of $758 million based on the closing price of DaVita’s common stock on May 18, 2012).

DaVita expects to fund the cash portion of the purchase price through a combination of available cash, additional borrowings under DaVita’s existing senior secured credit facilities (which are expected to be amended to permit these borrowings), and additional debt financing.

View the full deal at Current Agreements

3. Bristol-Myers Squibb acquires Amylin Pharmaceuticals

Deal value: $5,300 million

Deal outcome: BMS expansion into diabetes portfolio

Bristol-Myers Squibb, a top twenty pharmaceutical company, will acquire Amylin, a leading biotech company, for $31.00 per share in cash, pursuant to a cash tender offer and second step merger, or an aggregate purchase price of approximately $5.3 billion.

The total value of the transaction, including Amylin’s net debt and a contractual payment obligation to Eli Lilly & Company, together totaling about $1.7 billion, is approximately $7 billion.The acquisition has been unanimously approved by the boards of directors of Bristol-Myers Squibb and Amylin.

View the full deal at Current Agreements

2. Watson acquire Actavis

Deal value: $5,933 million

Deal outcome: Watson expansion into generic pharma

Watson Pharmaceuticals and Actavis, both top fifty pharmaceutical companies, jointly announced that Watson 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.

View the full deal at Current Agreements

TOP DEAL 2012: 1. Aetna acquires Coventry Health Care

Deal value: $7,300 million

Deal outcome: Aetna expands health care business

Aetna and Coventry Health Care have entered into a definitive agreement pursuant to which Aetna will acquire Coventry in a transaction valued at $7.3 billion, including the assumption of Coventry debt.

Under the terms of the agreement, which has been approved by the board of directors of each company, Coventry stockholders will receive $27.30 in cash and 0.3885 Aetna common shares for each Coventry share, or $42.08 per share, based on the closing price of Aetna common shares

Aetna expects to finance the cash portion of the transaction with a combination of cash on hand and by issuing approximately $2.5 billion of new debt and commercial paper.

Excluding transaction and integration costs, the transaction is projected to be modestly accretive to Aetna’s operating earnings per share (2) in 2013, $0.45 accretive in 2014 and $0.90 accretive in 2015.

View the full deal at Current Agreements

The findings come from our database Current Agreements, the leading life sciences deals and alliance database, which recorded 507 M&A deals during 2012, down from the 585 M&A deals announced in 2011.

M&A deals where bigpharma was involved:

Our database reveals that 43 M&A deals have been signed by big pharma companies alone in the last year. Amgen was the leader in dealmaking activity with 4 acquisitions, Takeda Pharmaceuticals and Sanofi with 3 and GSK, BMS and Baxter with 2 each.

Figure : A peek into the big pharma leaders in deal making in 2012

Acquirer Acquired Date Value US$m
Amgen deCode GeneticsMustafe NevzatKai PharmaceuticalsMicromet DecemberAprilAprilJanuary

415

700

315

1,160

Sanofi Dosch PharmaceuticalsGenfarPluromed OctoberOctoberMarch

-

-

-

Takeda LigoCyteMultilab Indústria e Comércio de Produtos FarmacêuticosURL Pharma OctoberMayApril

60

273

800

GlaxoSmithKline Human Genome SciencesCellzome JulyMay

3,000

99

Bristol-Myers Squibb AmylinInhibitex JuneJanuary

5,300

2,500

Baxter GambroSigma International DecemberApril

4,000

90

Source: Current Agreements, 2013

On understanding the deal making strategy the companies have adopted, one can possibly conclude that targeted deals are the sign of the times.

For a complete listing of leading life science, pharma and biotech M&A deals by headline value, together with summary term sheet for each deal, view the 2012 M&A Scorecard at Current Partnering.

Shamini Thiagarajan

Related items:

View: M&A scorecard for details of all deals from 2008-2013

View: Partnering Yearbook 2013 report series

Report: Merger and Acquisition Terms and Agreements

Report: Partnering Deals and Alliances with Big Pharma

View: Partnering Deals and Alliances company profile report series

Read also: Top twenty partnering/licensing deals in 2012 had a combined value of over $20 billion

Subscribe: Current Partnering Dealmakers Review - free weekly email newsletter covering all latest partnering news and views

Subscribe: Current Agreements Deal Review - monthly email newsletter providing a review of the previous months deal news and metrics

View: Full deal record for all M&A deals at Current Agreements (subscription required)

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