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Summary Results
In 2012, trade sales of North American and European pharma and biotech companies generated an upfront Total 2012 deal value lower than in transaction volume of $43.5 billion. This was lower than 2011 and 2010. the deal volumes reported in 2011 and 2010 ($63.5 billion and $66.9 billion). However, the number of transactions in Fewer public takeovers, but high 2012 (72) was in line with previous years (69 in 2011 and number of private transactions. 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).
M&A activity strong in the US, weaker in Europe. US buyers dominate. Specialty pharma buyers very active. Valeant (Canada) buys 5 companies.
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. Private equity funds sold 10 pharma Total transaction volume including contingent payments companies. 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).
High deal volume (incl. contingent payments) for VC-backed companies. Strong returns for US VC investors.
(Upfront) Transaction Volumes of Pharma/Biotech Trade Sales Biopharma M&A Upfront Transaction Volume (US, Canada, Europe)
$177.1 bn
Public companies (> $10bn) Public companies Other private companies Private companies (>$10bn) VC/PE-backed private companies
100
80 60
$80.8 bn
Merck KGaA/Serono Bayer/Schering AG Pfizer/Wyeth Merck/Schering P. Roche/Genentech
$66.9 bn
155.4
$52.7 bn
$63.5 bn
35.0
$49.2 bn
20.1
Novartis/Alcon (minority/option) Sanofi/Genzyme
Takeda/ Nycomed
40
$25.7 bn
29.6 41.5
AstraZ./Medimmune Schering P./Organon
11.0
$43.5 bn
Novartis/Alcon
Gilead/ Pharmasset
20 0
39.3
0.7 3.6
11.3 1.9
15.2 6.9
6.4
0.3 2.4
5.0
13.9
2005
2006
2007
2008
2009
2010
2011
2012
4
HBM Partners
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.
80 70
# of Transactions
60 50 40
13 24 3 32
19
11 27 2 31
9 25 13 27
6 13 6 17 26 15 3 29 3 28
1 11 22 10 28
14 12
18 1 19 2009
24 1 29
30 20
10 0
2005
2006
2007
2008
2010
2011
2012
6
HBM Partners
Number of Biopharma M&A Deals With an Upfront of at Least $100 Million (US, Canada, Europe)
Public companies
40
# of Transactions
30
11 13 19 7 2 1 12 2007 9 2008 25
17
11 3
20
4 3 10 0 2005
12
6 1 9 2009
13
5 3 10 2010 5 3 12 2011
10
10
3 1
8 2006
12 2012
10
HBM Partners
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. 3
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.
200
150
2.6
1.0
0.9
0.5 0.4 0.2 58
100
0.4
0.1
45
33%
26 25 16 0.0 6
44 25 32
49 34
55
56%
48 40 41 26
53
52%
47%
28 15 17 19
50
39 38 27 10 16
35
18 9
22
Premium of purchase price compared to the stock price before the deal announcement
Zentiva Indevus Genentech CV Therapeutics Cougar Noven Medarex Sepracor Wyeth Schering Plough Goldshield Group Chattem BioForm Medical Facet Biotech Javelin OSI Pharma Valeant ZymoGenetics Movetis Abraxis Penwest Biocompatibles Cypress Martek Eurand Q-Med Crucell King Genzyme Prostrakan Clinical Data Inspire Caraco Talecris AB Sanitas Cephalon Anadys Adolor Novagali Inhibitex Pharmasset Ardea Biosciences Micromet Ista Human Genome Amylin Proximagen Allos Therapeutics Medicis Dusa
2009
2010
2011
2012
Comment: Public takeovers of US, Canadian and European biopharma companies with an upfront transaction value of at least $100 million. Premium of takeover price as compared to the last stock price before the announcement of the deal.
HBM Partners
% Premium Paid
13
180
Upfront Transaction Volume ($ billion)
3.2 Asian / ROW buyers European buyers North American Buyers 56.9
80
60 40 20 0
0.7
Pfizer/Wyeth Merck/Schering P.
108.7
61.8 0.9 14.7 10.2 18.3 4.9 23.8 20.5 10.1 30.5 12.4
34.3
13.6
8.1
2005
2006
2007
2008
2009
2010
2011
2012
11
Comment: Trade sales of Pharma/Biotech public and private pharma/biotech companies US, Canada and Europe Source: HBM M&A Report
HBM Partners
Also, large pharmas 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 worlds 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 Private & Public Pharma/Biotech Companies (US, Canada, Europe) a record deal volume of $12.5 billion. Buyers of VC-Backed Private Pharma/Biotech Companies (% Trans. Vol.) Share of M&A Upfront Transaction Volume by Type of Buyer
100%
6% 5% 17% 15%
7% 3% 9%
2% 1%
1% 11% 6%
2% 1%
4% 1% 27%
Other
18%
2%
80%
Small biotech
60%
96%
40%
72% 58%
81%
81%
Large biotech
20%
38%
Large pharma
Large Biotech VC-Backed PE-Backed & Other Private Public Total Small & Mid-Sized Pharma VC-Backed PE-Backed & Other Private Public Total Small Biotech Private Public Total
2005-08 25 3 32 60 0 0 6 2 7 15 0 0 6 15 21 42 0 0 2 6 8
2009 5 4 8 17 1 0 1 2 3 3 2 8 0 0 0
2010 6 1 7 14 3 1 1 5 1 5 5 11 1 0 1
2011 5 1 6 12 3 0 0 3 3 7 9 19 1 0 1
2012 4 3 5 12 2 1 2 5 4 5 3 12 0 1 1
2009-12 20 9 26 55 0 0 9 2 4 15 0 0 11 20 19 50 0 0 2 1 3
Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe >=$100 million upfront
VC-backed co's
PE-backed co's
25
70
59
Transaction Volume ($ billion)
60
54 40
58
2.1
61
60
20 15
46
50
0.7 40 30
# of Transactions
14
38
14.6
incl. $13.7 bn Nycomed/Takeda
10
5 0
7.5 0.3
2.4 2008 0.6 1.9 2009
10.5
20 10
4.0
2007
4.1 2011
3.4 2012
HBM Partners
15
15
10
Upfront transaction value
10
10
# of Transactions
16
14.6 10.5 5
3 1.7
2010
3
incl. $5.6 bn Actavis/Watson
1.4
2005
0.6 2006
0 2011 2012
HBM Partners
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 $100 million.
Private VC/PE-Backed Pharma/Biotech Companies (US, Canada, Europe)
Trade Sales of Other Private (Not VC/PE-Backed) Biopharma Companies (US, Canada, Europe)
15 24
Transaction Volume ($ billion)
27 24
30 26
22
10
incl. $8.3 bn Hexal/Novartis
18
Upfront transaction value
20 15
# of Transactions
17
13
10.4
10
1.9
0.3
HBM Partners
HBM Pharma/Biotech M&A Report 2012 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 Biomedicals potential deal value was $2.63 billion and Enobia could also become a billion-dollar deal if all milestones are met.
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
Trade Sales of VC-Backed Private Pharma/Biotech Companies Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)
10.0
Upfront transaction value Total value
40 32 31 27 29 28 28
7.5
29
30
# of Transactions
10
5.0
19
8.3
20
6.7 2.5
4.0 3.3 3.1 3.5 2.6
2005 2006
4.8 2.4
4.7 2.3
2010
4.1
10
3.4 0
0.0
2007 2008 2011 2012
HBM Partners
18
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 $115 million in 2011.
Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)
Average Investment / Average Upfront and Total Deal Values Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)
VC-backed companies only.
400 350
Average Values ($ million)
440
Average Total Transaction Value Average Upfront Transaction Value Average Invested Capital 170 123 196 137 176 88 55 62 39 134 88 317 156 203 333
300
250 200 150
174
100
50 0
151
117 49
63 2009
16
56
73
70
2005
Number of transactions where investment amounts and transaction values were available
2006
20
2007
22
2008
21
2010
20
2011
20
2012
18
21
HBM Partners
19
Ratio of Deal Values to Invested Capital / Average & Median Multiples Return Estimates for Venture Investors from VC-Backed Trade Sales (US, Canada, Europe) 7 6 5
VC-backed companies only.
6.4 5.7 4.6 3.7 2.5 3.7 2.7 2.5 1.7 1.0 3.5
Average Investor Multiples (on Upfront) Median Investor Multiples (on Upfront)
5.1
Ratio / Multiple
3.5
2.4
2 1 0 2.1 1.6
1.9
2.5
2005
2006
2007
2008
2009
2010
2011
2012
20
Only forinformation transactions where respective Comment: For VC-backed company trade sales where respective was available. Source: HBM Pharma/Biotech M&A Report information was available.
HBM Partners
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.
11
Return Estimates for Venture Investors from VC-Backed Trade Sale (US vs. Europe)
VC-backed companies only.
7x
6x
Multiples of average private valuations to upfront transaction value
6.7x Estimated multiples US (Average) 4.1x 3.1x 2.6x 2.4x Estimated multiples Europe (Average)
Estimated Multiples
5x 4x
3.1x
3x 2x 1.9x 1x 0x 2005 2006 0.8x 2007 2008
2.3x
2.4x
2.0x
1.8x
1.3x 2009
1.7x
Median 1.5x
2010
2011
2012
HBM Partners
21
Only for transactions where Comment: For Source: VC-backed company trade sales where respective information wasrespective available. HBM Pharma/Biotech M&A Report information was available.
30
2 25
# of Transactions
2
3
2 2
4 6 3
2 2 6
Market
4 3 1 1 6 4
6 8 2 3 9 10 4
Phase II
Phase III / NDA
20 15 10 5 0
8
8 4
4
13 13
7
9 1 5
Phase I
10
3
2
Pre-clinical
2005
2006
2007
2008
2009
2010
2011
2012
22
Only transactions where sale respective Comment: Only for transactions where stage of lead product atfor the time of trade was available. HBM Partners Source: HBM Pharma/Biotech M&A Report information was available.
12
Platform or technology 25
# of Transactions
Product(s) 25 24 21
23
24
23
20
18
14 11 14
18 16
15
10 5 0
7 3
7 3
2005
2006
2007
2008
2009
2010
2011
2012
24
Only for transactions where Comment: For Source: VC-backed company trade sales where respective information wasrespective available. HBM Pharma/Biotech M&A Report information was available.
HBM Partners
(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 Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe) can orchestrate a trade sale. Years From Company Founding to Trade Sale Time From Company Foundation to Trade Sale
VC-backed companies only.
8 7 6
4
2005 2006 2007 2008 2009 2010 2011 2012
25
Only forinformation transactions where Comment: ForSource: VC-backed company trade sales where respective wasrespective available. HBM Pharma/Biotech M&A Report information was available.
HBM Partners
13
January 2013
Please address questions, comments or corrections to the authors of this report: Dr Ulrich Geilinger, ulrich.geilinger@hbmpartners.com and Dr Chandra P. Leo, chandra.leo@hbmpartners.com HBM Partners AG, CH-6300 Zug, Switzerland, phone +41 43 888 71 71
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