2013 Deals Review Finds Spec Pharma, Bolt Ons Dominated M&A

 

As the door shuts on 2013 and we reflect on the year’s biopharma M&A activity, what’s most noteworthy is the activity of specialty pharmaceutical and big biotech companies, which supplanted Big Pharma as the year’s most aggressive buyers. An optimist might argue that industry’s largest players are savvy avoiders of overvalued assets; another possibility is that they’re simply losing the battle to acquire tomorrow’s growth-drivers.

Amgen Inc.’s $9.7 billion (net of cash) purchase of Onyx Pharmaceuticals in October was the industry’s largest of the year. It reflected the value Onyx built up over years as it grew a successful R&D and commercial operation, and, most notably, the potential of its key asset, Kyprolis (carfilzomib), which gained U.S. approval for treatment of multiple myeloma in July 2012.  After receiving the offer in June 2013, the biotech tried for several weeks to push up Amgen’s original proposed price of $120 per share ($8.7 billion) and finally agreed to a price of $125 a share. Analysts had predicted that Onyx would get $10 to $30 more per share than the original offer, but uncertainty surrounding Kyprolis’ peak potential kept buyers’ enthusiasm in check.

Of 92 biopharma-related M&A deals that closed in 2013, nearly 15% – including half of the top ten deals by upfront price – involved specialty pharma buyers. Of these buyers, Valeant International Inc., Endo Health Solutions Inc., Opko Health Inc., and the much-reconfigured Elan Corp. PLC were particularly active, with each pursuing two or more acquisitions. 

Valeant, Perrigo Co. and Actavis PLC were the top three spenders, while Valeant’s acquisition of privately held Bausch & Lomb for $8.7 billion came in as the industry’s second largest acquisition of the year. B&L will continue to operate as a separate subsidiary within Valeant, which has led the way within the industry in favoring financial efficiency over R&D innovation as a driver of M&A. Valeant in April also acquired the mid-sized dermatology-focused pharma Obagi Medical Products Inc. for $418.4 million.

Deals Of The Year

Our editors have selected what they view as the most significant and intriguing deals of 2013 in three categories – in addition to M&;A, we’ve included alliances and financings – and invite readers to vote on their favorites. Please view profiles of our nominees at http://pages.elsevierbi.net/DOTY/2013.  Polls are open until noon ET on Jan. 7.

Perrigo and other less traditionally visible buyers also reflected the strength of specialty pharma companies. Gastroenterology-focused Salix Pharmaceuticals Ltd. is in the process of buying specialty pharma Santarus Inc. for $2.1 billion, while the latter, in a surprise move, bought Elan for $8.3 billion. 

Also notable was the complete absence from M&A of some of the industry’s biggest companies; Merck & Co. Inc., Forest Laboratories Inc., Novartis AG, and Pfizer Inc., among others, were nowhere to be found among buyers. Those that did surface didn’t make huge waves. Bayer AG’s $2.4 billion proposed acquisition of its Xofigo (radium-223 dichloride) partner Algeta ASA in December consolidates ownership of a potential blockbuster;  AstraZeneca PLC’s smaller acquisitions of fish-oil specialist Omthera and respiratory company Pearl Therapeutics were so-called ‘bolt-ons’ that added near-market but me-too products to its portfolio.

About 10% of acquisitions, or nine, involved rare disease companies. In one of the year’s biggest deals, Shire PLC announced in November that it is buying rare disease company ViroPharma Inc. for $3.3 billion on ambitions of becoming a leading rare disease player. In January, Shire also acquired LotusTissue Repair, which focuses on wound care and dermatology, for $49.3 million upfront and another $275 million in potential earnouts.--Wendy Diller

Credit to the PAXsims blog by Rex Brynen for the image