Wednesday, May 16, 2007

M&A: Gulf War

So there's now a class-action lawsuit that asserts MedImmune's shareholders are getting a raw deal in that company's acquisition by AstraZeneca, pretty much because MEDI CEO David Mott is now the $400 million man.

On the other hand, AstraZeneca shareholders have been none too pleased with MEDI's $15.6 billion price tag, asking, essentially, where's the beef? And by beef, we mean value. And by value, we mean late-stage clinical projects.

Perspective is an amazing thing.

Whether or not AZ paid too much or too little (in other words, whether the deal will eventually pay off for the Big Pharma) is impossible to know right now, and therefore isn't as interesting to us as looking at the value of MedImmune, the stand-alone biotech giant, versus the value of MedImmune, the industrial-strength pharmaceutical company fertilizer. This valuation gulf and the monster takeout premiums it creates have been evident across the board in looking at the biggest companies’ biggest biotech acquisitions of the past five years.
Why this gulf? Pick your reason: stingy public markets, desperate Big Pharma (and some none-too-clever acquisition hunting tactics by senior management, if you believe the grapevine), savvy biotech dealmakers?

We looked at those deals for an upcoming IN VIVO article, and weighed in on the success or failure of the ones far enough in the rear-view mirror to judge. The twenty top pharma companies (by 2006 revenues) made 33 biotech/small pharma acquisitions valued at greater than $100 million since the beginning of 2003 (we excluded generics, diagnostics, devices, OTC, etc.). Acquisitions like AZ/MedImmune brought the mean value of those deals close to $2.9 billion (median is about $900 million). Pfizer, J&J and AZ did the most deals, while Wyeth, Sanofi-Aventis, and BMS did none that fit the criteria. Here’s another taste of the data, all from Windhover’s Strategic Transactions Database.

So which do you think were the best deals of the past five years? Let us know in the comments.

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