hbm pharma biotech m&a report 2012
TRANSCRIPT
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HBM Pharma/Biotech M&A Report 2012
Summary Results
In 2012, trade sales of North American and European
pharma and biotech companies generated an upfront
transaction volume of $43.5 billion. This was lower than
the deal volumes reported in 2011 and 2010 ($63.5 billion
and $66.9 billion). However, the number of transactions in
2012 (72) was in line with previous years (69 in 2011 and
78 in 2010). If one excludes transactions over $10 billion
(1 in 2012, 2 in 2011 and 1 in 2010), then 2012 looks quite
strong with $32.3 billion of transaction volume (vs. less than $30 billion in 2011 and in 2010).
The number of public takeovers during 2012 dropped to 12 (vs. 20 or more in the years before), whereas
the number of private deals reached 60 transactions. These private transactions generated an upfront deal
volume of $14.6 billion (only surpassed by the $20.8 billion upfront in 2011).
M&A activity in the US remained strong with 48 deals
generating an upfront transaction volume of $32.5 billion
(vs. $42.7 billion in 2011 from 39 deals). Europe reported
significantly lower transaction volume in 2012
($10.4 billion) as compared to the year before when M&A
deal volume reached $20.6 billion (which included the
$13.7 billion buyout of Nycomed by Takeda).
North American large pharma and biotech firms as well as
specialty pharmas were clearly the dominant buyers during
2012, shelling out two thirds of the transaction dollars in more than 40 deals. Valeant bought 5
biopharma companies in 2012, followed by Amgen (3) and Takeda (3).
While the number of exits for VC-backed companies (28) was in line with past years, significantly more
private equity-backed companies were sold in 2012 (10 vs. 3 such transactions each in 2011 and in 2010).
6 of these exits were in the US, 4 in Europe. Total deal value here reached $10.5 billion.
US VC-backed biopharma companies continued to attract more interest from buyers then their European
counter-parts (22 US deals vs. 5 European deals1). Overall
upfront paid for VC-backed companies was $3.4 billion.
Total transaction volume including contingent payments
reached a new high of $8.3 billion (two transactions had a
biodollar value of $1 billion or more each).
The returns from VC-backed trade sales during 2012 were
stronger than ever driven by the excellent performance of
some US exits. The average multiple to investors from
upfront payments alone (for the 15 transactions where
such a multiple could be estimated) reached 5.7x (the
median was 3.5x).
1 Plus one Canadian VC-backed company sold in 2012 (Enobia)
Total 2012 deal value lower than in 2011 and 2010. Fewer public takeovers, but high number of private transactions.
M&A activity strong in the US, weaker in Europe. US buyers dominate. Specialty pharma buyers very active. Valeant (Canada) buys 5 companies.
Private equity funds sold 10 pharma companies. High deal volume (incl. contingent payments) for VC-backed companies.
Strong returns for US VC investors.
HBM Pharma/Biotech M&A Report 2012
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Trade Sales of Public and Private Biopharma Companies in 2012
In 2012, the sale of 73 North American and European biopharma companies generated an upfront
transaction volume of $43.5 billion, or $49.3 billion if one includes contingent payments. Compared to
previous years, the overall deal volume was thus lower mainly due to the smaller number of public take-overs
(12 vs. over 20 in the years before) and the absence of a “mega deal”.
Biopharma M&A Upfront Transaction Volume (US, Canada, Europe)
4Source: HBM Pharma/Biotech M&A Report HBM Partners
(Upfront) Transaction Volumes of Pharma/Biotech Trade Sales
4.0 3.6 6.4 2.4 2.5 4.0 5.013.9
13.710.4
0.71.9
0.37.5 6.9
2.10.7
11.441.5
11.3
39.311.4 15.2
22.6
17.7
35.0
29.611.0
155.4
41.2
20.1
11.2
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011 2012
Up
fro
nt
Tran
sact
ion
Vo
lum
e ($
bill
ion
)
Public companies (> $10bn)
Public companies
Other private companies
Private companies (>$10bn)
VC/PE-backed private companies
$80.8 bn
Public & Private Pharma/Biotech Companies (US, Canada, Europe)
Pfizer/Wyeth
Merck/Schering P.
Roche/Genentech
Novartis/Alcon
(minority/option)
AstraZ./Medimmune
Schering P./Organon
Merck KGaA/Serono
Bayer/Schering AGTakeda/
Nycomed
$66.9 bn$63.5 bn
$177.1 bn
$52.7 bn$49.2 bn
$25.7 bn
The Alcon/Novartis transaction was recorded with $11 billion in 2008 (minority purchase) and with $41.1 billion in 2010.
$43.5 bn
Novartis/Alcon
Gilead/
Pharmasset
Sanofi/Genzyme
The HBM Pharma/Biotech M&A Report covers all completed trade sales of US, Canadian and European biotechnology and pharma (incl. generics and OTC) companies since 2005 to the end 2012. While providing some top line results for public and private transactions, the analysis focuses mainly on trade sales of private venture- or private-equity-backed companies (called “VC/PE-backed companies” in this report). The report also includes acquisitions of biopharma companies by PE- or buyout investors.
The survey does not cover diagnostics, medical technology or life sciences tools & services companies. Reverse mergers, minority investments and the purchase of assets or subsidiaries are not included in the survey. Acquisitions that were structured as mergers for tax or other reasons are included.
Unless mentioned otherwise, transaction volume is defined in this report as the upfront consideration in cash and/or shares. The total transaction value includes contingent (“biodollar”) payments linked to reaching certain milestones.
Additional data such as investment by VCs, exit multiples, stage of lead product etc. were collected from various sources. Please note that such data may be based on estimates and may not have been available for all transactions. Also, the results presented in this report may deviate from earlier reports due to subsequent reclassification or correction of data.
Further information about the HBM Pharma/Biotech M&A Report including a list of all transactions can be found under www.hbmpartners.com/report. The use of data and charts is permitted with reference to “HBM Partners Pharma/Biotech M&A Report”.
HBM Pharma/Biotech M&A Report 2012
3
While transaction volume in 2012 was relatively low, the overall number of biopharma M&A transactions was
in line with previous years, driven by a high number of private transactions (including a record number of
trade sales of private equity-backed pharma companies, mainly former buyouts).
Number of Biopharma M&A Deals (US, Canada, Europe)
6Source: HBM Pharma/Biotech M&A Report HBM Partners
Number of Pharma/Biotech Trade Sales by Year
32 29 31 2719
29 28 28
31 2
1
3 310
2424
27
1318
26
15
22
13 19 11
25
12
13
17
119
14
6
61
0
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Public companies >$100m
Other private companies
PE-backed private companies
VC-backed private companies
Public companies <$100m value
(not in survey before 2008)
Public & Private Pharma/Biotech Companies (US, Canada, Europe)
Significant Transactions in 2012
The number of transactions with an upfront of at least $100 million was again very high in 2012. The number
of $100+ million private deals significantly increased in 2012 due to the 10 PE-backed company exits1 (with a
median deal value of over $500 million).
Number of Biopharma M&A Deals With an Upfront of at Least $100 Million (US, Canada, Europe)
10Source: HBM Pharma/Biotech M&A Report HBM Partners
Number of Pharma/Biotech Trade Sales >=$100m Upfront Transaction Volume
10 812
9 9 10 12 12
3
1
2
13
3
104
3
7
1
65
5
31319
11
25 1213
1711
0
10
20
30
40
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Public companies
Other private companies
PE-backed private companies
VC-backed private companies
Public & Private Pharma/Biotech Companies (US, Canada, Europe)
1 While no transaction values for the secondary buyout of Aenova by BC Partners from Bridgepoint were disclosed, it
can be assumed that this transaction was valued clearly above $100 million.
HBM Pharma/Biotech M&A Report 2012
4
In 2012, there were 9 deals with an upfront transaction volume of over $1 billion each. The largest deal was
the purchase of NASDAQ-listed Pharmasset by Gilead Sciences for $11.2 billion. Pharmasset has several
clinical programs in hepatitis C with the most advanced product in phase III. Two private trade sales, both
companies backed by private equity, also reached values over $1 billion: Generics company Actavis
(Switzerland) was sold to Watson for $5.6 billion and dermatology company Fougera, a spin-off from
Nycomed (sold in 2011 for over $13 billion), was picked up by Sandoz/Novartis for $1.5 billion.
Largest Biopharma M&A Transactions in 2012 (US, Canada, Europe)
TargetVC/PE-
BackedBuyer
Upfront Value
($ million)
Total Value
($ million)
1 Pharmasset (US) Public Gilead Sciences (US) 11'200 11'200
2 Actavis (CH) Private PE Watson Pharmaceuticals (US) 5'600 5'920
3 Amylin (US) Public Bristol-Myers Squibb (UK) 5'300 5'300
4 Human Genome Science (US) Public GlaxoSmithKline (UK) 3'600 3'600
5 Medicis Pharmaceutical (US) Public Valeant (Canada) 2'600 2'600
6 Inhibitex (US) Public Bristol-Myers Squibb (US) 2'500 2'500
7 Fougera (US) Private PE Novartis (CH) 1'525 1'525
8 Ardea Biosciences (US) Public AstraZeneca (UK) 1'260 1'260
9 Micromet (Germany) Public Amgen (US) 1'160 1'160
10 URL Pharma (US) Private PE Takeda (J) 800 800
11 Mercury Pharma (UK) Private PE Cinven (UK) 732 732
12 EUSA Pharma (UK) Private PE Jazz Pharmaceuticals (US) 650 700
13 Enobia (Canada) Private VC Alexion (US) 610 1'080
14 Amdipharm (Ireland) Private Cinven (UK) 590 590
15 Azur Pharma (Ireland) Private PE Jazz Pharmaceuticals (US) 580 580
16 Ista Pharmaecuticals (US) Public Bausch & Lomb (US) 500 500
17 deCode Genetics (Iceland) Private Amgen (US) 415 415
18 Avila Therapeutics (US) Private VC Celgene (US) 350 545
19 SkinMedica (US) Private VC Allergan (US) 350 375
20 Proximagen (UK) Public Upsher-Smith (US) 347 553
21 Kai Pharmaceuticals (US) Private VC Amgen (US) 325 325
22 Orapharma (US) Private PE Valeant (Canada) 312 426
23 NextWave (US) Private VC Pfizer (US) 255 680
24 Dusa Pharmaceuticals (US) Public Sun Pharmaceuticals (India) 230 230
25 Allos Therapeutics (US) Public Spectrum Pharmaceuticals (US) 206 206
26 Boston Biomedical (US) Private VC Dainippon Sumitomo (Japan) 200 2'630
27 JHP Pharmaceuticals (US) Private PE Warburg Pincus (US) 195 195
28 Airborne (US) Private PE Schiff Nutrition (US) 150 150
29 EKR Therapeutics (US) Private VC Cornerstone Therapeutics (US) 125 150
30 Elevation Pharmac. (US) Private VC Dainippon Sumitomo (J) 100 400
31 FerroKin (US) Private VC Shire (Ireland) 100 325
32 CorImmun (Germany) Private VC Johnson & Johnson (US) 100 200
33 CNS Therapeutics (US) Private VC Mallinckrodt (US) 100 100 Comment: CH = Switzerland. Green shading = trade sales of VC-backed companies. Grey shading = trade sales of PE-backed companies.
Also see list of all transactions: www.hbmpartners.com/report.
In 2012 there were also quite a number of larger exits of VC-backed biopharma companies. This list – ranked
by upfront consideration – is topped by Canadian orphan disease company Enobia sold to Alexion in a
transaction that could reach $1 billion if all milestones are met. Second was derma company SkinMedica
which was picked up by Allergan for $350 million. The sale of Boston Biomedical to Dainippon Sumitomo
reached the highest-ever biodollar value ($2.63 billion) of a VC-backed company.
HBM Pharma/Biotech M&A Report 2012
5
Premiums Paid for Public Biopharma Companies 2009 – 2012 (Takeover Value >=$100 million)
13Source: HBM Pharma/Biotech M&A Report HBM Partners
Premiums Paid for Public Biopharma Companies 2008 – 2012
2.6
0.4
46.8
1.41.0
0.4
2.22.6
66.7
42.0
0.3
1.9
0.3
0.5
0.1
4.03.3
0.9
0.6
2.9
0.1
0.30.3
1.1
0.6
1.2
2.3
3.6
20.1
0.5
0.9
0.4
0.2
3.4
0.4
6.8
0.20.2
0.1
2.5
11.2
1.31.2
0.5
3.6
5.3
0.3
0.2
2.6
0.2
6
45
2625
1622
90
2532
4449
34
606764
55
15
84
74
1719
28
160
35
9
18
58
40
4841
7
26
5
53
80
39
6
71
163
89
54
33
10
99
1016
27
3938
0
50
100
150
200
0.0
0.1
1.0
10.0
100.0
Zentiva
Indevu
s …
Genente
ch
CV
Thera
peu
tics
Cougar …
Nove
n …
Medare
x
Sepra
cor
Wye
th
Schering P
lough
Gold
shie
ld G
roup
Chattem
Bio
Form
Medic
al …
Facet
Bio
tech …
Jave
lin …
OS
I P
harm
a
Vale
ant
Zym
oG
en
etics
Movetis
Abra
xis …
Penw
est
Bio
com
patib
les
Cyp
ress …
Mart
ek
Eura
nd
Q-M
ed
Cru
cell
Kin
g …
Genzym
e
Pro
str
akan
Clin
ical
Data
Inspire
Cara
co
Tale
cris …
AB
Sanitas
Cephalo
n
Anadys
Adolo
r
Nova
gali
Inhib
itex
Pharm
asset
Ard
ea B
ioscie
nces
Mic
rom
et
Ista
…
Hum
an G
enom
e …
Am
ylin
Pro
xim
ag
en
Allo
s T
hera
peutics
Medic
is …
Dusa …
% P
rem
ium
Pa
id
De
al V
alu
e $
billio
n
Deal value $ bn
Premium in %
2009 2010 2011 2012
33%47%
56% 52%
Premium of purchase price compared to the stock price before the deal announcement
Comment: Public takeovers of US, Canadian and European biopharma companies with an upfront transaction value of at least
$100 million. Premium of takeover price as compared to the last stock price before the announcement of the deal.
Premiums Paid for Takeovers of Public Biopharma Companies
The premiums paid for public biopharma companies since 2009 have increased to over 50% (premium of takeover price as compared to the last stock price before the deal announcement). As the chart below shows, there is a high degree of variance in these premiums. Any general conclusion from the data therefore should be interpreted with caution. Nevertheless, a few interesting observations can be made:
The 10 public biotechs sold that had significant biologics assets (antibodies etc.) were able to command on average a premium of 67% (vs. the 47% average for all 50 public takeouts in this analysis).
The 10 pre-commercial companies (phase II and III) also were rewarded with a higher premium (over 70% on average).
Premiums paid for US public companies (38 deals) were on average 10% higher than the premiums paid for European firms (12 deals).
The only therapeutic category that yielded significantly higher premiums was anti-infectives: The average premiums paid for the 5 companies in that field were over 100%.
No correlation between size of transaction (i.e. size of company) and premiums was observed.
HBM Pharma/Biotech M&A Report 2012
6
Location of Buyers / Type of Buyers
In contrast to previous periods, M&A deal making in 2012 was clearly dominated by North American (mostly
US) buyers who generated over two thirds of transaction volume.
Location of Buyers
11Source: HBM Pharma/Biotech M&A Report HBM Partners
Pharma/Biotech Trade Sales - Location of Buyers
10.2 18.3 20.5 12.4 8.1 12.3 13.628.8
108.7
14.7
61.8
23.830.5
56.9
50.534.3
13.30.9
0.7
4.9 10.1
3.2
4.4
15.61.4
0
20
40
60
80
100
120
140
160
180
2005 2006 2007 2008 2009 2010 2011 2012
Up
fro
nt
Tran
sact
ion
Vo
lum
e ($
bill
ion
)
Asian / ROW buyers
European buyers
North American Buyers
Public & Private Pharma/Biotech Companies (US, Canada, Europe)
Pfizer/Wyeth
Merck/Schering P.
Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe
Also, large pharma’s share of deal volume declined significantly in 2012 for several reasons: There were no
mega transactions as in the years before. The largest deal in 2012 was consummated by Gilead (classified as
“Large Biotech”) and Amgen, the world’s largest biotech, also bought 3 companies in 2012. In addition,
smaller and medium-sized pharma companies were again very active buyers in 2012 with 30 acquisitions and
a record deal volume of $12.5 billion.
Share of M&A Upfront Transaction Volume by Type of Buyer
12Source: HBM Pharma/Biotech M&A Report HBM Partners
58%
72%81% 81%
96%
82% 78%
38%
15%
13%2%
1%
6%
2%
30%
17%
14% 15%9%
2%11%
18%
27%
5%
2%
3%
1% 1% 1%6% 7%2% 4%
0%
20%
40%
60%
80%
100%
2005 2006 2007 2008 2009 2010 2011 2012
% o
f (U
pfr
on
t) T
ran
sact
ion
Vo
lum
e
Other
Small biotech
Small & mid-sized pharma
Large biotech
Large pharma
Buyers of VC-Backed Private Pharma/Biotech Companies (% Trans. Vol.)
Private & Public Pharma/Biotech Companies (US, Canada, Europe)
Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe
HBM Pharma/Biotech M&A Report 2012
7
The table below shows that small and medium-sized pharma companies, which have been active buyers of
other biopharma companies for the years covered by our report, have become very important as a buyer
group.
Number of M&A Transactions by Type of Buyer (Transactions with >=$100 Million Upfront)
Buyer Group
Large Pharma 2005-08 2009 2010 2011 2012 2009-12
VC-Backed 25 5 6 5 4 20
PE-Backed & Other Private 3 4 1 1 3 9
Public 32 8 7 6 5 26
Total 60 17 14 12 12 55 0 0
Large Biotech 0 0
VC-Backed 6 1 3 3 2 9
PE-Backed & Other Private 2 0 1 0 1 2
Public 7 1 1 0 2 4
Total 15 2 5 3 5 15 0 0
Small & Mid-Sized Pharma 0 0
VC-Backed 6 3 1 3 4 11
PE-Backed & Other Private 15 3 5 7 5 20
Public 21 2 5 9 3 19
Total 42 8 11 19 12 50 0 0
Small Biotech 0 0
Private 2 0 1 1 0 2
Public 6 0 0 0 1 1
Total 8 0 1 1 1 3 Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe >=$100 million upfront
Trade Sales of Private Biopharma Companies
60 private biopharma companies were sold in 2012, on par with the 60 transactions in 2007. Deal volume
was also high driven by the $5.6 billion acquisition of Actavis by Watson and other significant exits for PE-
backed companies. Upfronts paid for the 28 VC-backed companies were down slightly from 2011. The 23
other private (mostly family-owned) pharma companies sold generated a low overall deal volume in 2012.
However, it should be mentioned that terms for some of these trade sales are not disclosed.
Trade Sales of Private Biopharma Companies (US, Canada, Europe)
14Source: HBM Pharma/Biotech M&A Report HBM Partners
Trade Sales of Private Pharma/Biotech Companies
2.6 3.1 4.02.4 1.9 2.3
4.1 3.41.4 0.6
2.4
0.61.7
14.6
10.510.4
0.7
1.9
0.3
7.56.9
2.1
0.7
5954
60
40 38
58
46
61
0
10
20
30
40
50
60
70
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012
# o
f T
ran
sact
ion
s
Tra
nsa
ctio
n V
olu
me
($ b
illio
n)
VC-backed co's PE-backed co's Other private co's
Private Pharma/Biotech Companies (US, Canada, Europe)
incl. $13.7 bn
Nycomed/Takeda
incl. $5.6 bn
Actavis/Watson
HBM Pharma/Biotech M&A Report 2012
8
Trade Sales of Private PE-Backed Biopharma Companies (US, Canada, Europe)
16Source: HBM Pharma/Biotech M&A Report HBM Partners
Trade Sales of PE-Backed Private Pharma/Biotech Companies
1.4 0.62.4
0.61.7
14.6
10.5
3
1
2
1
3 3
10
0
5
10
15
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Tran
sact
ion
Vo
lum
e ($
bill
ion
)
Upfront transaction value
Private VC/PE-Backed Pharma/Biotech Companies (US, Canada, Europe)
incl. $13.7 bn
Nycomed/Takeda
incl. $5.6 bn
Actavis/Watson
More details on the exits of PE-backed biopharma companies in 2012 can be found on the next page.
Within the “Other Private Company” segment, the only significant transaction reported in 2012 was the
acquisition of UK generics company Amdipharm by UK buyout house Cinven for $590 million. All other
transactions were below $100 million.
Trade Sales of Other Private (Not VC/PE-Backed) Biopharma Companies (US, Canada, Europe)
17Source: HBM Pharma/Biotech M&A Report HBM Partners
Trade Sales of Other Private Pharma/Biotech Companies
10.4
0.71.9 0.3
7.56.9
2.1 0.7
24 24
27
13
18
26
15
22
0
10
20
30
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Tran
sact
ion
Vo
lum
e ($
bill
ion
)
Upfront transaction value
Private VC/PE-Backed Pharma/Biotech Companies (US, Canada, Europe)
incl. $8.3 bn
Hexal/Novartis
incl. $5.0 bn
Ratiopharm/Teva
incl. $3.3 bn
Stiefel/GSK
HBM Pharma/Biotech M&A Report 2012
9
Trade Sales of Private Equity-Backed Pharma Companies During 2012 (ranked by transaction value)
In 2012, private generics company Actavis was acquired by Watson for $5.6 billion plus contingent payments of approx. $300 million. The deal closed in July 2012. This transaction creates the #3 global generics company. Actavis, headquartered in Switzerland, was acquired in 2007 by Novator, the investment vehicle of Thor Bjorgolfsson, an Icelandic billionaire with substantial leverage provided by Deutsche Bank which is reported to have taken control of the company in 2010. It is rumored that Deutsche Bank lost over $1 billion in this transaction (and equity investors probably lost most or all of their investment).
Fougera, a leading US dermatology generics company, was acquired in May 2012 by Sandoz/Novartis for $1.5 billion in cash. Fougera, formerly a division of Nycomed, was spun off in 2011 when Nycomed was sold to Takeda for over $13 billion. Sales of Fougera were reported as $429 million. The main investors in Fougera (and Nycomed) were Nordic Capital, DLJ Credit Suisse and Avista Capital. No return figures are available from the Fougera transaction, but the overall Nycomed deal should have generated great returns for investors, most of all for Nordic Capital which was the lead investor in Nycomed.
URL Pharma, a US specialty pharma company, was acquired in June 2012 by Takeda for $800 million in cash and undisclosed contingent payments. URL had sales of around $500 million. Takeda was mainly interested in URL's gout product (Colcrys) that was approved in 2009 and had net sales of over $400 million in 2011. In 1997, Elliott Associates and Momar Corporation purchased a majority of URL. No investment or return figures were reported, but it is believed that investor returns have been excellent (even though the holding period was about 15 years).
Mercury Pharma was acquired in August 2012 by Cinven, a UK buyout group, for £465 million ($732 million). The company focusing on generics was bought by UK private equity house HG Capital in 2009 for £187 million ($285 million). This secondary buyout has yielded a multiple of around 3x to HG within a relatively short time period. The company was reported to have sales of £100 million. Cinven accounced that it plans to combine Mercury Pharma with Amdipharma, which was acquired later in 2012.
In June 2012, US Jazz Pharmaceuticals completed the acquisition of EUSA Pharma (UK) for $650 million in cash plus contingent milestone payments of $50 million. EUSA was founded in 2006 by pharma executives and US investor Essex Woodlands to acquire specialty and/or orphan products. Sales of EUSA in 2011 were $95 million. The company raised approx. $225 million of equity mainly from European VCs and $55 million of debt. While no return figures have been published, the multiple to investors is believed to be between 2.5x and 3x.
Azur Pharma, an Irish specialty pharma company with products in pain and women's health, merged with US-listed Jazz Pharmaceutcials in January 2012. Azur Pharma's shareholders will own 20% (valued at around $580 million) of the combined company Jazz Pharmaceuticals plc, to be located in Ireland. Azur was founded in 2005 by former Elan executives to acquire specialty pharma assets and was backed with over $150 million by private investors. While no return figures are available, it is believed that investors - based on the current valuation of Jazz - have seen an increase of over 3x in value.
In June 2012, acquisitive Valeant purchased US Orapharma for $312 million of cash plus $114 million of contingent payments. Orapharma, a leading dental anesthesia and dental health company, was purchased by Water Street Healthcare from Johnson & Johnson in 2010. Water Street reportedly invested around $100 million in the deal. No investor returns are available, but it is estimated that Waterstreet made a 2x-3x on the upfront consideration.
At the end of December 2012, JHP Pharmaceuticals was acquired by private equity firm Warburg Pinucs in a $195 million deal. JHP, a specialty pharma company, founded in 2007, was financed by Morgan Stanley Principal Investments. The company is a contract manufacturer and seller of branded and generics injectables. No return estimates on Morgan Stanley's investment are available.
The US immune support supplement producer Airborne was purchased in April 2012 by publicly-listed vitamin maker Schiff Nutrition for $150 million in cash. The company, founded in the 1990s, had an eventful history including several ownership changes and lawsuits including a $30 million settlement payment to the Federal Trade Commission. Airborne was owned temporarily by Summit Partners and in 2009 was taken over by private equity firm CF Capital. Return figures are not available.
In August 2012, BC Partners acquired German Aenova, a leading producer, developer and seller of solid dosage form medicines, from Bridgepoint, which invested in the company in 2005. The terms of this secondary buyout were not disclosed. Sales of Aenova are reported to be €250 million with 1600 employees. The company is catering its services and products to other pharma companies concentrating on generics and OTC products, among others.
HBM Pharma/Biotech M&A Report 2012
10
Trade Sales of VC-Backed Biopharma Companies
The number of VC-backed biopharma companies sold in 2012 was in line with previous years. While the
upfront transaction volume was lower than in 2011, the total volume including contingent payments reached
a new high of $8.5 billion. As noted previously, Boston Biomedical’s potential deal value was $2.63 billion
and Enobia could also become a billion-dollar deal if all milestones are met.
Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)
18Source: HBM Pharma/Biotech M&A Report HBM Partners
Trade Sales of VC-Backed Private Pharma/Biotech Companies
2.6 3.14.0
2.41.9 2.3
4.13.43.3 3.5
4.83.7
5.1 4.7
6.7
8.3
32
2931
27
19
29 28 28
0
10
20
30
40
0.0
2.5
5.0
7.5
10.0
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Tran
sact
ion
Vo
lum
e ($
bill
ion
)
Upfront transaction value Total value
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
The upfront consideration from trade sales of VC-backed biopharma companies in 2012 averaged
$174 million per deal, below the $203 million in 2011. The median upfront value in 2012 was $100 million,
compared to $115 million in 2011.
Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)
19Source: HBM Pharma/Biotech M&A Report HBM Partners
123
170196
137
317
156
333
117
151176
88
134
88
203174
49 55 6239
63 5673 70
0
50
100
150
200
250
300
350
400
2005 2006 2007 2008 2009 2010 2011 2012
Ave
rag
e V
alu
es ($
mill
ion
)
Average Total Transaction Value
Average Upfront Transaction Value
Average Invested Capital
Average Investment / Average Upfront and Total Deal Values
Only for transactions where respective
information was available.
VC-backed companies only.
Number of transactions
where investment amounts
and transaction values
were available
21 20 22 21 16 20 20 18
440
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
HBM Pharma/Biotech M&A Report 2012
11
Average total deal values (including biodollars) rose to $440 million in 2012. This number is skewed by the
potentially very high deal value of Boston Biomedical. Therefore, median numbers are more meaningful here
($200 million in 2012 vs. $212 million in 2011).
It is interesting to note that the average total VC investment into the companies that were sold in 2011 and
2012 was higher than in previous years indicating that investors are prepared to (or need to) invest more
until a company reaches the exit stage.
Estimated Returns to Venture Investors
Wherever available, HBM is collecting additional information about biopharma trade sales that allows an
estimate of (venture) investors’ returns in such transactions. While the biotech IPO market is open again – at
least in the U.S. – step-ups from private to IPO valuations have been modest. Thus, a trade sale continues to
be the preferred exit route.
A rough estimate of investor return is the ratio between upfront or total proceeds from a trade sale divided by
invested capital. Furthermore, in some transactions, we estimated the step-up from the average valuation
paid by private investors to the exit valuation (upfront transaction volume).
It should be noted that the ratios mentioned above and the return estimates were only available for about
70% of the deals. Also, one or two good exits can significantly drive up average values. Median return
multiples are thus substantially lower.
Return Estimates for Venture Investors from VC-Backed Trade Sales (US, Canada, Europe)
20Source: HBM Pharma/Biotech M&A Report HBM Partners
Ratio of Deal Values to Invested Capital / Average & Median Multiples
Only for transactions where respective
information was available.
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
3.1 3.23.4 3.5
5.1
3.7
4.6
6.4
2.42.7 2.8
2.2 1.91.7
2.72.5
2.1 2.1 2.32.0 2.1
2.5
3.7
5.7
1.62.0
1.81.5
2.0
1.0
2.5
3.5
0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011 2012
Rat
io /
Mu
ltip
le
Total Deal Values/Invested Capital
Upfront Deal Values/Invested Capital
Average Investor Multiples (on Upfront)
Median Investor Multiples (on Upfront)
These multiples
are weighted by
invested capital
VC-backed companies only.
Comment: For VC-backed company trade sales where respective information was available.
The ratio of total value (including biodollars) to invested capital was about 3x until 2007 and then increased
substantially as contingent payments became more prevalent. This ratio reached a new high in 2012 of 6.4x.
If one excludes Boston Biomedical, where investors could get up to 40x of the invested capital, this ratio
drops to 4.3x, still a good number.
The ratio of upfront proceeds to invested capital inched up to 2.8x between 2005 and 2007 and then dropped
to a low of 1.7x in 2010. The ratio jumped back to over 2x in 2011 and 2012. The gap between multiples from
upfront and the maximum multiple widened substantially in 2009 and the following years as milestone-driven
deals became more prevalent.
HBM Pharma/Biotech M&A Report 2012
12
The estimated return multiples, i.e. upfront proceeds to private valuations, show a similar development. The
multiples were stable at around 2x until 2009 and since then have shown a healthy increase.
Overall, returns to VC investors clearly have been on the upswing since 2009 (both in the US and in Europe,
see below). However, US deals have generated substantially better returns during the last 4 years.
Return Estimates for Venture Investors from VC-Backed Trade Sale (US vs. Europe)
21Source: HBM Pharma/Biotech M&A Report HBM Partners
Estimated Investor Return Multiples – US vs. European Trade Sales
1.9x 2.0x
3.1x
1.8x
2.4x
3.1x
4.1x
6.7x
2.3x 2.4x
0.8x
2.6x
1.3x
1.7x
2.3x2.7x
0x
1x
2x
3x
4x
5x
6x
7x
2005 2006 2007 2008 2009 2010 2011 2012
Est
imat
edM
ult
iple
s
Estimated multiples US (Average)
Estimated multiples Europe (Average)
Europe:
Only 3 deals
with return data!
Only for transactions where respective
information was available.
3.5xMedian
1.5xMedian
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
Multiples of average
private valuations to
upfront transaction
value
VC-backed companies only.
Comment: For VC-backed company trade sales where respective information was available.
Stage of VC-Backed Biopharma Companies at Time of Trade Sale
Since 2007, the number of pre-clinical acquisitions has generally declined and the number of acquisitions of
companies with phase III programs or approved products has shown an increase. As mentioned in previous
reports, we observed no systematic impact of company stage on investor returns.
Stage of Lead Program at Time of Trade Sale (VC-Backed Co’s US, Canada, Europe)
22Source: HBM Pharma/Biotech M&A Report HBM Partners
1310
13
9
58
2
6
3
4
4
7
1
4
3
4
68
8
6
9
6
10
9
4 3
2
2
1
3
3
2
22
2
2
1
48
6
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Market
Phase III / NDA
Phase II
Phase I
Pre-clinical
Trade Sales of VC/PE-Backed Biopharma Companies by Stage of Lead Product
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
Only for transactions where respective
information was available.
VC-backed companies only.
Comment: Only for transactions where stage of lead product at the time of trade sale was available.
HBM Pharma/Biotech M&A Report 2012
13
In line with the trend to later-stage M&A deals are two further observations:
(1) Press releases of recent acquisitions rarely mention “platform” or “technology” as a reason for the
acquisition. Usually one or more products (in various stages of development) are highlighted. We have
analyzed the M&A press releases since 2005 and the chart below clearly confirms the trend towards “product
deals” (vs. “technology deals”).
Main Reasons for Acquisition (as Mentioned in Press Releases)
24Source: HBM Pharma/Biotech M&A Report HBM Partners
14
11
18
14
3
7 7
3
2324
23
18
16
2524
21
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012
# o
f Tr
ansa
ctio
ns
Platform or technology Product(s)
Main Reasons for Acquisition (as mentioned in press releases)
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
Only for transactions where respective
information was available.
VC-backed companies only.
Comment: For VC-backed company trade sales where respective information was available.
(2) The time from founding of a company to trade sale has significantly increased since 2005. Whereas the
average “time to exit” was a bit more than 5 years in 2005 it now has increased to almost 9 years, indicating
that VC-backed biopharma companies have to develop their products in later-stage clinical trials before they
can orchestrate a trade sale.
Time From Company Foundation to Trade Sale
25Source: HBM Pharma/Biotech M&A Report HBM Partners
Years From Company Founding to Trade Sale
5.2
5.7
6.4
8.0
6.8
7.5
8.5
9.0
4
5
6
7
8
9
10
2005 2006 2007 2008 2009 2010 2011 2012
Yea
rsto
Trad
e S
ale
Time from company founding to trade sale
Only for transactions where respective
information was available.
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
VC-backed companies only.
Comment: For VC-backed company trade sales where respective information was available.
HBM Pharma/Biotech M&A Report 2012
14
Outlook
While 2012 was not the strongest M&A year in terms of transaction volume, industry participants will
nevertheless look back at 2012 as a “good” M&A year with a high number of significant transactions,
especially in the private sector. Private deals mostly produced good returns for venture- and private-equity
investors.
Medium-sized pharma companies have become very active in the M&A market on the buy side and we expect
this to continue in 2013.
As the biotech IPO window is open again (in the US), US biopharma companies have an alternative exit route
now, even though in most cases a trade sale is still preferred. As the public stock performance in the sector
has been strong, public biopharma companies might look less attractive and interested buyers turn more
towards private targets.
The high number of larger exits for PE-backed pharma companies will certainly increase the appetite for
buyouts groups to engage more in the sector. As buyout firms prefer to acquire well-established private
companies or divisions of larger companies, we do not expect buyout houses to pick up VC-backed
biopharma companies.
Pharma/biotech M&A activity will focus mainly on the US and the emerging markets. European companies
with unique products that can be sold worldwide also represent attractive targets. We have not seen yet a
sell-out of smaller pharma companies in Southern Europe, i.e. in the countries which have been most
affected by the “Euro crisis”.
The good number of significant M&A transactions already announced during the first weeks of the New Year
lead us to believe that 2013 could again be a strong M&A year for the pharma/biotech sector.
January 2013
Please address questions, comments or corrections to the authors of this report:
Dr Ulrich Geilinger, [email protected] and Dr Chandra P. Leo, [email protected]
HBM Partners AG, CH-6300 Zug, Switzerland, phone +41 43 888 71 71
About HBM Partners
HBM Partners is a globally active, healthcare-focused investment management group headquartered in Switzerland. HBM Healthcare Investments AG and funds advised by HBM invest in private and public companies across North America, Europe, India and China. Since 2001, HBM has generated more than 40 trade sales and IPOs of pharma/biotech, medtech and diagnostics companies.
More information can be found at www.hbmpartners.com.