The Health Care M&A Monthly: The Premiums They Paid, Part II --

Biotechnology Premiums For The Past Five Years

With this second installment, we continue our series on premiums paid in the acquisition of publicly traded health care companies over the period 2007-2011. We follow the methodology used in our analysis of premiums paid in the Medical Device sector (see our May 2012 issue). Because the sector is not as mature as the other technology sectors, Biotechnology premiums tend to represent a wider range of variation. However, they are still sensitive to the relative size of the deal. Billion-dollar deals, usually involving more established companies, tend to have lower premiums than do smaller deals involving the purchase of companies yet to reach their full potential.

Our results cover deals throughout the five-year period starting with the onset of the Credit Crunch and Great Recession in 2007 through the end of 2011. The chart on page 10 presents two main data points for each year, the median and average premiums paid in all relevant Biotechnology deals. As can be seen from the chart, both figures have risen over the past five years, but not as smoothly as the premiums for Medical Devices (see the chart on page 11). In particular, the years 2008 and 2011 show marked spikes in the size of the premiums. Examining the data more closely, we found a pattern much like the one discovered for deals in the Medical Device sector. The presence of billion-dollar deals in a given year, presented in the charts as a third data point representing the percentage of all deals with premiums, tends to negatively correlate with the size of the premiums. The fewer billion-dollar deals there are, the higher the premiums may rise. In both 2008 and 2011, billion-dollar deals were less than 20% of all biotech deals with premiums,and the premiums soared.........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today