Desperate acquirers often turn to private assets when the prices of publicly listed companies become exorbitant, and Roche’s recent move on Seragon is just one sign of the rising temperature at the closely held company end of the M&A spectrum.
But of course the recent flurry of activity has not been limited to private companies, implying that what we are seeing is a general scramble for assets. The Seragon price tag is not quite the highest paid for a private biotech start-up, but the move is up there and beats other takeovers on several key metrics, EvaluatePharma reveals (see table below).
The prize for the biggest private biotech acquisition goes to Boston Biomedical, bought by Dainippon Sumitomo two years ago for $2.6bn. However, there is an important footnote: the cash that Boston’s owners got up front in this deal was only $200m.
As most serious followers of biotech realise, it is the up-front cash that is the most important signifier of deal value, given that subsequent earnouts are often based on events that are either highly unlikely to occur, or that are so far off in the future that their net present value is much smaller than the headline amount.
In any case, another analysis favours Seragon. $1.89bn of the Boston contingent payments is in sales-based milestones, whose inclusion in a deal’s total biodollar value is questionable. Without these the Boston deal is worth $740m in total, and Seragon thus comes out on top as the biggest private biotech takeout of recent years.
Roche paid Seragon’s private owners an impressive $725m up front, and on this metric the takeover is second only to Daiichi Sankyo’s $935m move on Plexxikon, which included an $805m signing fee (If you thought Aragon’s exit was impressive, check out Seragon, July 2, 2014).
|Biotech's biggest private company takeovers|
|Target company||Acquiring company||Deal value ($m)||Up-front portion ($m)||Contingent payments ($m)||Deal date|
|Boston Biomedical||Dainippon Sumitomo Pharma||2,630||200||2,430||1 March 2012|
|Seragon||Roche||1,725||725||1,000||2 July 2014|
|Pearl Therapeutics||AstraZeneca||1,150||560||590||10 June 2013|
|Enobia Pharma||Alexion Pharmaceuticals||1,080||610||470||28 December 2011|
|BioVex||Amgen||1,000||425||575||24 January 2011|
|Aragon Pharmaceuticals||Johnson & Johnson||1,000||650||350||17 June 2013|
|Plexxikon||Daiichi Sankyo||935||805||130||28 February 2011|
|Avila Therapeutics||Celgene||925||350||575||26 January 2012|
|Ovation Pharmaceuticals||Lundbeck||900||600||300||9 February 2009|
|Proteolix||Onyx Pharmaceuticals||851||276||575||12 October 2009|
|Avid Radiopharmaceuticals||Lilly||836||286||550||8 November 2010|
|Labrys Biologics||Teva Pharmaceutical Industries||825||200||625||3 June 2014|
|iPierian||Bristol-Myers Squibb||725||175||550||29 April 2014|
|NextWave Pharmaceuticals||Pfizer||700||275||425||22 October 2012|
|FoldRx Pharmaceuticals||Pfizer||655||not disclosed||not disclosed||1 September 2010|
|Note: All data are from 2000 onwards and sourced to EvaluatePharma|
Several caveats have to be made regarding the EvaluatePharma data, the most important of which is that the numbers go back no further than 2000. Deals whose terms were not disclosed are excluded, and, to capture true biotech start-ups, private companies that were generating revenues at the time of their acquisitions, like Stiefel Labs and Aptalis, are also left out.
Even applying these rules, several borderline cases creep in. Plexxikon, Avid and FoldRx each had a project going through the approval process – FoldRx’s had actually just gained approval when Pfizer pulled the trigger – so it could be argued that most of the risk for their acquirers had already passed.
Not so for Roche’s Seragon buy, where high risk is the name of the game: the target company had only a single asset to speak of – a selective estrogen receptor degrader for breast cancer – and an early one at that. In the top-15 list above four other companies can also be considered to have been single-asset plays: Enobia, Aragon, Ovation and Proteolix.
A fifth company, iPierian, had no clinical assets at all, and was instead a broad bet on a preclinical approach to treating progressive supranuclear palsy. The $175m up-front fee Bristol-Myers Squibb handed over in April was a hefty amount for a preclinical business.
If this and takeovers of the likes of Seragon, Pearl Therapeutics and Aragon do not provide conclusive evidence of a burgeoning M&A market for private biotechs then one final statistic should: the oldest of these 15 biggest transactions dates back only five years.