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Big pharma and biotech M&A activity increases in Q4 2006

Multi-billion dollar acquisitions by big pharma of large cap biotech company's increased during the final quarter of 2006, according to a report by US-based life sciences merchant bank Burrill & Company
Multi-billion dollar acquisitions by big pharma of large cap biotech company's increased during the final quarter of 2006, according to a report by US-based life sciences merchant bank Burrill & Company.

The big M&A stories of Q4 2006 were Abbott's $3.7 billion acquisition of specialty pharmaceutical company Kos Pharmaceuticals to enhance its portfolio of products for lipid management and Gilead Sciences acquisition of Myogen for $2.5 billion.

Another important story was Genentech's acquisition of Tanox, a biotechnology company specialising in the discovery and development of biotherapeutics based on monoclonal antibody technology, for approximately $919 million. The companies have been working together in collaboration with Novartis since 1996 to develop and commercialise Xolair, an anti-IgE monoclonal antibody approved by the FDA in 2003 for the treatment of moderate-to-severe allergic asthma, HIV and age-related macular degeneration.

According to Burrill & Co's report, the M&A trends witnessed in 2005 and 2006 should continue in 2007 with big pharma desperate to plug pipeline gaps and increase innovation. Also, both big pharma and big biotech will be competing for companies with advanced product pipelines, as well as important technology purchases, such as the $1.1 billion acquisition of Sirna by Merck announced in November 2006. Burrill also sees partnering deals maintaining pace, with a significant proportion of the $20 billion projected to be raised in 2007 directed at gaining access to drug delivery technology at an earlier stage in its development, as companies strengthen their product indication franchises.

Burrill noted: "We haven't seen this many deals in any year between pharma/ biotech and biotech/biotech in the industry's history. The huge premiums that big pharma is willing to pay for biotech innovation reflects their pipeline problems. Compared with the daunting $1.2 - $1.8 billion needed to bring a new drug to market and the long 10-15 year development cycle, paying big premiums, even for drugs that are not even in the clinic is both a cheap and efficient way of reducing development costs and shortening commercialisation timelines for the pharma acquirers."

Table 1 (Selected partnering transactions during Q4 2006):

Target Acquirer Description Value ($M)
Genmab GSK HuMax (ofatumumab) 2,100
Epix GSK Global development and commercialisation of G-protein coupled receptors 1,200
Halozyme Roche Enhanze drug delivery technology 612
InterMune Roche Hepatitis C virus (HCV) protease inhibitor programme 530
Idera Merck Toll-like Receptor (TLR) agonists 455
AC Immune Genentech Anti-beta-amyloid antibodies for the potential treatment of alzheimer's Disease and other human diseases 300
Altus Genetech ALTU-238, a subcutaneously administered, once-a-week formulation of human growth hormone 280

Table 2 (Selected M&A transactions announced during Q4 2006):

Acquirer Target Value ($M)
Abbott Kos Pharmaceuticals 3,700
Eli Lilly Icos 3,200
Gilead Myogen 2,500
Merck Sirna Therapeutics 1,100
Genentech Tanox 919
Illumina Solexa 660
Genzyme AnorMED 584

Full details can be found at http://www.burrillandco.com

4th January 2007

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