G. Steven Burrill
|
The strong boost to biotech stocks in the first two months of the year has energized the sector and allowed companies to make
deals and raise funding. Of the 340 life sciences companies trading at or above $1 at the end of 2011, 253, or 74.4% of them,
are trading higher after the first two months of the year, while 25% of those companies are up more than 25% so far this year.
There has been a sharp improvement in the price of life-sciences stocks as economic news in the US has been generally positive
this year, actions in Europe to address the debt crisis advance, and news within the sector is encouraging. All of the Burrill
Life Sciences Indices have posted gains for the year with the flagship Burrill Select Index the strongest performer, climbing
15.5% through the end of February. The Dow Jones Industrial Average, up 6% for the same period, closed above the 13,000 mark
in February, the first time since 2008.
We are still in an environment where markets can turn quickly in response to negative news. Smart companies will take advantage
of opportunities to secure financing and get deals done. Life-sciences companies through secondary offerings raised $1.4 billion
in the first two months of 2012 through 29 financings, 23 of which were completed by therapeutics companies.
Roche's hostile $5.7-billion bid for the tools and sequencing systems company Illumina reflected strong dealmaking activity
for the life sciences at the start of the year. The wrangling between Roche and Illumina is likely to go on for months. The
deal reflects Roche's efforts to build itself into a personalized medicine powerhouse and its belief that sequencing technology
will eventually migrate from the laboratory to the doctor's office.
Some of the year's biggest acquisitions have been traditionally structured takeovers. Bristol-Myers Squibb agreed to acquire
hepatitis C drug developer Inhibitex for $2.5 billion. Amgen said it would buy Micromet, which is developing a new class of
drugs that enlist the body's T-cells to battle cancer, for $1.2 billion. But a number of transactions of privately held companies
included large milestone payments.
Privately held companies that are being acquired today often find they will have to wait to reap the rewards of a transaction.
In the absence of a vibrant initial public offering (IPO) market, buyers have the upper hand and often insist on sharing risk.
Increasingly, the structure of these agreements may borrow from those of partnerships and may mean investors seeking exits
will have to be patient to realize their full return.
Celgene agreed to acquire privately held Avila Therapeutics for $350 million plus milestones that could push the total value
of the deal up to $925 million. Dainippon Sumitomo said it would acquire privately held Boston Biomedical, a developer of
oral therapies that target cancer stem cells with its lead candidate in late-stage clinical testing, for $200 million in upfront
cash and milestones that could push the total deal value to $2.6 billion. Biogen Idec said it would acquire privately held
Stromedix, a developer of therapies for fibrosis and organ failure with its lead candidate in mid-stage clinical testing,
for $75 million upfront and milestones that could push the total deal value to $562.5 million.
