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 March
2008
issue:
Home Health Care Heats Up--
Changes To Medicare Reimbursement Prompt Sell-Off
The Home Health Care M&A market is seeing increased activity. Recent changes
to Medicare reimbursement have put more properties on the market, depressing
prices with an increased supply and attracting buyers to bargains.
...
Biotech Leads Health Care M&A--
Twelve Deals Announced Worth $4.1 Billion
A total of 12 deals were announced in the
bio-technology industry worth a combined $4.1 billion. Deal making is on the
rise as companies and their pipelines mature. Collaboration and development
agreements are dominating the action.
...
February 2008 M&A Market
February saw a total of 62 transactions worth
a combined $12.3 billion. Four billion-dollar deals are included in this
batch of deals.
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
-Transaction Updates
Technology
-Deal Summaries
-Additional Transactions
-Transaction Updates
-Health Care Technology
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Articles Archive
Companies Mentioned in this issue:
March 2008
Symbols
3i Group plc p16
A
Abbott Laboratories p15
Acceleron Pharma p10
Accipiter Capital Management p3
Achilleion p4
Air Products Healthcare p2
Alopharma p16
Amedisys p3
American Homecare Supply p2
Amgen p10
Amgen KK p14
Amira Pharmaceuticals p14
AMN Healthcare Services p8
Arcapita, Inc. p3
AstraZeneca p16
B
Banc of America Securities LLC p16
Bayer HealthCare p15
Boehringer Ingelheim GmbH p15
Brandywine Senior Living p4
Brown & Toland Medical Group p8
BUPA Hospitals p4
C
Cain Brothers Investment Bank p8
California Pacific Medical Center p8
CALYON p16
CapitalSource p8
Celgene Corp. p10
CeNeS Pharmaceuticals p15
CIB p16
Cinven p4
Classic Hospitals Group p4
CollaGenex Pharmaceuticals p16
Colts Neck Village Assisted Living p8
Comprehensive Home Healthcare Services, Inc. p3
Cook Inlet Housing Authority p8
Cowan and Company p16
Credit Agricole p16
Credit Suisse p16
Critical Homecare Solutions Holdings p2
D
Danske Bank p16
Dyax p14
E
Emdeon Business Services p15
Emdeon Practice Services p15
European Capital Financial Services Limited p16
EUSA Pharma p14
Evangelismos p4
F
Family Home Health Care, Inc. p3
Forest Laboratories p16
FUJIFILM Holdings Corp. p16
G
Galderma Laboratories p16
Galderma, SA p16
GE Healthcare p15
General Atlantic p15
Genmab A/B p15
Gentiva Health Services p3
GlaxoSmithKline p14
H
Healthfield Group p3
HLTH p15
Home Health Care Affiliates, Inc. p3
Houlihan Lokey p8
Housecall Medical p3
Humana p8
Hunter-Fleming p14
Hygeia p4
I
Iasis Glenwood Regional Medical Center p4
Iasis Healthcare p4
InSight Health Services p4
Institutional Shareholder Services p10
IntegriCare p3
J
Jeffries Finance, LLC p2
JP Morgan p8
K
Kohlberg & Company, LLC p2
L
LCA-Vision p4
LGV Capital p4
L’Oreal p16
M
Marcus & Millichap p8
Mary Conrad Center p8
MBF Healthcare Acquisition Corp. p2
Medrad p15
Meridian Health System p4
Merrill Lynch Healthcare Capital Finance p8
Momentum Medical Group p8
Mylan p16
N
National Medical Health Card Systems p8
Navigant Capital Advisors p3
Nestle p16
Netsmart Technologies p15
Newron Pharmaceuticals, SpA p14
Nightingale VantageMed p15
Nueterra Healthcare p4
O
Odyssey HealthCare p2
Opi SA p14
Ouachita Community Hospital p4
P
PDL BioPharma p15
Pharmion p10
Pinewoods Assisted Living p8
Platinum Select, LP p8
Possis Medical p15
PricewaterhouseCoopers p16
Proxy Governance p10
R
RadNet p4
RainDance Healthcare Group p8
Raymond James Health Care Investment Banking Group p3
Regeneration Technologies p16
Rolling Oaks Radiology Imaging Centers p4
Rosewood Assisted Living p8
RTI Biologics, Inc. p16
S
SAC Capital Advisors p10
Sage Group p15
sanofi-aventis p14
Sierra Health Services p8
Spire Healthcare p4
Sutter Health p8
SXC Health Solutions p8
Sycamore Assisted Living p8
T
Taisho Pharmaceutical Co. p16
Takeda Pharmaceutical Co. p10
TLC Health Care Services p3
TLC Vision Corp. p4
Toyama Chemical p16
Tutogen Medical p16
U
UnitedHealth Group p8
V
Vaccinex p14
VistaCare p2
Vital Health Technologies p8
W
Warburg Pincus p8
WebMD p15
Whatman, plc p15
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Biotech Leads Health Care M&A--
Twelve Deals Announced Worth $4.1 Billion
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article to a friend
Email Editor
The Biotechnology industry generated the
greatest deal and dollar volume of any single sector during the month of
February. Within the space of just 29 days, it produced 12 deals worth a
combined total of $4.1 billion, representing, respectively, 19% of all
deals announced and 33% of all dollars committed to health care M&A. The
growth in importance of the biotech industry is, if you will, organic. As
the industry matures, more products are coming to market and even more
candidates are filling the development pipelines behind them. Larger, more
established health care technology companies, rather than diffusing their
own corporate focus by undertaking expensive R&D for newer, more
sophisticated drugs, are considering acquisitions of biotech platforms,
products and even whole companies. Pharmaceutical companies are naturally
pursuing biotechs for their up-and-coming therapeutic products while some
Medical Device companies are on the hunt for new diagnostic tests. And,
with a number of biotech product candidates maturing to marketability,
some buyers want to get in on the action while it is still relatively
cheap to do so. Also, the looming threat of branded products going off
patent and being cannibalized by generic companies has helped motivate big
pharma to cherry-pick what it can from promising biotechs. Even so, as
biotech comes of age as an industry, several of its leading stars are
undertaking a variety of deals with other biotechs to grow their
companies, as illustrated by the largest deal below.
The five largest biotech deals of the month are all collaboration or
development agreements in which the partner has put down a relatively
small upfront payment, with the bulk of the consideration coming later in
the form of development, regulatory and commercialization milestones. And
to round out the picture, these agreements also generally stipulate
royalties on the sale of actual products. It’s a risk, of course, because
some product candidates may well not make it through the gauntlet of
clinical trials and regulatory scrutiny, and others will emerge only
several years down the line, but that’s why the initial down payments are
just a fraction of the potential total payout.
The largest deal has Celgene Corp. (NASDAQ: CELG), itself a
profitable biotech, entering into a collaboration deal with privately held
Acceleron Pharma to develop and commercialize ACE-001, a
bone-forming compound that is used in the treatment of cancer and
cancer-related bone loss. Under terms of the deal, Acceleron, based in
Cambridge, Massachusetts, will pursue R&D for ACE-011 through
mid-stage human clinical trials and also manufacture clinical supplies.
After that, CELG will take over and conduct late-stage human clinical
trials, as well as manufacturing phase III and commercial supplies.
Notably, the two companies also signed an option agreement for certain
discovery-stage programs.
This agreement broadens CELG’s oncology franchise, where it is already a
leader in the field of blood cancers. Two years ago, CELG, which owns
worldwide rights to thalidomide, reintroduced the drug as a
treatment for multiple myeolma under the name Revlimid. Multiple myeloma
is one of the indications for which Acceleron’s ACE-011 is also
believed to have great potential. ACE-001, a protein therapeutic
based on the activin receptor type IIA, has reported success in key
biomarkers on bone formation in preclinical and early clinical studies: It
has increased bone density, improved bone architecture and improved bone
mechanical strength. The central premise of this collaboration is to bring
together Acceleron’s expertise in novel biologics drug discovery with
CELG’s established commercial, clinical and regulatory capabilities.
If all conditions of the deal are met, CELG will end up paying a total of
$1.87 billion to Acceleron. The consideration is to consist of a $50.0
million upfront payment; up to $510.0 million in development, regulatory
and commercial milestones; and up to an additional $437.0 million for each
of the three discovery-stage programs. Tiered royalties on product sales
resulting from this collaboration are also stipulated in the deal. Just to
keep all its bases covered, CELG’s upfront payment includes a $5.0 million
equity investment in Acceleron; should Acceleron go public via IPO, CELG
also agreed to buy a minimum of $7.0 million of Acceleron’s common stock.
In the meantime, CELG is working hard to close on its $2.9 billion
acquisition of Pharmion (NASDAQ: PHRM), a deal that was originally
announced in November 2007 and is designed to get hold of PHRM’s Vidaza
hematology drug, as well as its international marketing network. SAC
Capital Advisors, a hedge fund that owns 8.3% of PHRM, has said that
the deal undervalues the company and that shareholders should hold out for
more. However, four proxy advisory firms, among them Institutional
Shareholder Services and Proxy Governance, endorsed CELG’s
offer on its original terms.
In the second-largest biotech deal of February, Amgen (NASDAQ: AMGN)
is granting rights to Takeda Pharmaceutical Co. (T: 4502) to
develop and commercialize up to 13 molecules in its pipeline. The
collaboration includes early to mid-stage candidates in a variety of such
therapeutic areas as oncology, inflammation and pain. With the exception
of oncology drug candidate motesanib diphosphate, all molecules
included in this partnership are biologics. If all conditions are met, the
transaction will be worth nearly $1.2 billion to AMGN. Consideration is to
consist of $200.0 million in an upfront cash payment; $340.0 million in
development payments; $362.0 million in milestone payments; and $275.0
million for the partnership for motesanib diphosphate. Double-digit
royalties are to be paid on drugs that reach market. In addition, Takeda
will acquire all the shares of Amgen’s Japanese subsidiary, Amgen KK,
for an undisclosed amount sometime in Spring 2008. The overall
collaboration enlarges Takeda’s pipeline in its core therapeutic areas of
cancer and bone/joint diseases. It also benefits AMGN by allowing for more
rapid development and commercialization of its drug candidates than could
be achieved on its own.
In the third-largest deal, consisting of two related agreements, Dyax
(NASDAQ: DYAX), another Cambridge, Massachusetts-based biotech, is
granting sanofi-aventis (NYSE: SNY) an exclusive worldwide license
to develop and commercialize the fully human monoclonal antibody
DX-2240, as well as a nonexclusive license to DYAX’s proprietary
antibody phage display technology. The antibody product has, it is
believed, potential therapeutic value in numerous oncology indications,
particularly in treating solid tumors. It works by altering the vascular
tumor morphology so as to increase hypoxia and necrosis of the tumor,
smothering it to death, in other words. It also increases antitumor
activity when used in combination with certain other pathway inhibitors
and chemotherapeutic agents. The deal, which is worth up to $500.00
million, includes a $25.0 million upfront fee. Under terms set down, DYAX
may receive up to a total of $500.0 million in license fees and milestone
payments in the case of full commercial success of the first five antibody
candidates developed from this partnership, including DX-2240. And
royalties will be paid on commercial sales of DX-2240.
As exclusive licensee, SNY is responsible for the continuing development,
commercialization and consolidation of sales of DX-2400. For
certain other future antibody product candidates discovered by SNY, DYAX
will retain co-development and profit-sharing rights while SNY will
maintain leadership in development and commercialization, and book sales
worldwide. This deal clearly benefits SNY’s oncology franchise. Dyax will
likely plough the proceeds of this agreement back into the development of
its lead product candidate, DX-88, a recombinant small protein
currently in clinical trials for two indications, one for the treatment of
hereditary angioedema, the other for preventing blood loss during on-pump
coronary artery bypass graft procedures.
GlaxoSmithKline (NYSE: GSK) is responsible for the fourth- and
fifth-largest deals. In the larger of the two, San Diego’s Amira
Pharmaceuticals is granting rights to GSK to develop and commercialize
certain early-stage compounds for the treatment of respiratory and
cardiovascular disease. This deal has the potential to strengthen GSK’s
asthma franchise; the company’s top-selling drug, Advair, which
generates $5.0 billion in revenue, is an asthma treatment. Amira’s
early-stage candidate AM 103, if it comes to market, could
complement Advair and be marketed economically through the same sales
force. Apart from AM 103, which has already produced a promising
phase I clinical study, Amira has other candidates for treating
cardiovascular disease. They work by targeting a protein known as FLAP,
which is implicated in inflammation. Under terms of the deal, GSK will pay
up to $425.0 million if all development and regulatory milestones are met.
Royalties on sales of drugs are also naturally stipulated.
In the smaller of the two deals, EUSA Pharma is out-licensing to
GSK exclusive worldwide rights to its preclinical-stage human
anti-interleukin-6 antibody. EUSA’s product, OP-R003, has target
indications in oncology and inflammatory disease. This license gives GSK
access to a promising oncology drug candidate. EUSA acquired OP-R003
as part of its 2007 acquisition of Opi SA of France. As part of the
current deal, EUSA will pay about 50% of its GSK payments to Vaccinex
of Rochester, New York, its development partner for the antibody product.
GSK will fund and conduct all future development, production and
commercialization. The upfront fee and development milestones combined
yield a purchase price of $44.0 million. (And, yes, royalties are to be
paid on future sales.)
It is at this point that the deals turn from collaboration agreements into
more conventional acquisitions with Newron Pharmaceuticals, SpA (SWX:
NWRN), a biotech based near Milan, Italy, buying Hunter-Fleming for
approximately $38.0 million. Based in England, Hunter-Fleming is a
biopharmaceutical company developing new medicines to treat
neurodegenerative and inflammatory disorders. It currently has three
compounds in various phases of clinical development. This acquisition
allows the buyer to expand its late-stage development pipeline and to
enhance its CNS expertise. Hunter-Fleming’s HF0220 is a very
attractive candidate. It is a broad neuroprotective agent with an ongoing
phase II study in patients with Alzheimer’s disease and a phase II study
for rheumatoid arthritis planned for late 2008. Payment is to consist of
€8.0 million upfront (minus net debt) and up to €17.0 million in
performance-based contingent payments.
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