Replies to post #83353 on Biotech Values

[DewDiligence]

Buy or Be Bought

[From Tuesday’s Boston Globe.]

http://www.boston.com/business/healthcare/articles/2009/09/22/inverness_deal_biogen_idec_offer_reflect_acquisition_fever_among_biotech_firms

›By Robert Weisman
September 22, 2009

That appears to be the new mantra for the Massachusetts life sciences industry, where the strengthening economy and rising stock market have sparked a small wave of acquisitions.

Yesterday alone, Waltham’s Inverness Medical Innovations Inc. agreed to purchase a Seattle company, while Cambridge’s Biogen Idec Inc. launched a hostile tender offer for a California company.

With another biotech company, Sepracor Inc. of Marlborough, agreeing earlier this month to be sold to a Japanese pharmaceutical giant, the scramble for merger partners is on.

A company’s size and the breadth of its product pipeline are key to staying independent in this environment, said Kevin J. Gorman, managing partner at the Burlington consulting firm Putnam Associates.

“You need to get critical mass,’’ Gorman said. “The bigger the animal, the fewer the predators.’’

Although each deal is different, several factors are driving the bump in takeovers among biotech, medical device, and diagnostic firms that had been holding off on mergers. Small companies need cash, big ones are seeking to expand their product lines, capital markets are loosening, and early fears about a health care overhaul leading to price controls or patent restrictions now seem unfounded.

Together, these factors have unleashed a spurt of pent-up deal demand that is likely to continue, industry insiders said.

This month’s deals involving Massachusetts companies follow an 18-month lull in which only one state life sciences merger was completed in the second quarter, two in the first quarter, and two in all of 2008, according to data compiled by the Thomson Reuters research firm in New York for the National Venture Capital Association.

Inverness, a medical testing and device firm that snapped up more than a dozen companies in 2007, yesterday said it would acquire Seattle’s Free & Clear Inc., which designs Web-based programs addressing chronic diseases like tobacco use, for $100 million in cash and $30 million in future payments contingent on next year’s revenue. The deal is expected to be completed by Monday.

Biogen Idec, meanwhile, made an unsolicited bid on Sept. 4 for Facet Biotech Corp. of Redwood City, Calif., a company with which it has been jointly developing drugs for multiple sclerosis and cancer. That bid was rebuffed by Facet’s board on Sept. 8, but yesterday Biogen Idec said it was commencing a $365 million cash tender offer for Facet - in effect, going over the heads of Facet’s directors and taking its bid directly to stockowners. The offer expires Oct. 19.

By acquiring its California partner, Biogen would own 100 percent of the rights to the revenue stream for daclizumab, their treatment for multiple sclerosis, a disease that is the largest target of Biogen Idec products. “The proposed transaction makes compelling business sense,’’ said Biogen Idec spokeswoman Jennifer Neiman.

In the biggest recent deal, Sepracor, a drug maker best known for its Lunesta sleep aid, agreed on Sept. 3 to be purchased by Dainippon Sumitomo Pharma Co. of Japan for $2.6 billion. The deal marked the second time in the past year that a Massachusetts biotech company was acquired by a Japanese buyer. Last year, Takeda Pharmaceutical Co. bought Millennium Pharmaceuticals of Cambridge for $8.8 billion, the state’s largest biotechnology deal ever.

“There’s no doubt that the industry is rolling up,’’ said Robert Coughlin, president of the Massachusetts Biotechnology Council, a trade group in Cambridge. “You’re seeing large companies buy large companies to streamline operations, and you’re seeing large companies buy small companies to keep their pipelines from drying up.’’

Although the Sepracor deal is scheduled to close by the end of the year, disgruntled investors have filed two lawsuits - the most recent lodged yesterday in US District Court in Massachusetts - alleging the terms of the acquisition are detrimental to shareholders. A Sepracor spokeswoman declined to comment on the suits.

Coughlin said the merger trend is “something we certainly keep our eye on,’’ noting that his council much prefers Massachusetts companies to be acquirers, as opposed to having distant owners take over local businesses. But he said the Takeda purchase of Millennium has boosted its local workforce because the Japanese company consolidated its oncology business at Millennium, while using the company to gain a foothold in the North American market. “We see more investment coming in than jobs going out,’’ Coughlin said.

Of particular concern to state business leaders is the continued independence of Biogen Idec and Genzyme Corp., the two largest biotechnology companies based in Massachusetts.

Even as Biogen Idec presses its bid for Facet, the Biogen Idec board now includes two representatives of shareholder activist Carl Icahn, who has proposed selling or breaking up the company.

Meanwhile, some analysts have speculated that Genzyme, also based in Cambridge, could be a takeover target if it fails to get under control recent production problems at its Allston plant, where scientists discovered a virus last spring. The problems caused Genzyme’s share price to tumble over the summer, but it has since rebounded.

Share prices of many other biotechnology companies, especially smaller ones that went public before the economic downturn, remain relatively low - making them more vulnerable to takeover.

And the buyers are circling.

“When you’ve had a cycle of fear and now we’re seeing real signs that growth is coming,’’ said Gorman at Putnam Associates, “if you can pick up an asset that fits your strategy, and you can pick it up at a decent price, why not?”‹

[DewDiligence]

Recent Biotech Buyouts

[Added TRMS deal (40% premium).]

 
 Acquired         Premium    Deal         iHub  
 Company  Buyer   to Market  Value  Date  Reference  
 GNLB     GSK       465%     $57M  10/08  #msg-33209281 
 MEMY     Roche     319%     $50M  11/08  #msg-33787598 
 KOSN     BMY       233%     $190M  5/08  #msg-29647147 
 MGRM     LH        171%     $155M  6/09  #msg-38960958 
 COLY     PFE       167%     $165M 11/07  #msg-24600805 
 NTMD     Deerfield 158%‡‡‡  $36M   1/09  #msg-35132470 
 EYE      ABT       149%   **$2.8B  1/09  #msg-34762429 
 IOMI     Intercell 147%     $190M  5/08  #msg-29232165 
 BTRX     Stiefel   136%     $150M  6/08  #msg-30201906 
 Tepnel   GPRO      126%     $132M  1/09  #msg-35221710 
 SGXP     LLY       119%     $64M   7/08  #msg-30547648 
 ENCY     PFE       118%     $350M  2/08  #msg-26978155 
 TRCA     Ipsen     104%     $660M  6/08  #msg-29795183  
 CRY.to   MDT        97%     $380M  9/08  #msg-32421462 
 Speedel  NVS        94%     $880M  7/08  #msg-30588524 
 MNT      JNJ        92%     $1.1B 11/08  #msg-33879830 
 MEDX     BMY        90%     $2.1B  7/09  #msg-39801273 
 SIRT     GSK        85%     $620M  4/08  #msg-28705020  
 CVTX     GILD     *‡76%     $1.4B  3/09  #msg-36225695 
 IDEV     ENDP     *†74%   *†$370M  1/09  #msg-34592416 
 LEVP     VPHM     ††73%   ††$510M  7/08  #msg-30704409 
 TARG     MDCO    ***72%     $42M   1/09  #msg-34774402 
 Ventana  Roche      72%     $3.4B  1/08  #msg-30912677 
 Jerini   Shire     *71%     $520M  7/08  #msg-30452872 
 AAH.AX   CEPH       69%     $207M  2/09  #msg-35956544 
 Acambis  SNY        64%     $550M  7/08  #msg-30990498 
 SCRX     Shionogi   61%     $1.4B  9/08  #msg-31859174 
 IDMI     Takeda     55%     $75M   5/09  #msg-37898204 
 ALO      KG       ‡†54%     $1.6B 11/08  #msg-33763449 
 MEDI     AZN      ‡‡53%     $15.2B 4/07  #msg-19020387 
 MLNM     Takeda     53%     $8.8B  4/08  #msg-28365383 
 PCOP     LGND    ***52%     $75M   9/08  #msg-32404474 
 CLZR     ELOS       51%     $65M   9/09  #msg-41293512 
 OMRI     JNJ      ‡*51%     $465M 11/08  #msg-33762745 
 IMCL     LLY     †††51%     $6.5B 10/08  #msg-32662830 
 CRGN     CLDX       50%     $40M   5/09  #msg-38262967 
 PHRM     CELG       46%     $2.9B 11/07  #msg-24645394      
 BRL      TEVA       42%   **$9.0B  7/08  #msg-30792830 
 TRMS     Arigene    40%     $81M  10/09  #msg-42147995 
 MOGN     Eisai      39%     $3.9B 12/07  #msg-25163775  
 SGP      MRK        34%     $41B   3/09  #msg-36140327 
 CGPI     Galderma   30%     $420M  2/08  #msg-28286522 
 WYE      PFE        29%     $68B   1/09  #msg-35077617 
 APPX     Fresenius †29%     $940M  7/08  #msg-30498388 
 SEPR     Dainippon  28%     $2.6B  9/09  #msg-41143301 
 Zentiva  SNY      ‡‡26%     $2.6B  9/08  #msg-32327005 
 NOVN     Hisamitsu  22%     $428M  7/09  #msg-39515681 
 CGRB     JNJ        16%     $970M  5/09  #msg-38039851 
 DNA      Roche      16%   †*$46.8B 3/09  #msg-36224175 
 ARI.to   Roche     ‡15%     $190M  7/08  #msg-30904056 
 CEGE     BPAX        6%     $38M   6/09  #msg-39163410 
 AVGN     MNOV     †‡(7%)    $38M   8/09  #msg-40769841 
 PGLA     Avexa       ®         ®  12/08  #msg-34341452 
 NUVO     ARCA        ®         ®   9/08  #msg-32420015 
 NOVC     Transcept   ®         ®   9/08  #msg-31869987 
 ANSV     Arcion      ®         ®   8/09  #msg-40467526 
 VSGN     IPC*††      ®         ®   8/09  #msg-40603745 
  
 ®Reverse merger with private or non-US company.  
  
 ‡Number is misleading inasmuch as Arius announced in 
 May 2008 that it was pursued by an unnamed suitor. 
  
 ‡‡Premium relative to commencement of bidding. 
  
 ‡‡‡To be liquidated by Deerfield following failed merger with 
 Archemix; premium relative to 11/18/08 date of Archemix deal. 
  
 ‡†Based on closing price 8/21/08, the day 
 before KG announced initial buyout offer. 
  
 ‡*Based on 11/20/08 close. 
  
 †Premium reaches 63% if earn-out met. 
  
 ††Premium and deal value based on 0.45/sh of contingent payments. 
  
 †††Premium relative to 7/30/08 close, the 
 day before BMY announced first buyout offer. 
  
 †*Price for 44% of DNA not already owned. 
  
 †‡7% discount to market price excludes contingent payments. 
  
 *199% premium to volume-weighted 
 price during preceding 3 months. 
  
 **Deal value includes assumption of debt. 
  
 ***Premium and deal value exclude contingent payouts. 
  
 *‡Premium relative to 1/26/09, the day 
 before Astellas announced $16/sh offer. 
  
 *†Premium includes estimated value of contingent 
 payouts, but listed deal value excludes them. 
  
 *††IntelliPharmaCeutics.