Merger and acquisition activity fell off slightly during the fourth quarter, declining nine percent to $2.1 billion across all three life-science sectors (see Table 2 for details). At the same time, however, the 17 deals that took place represented a 21 percent jump in transactions over the previous quarter. Those data are skewed by the fact that no financial terms were reported in almost half these deals – 8 of the 17.
Few of the deals were particularly pulse-quickening. The Japanese pharmaceutical giant Astellas Pharma (TYO: 4503) did agree to snap up the Santa Monica, Calif., biotech Agensys for $387 million, plus up to $150 million in milestone payments. For that sum, the pharma picked up a company that, more than a decade after its founding, apparently still has no drugs in human testing. (Every pipeline is promising until it is put to the test.)
Similarly, the largest “medical device” combination involved kidney-dialysis provider Fresenius Medical Care (NYSE: FMS) paying $190 million to buy up a smaller dialysis provider, Renal Solutions. The orthopedics device maker N Spine also sold itself to the Swiss conglomerate Synthes (SWX: SYST.VX) for $30 million plus up to an additional $45 million in milestone payments.
In fact, the increasingly common trend of splitting life-science acquisitions into upfront payments and future milestone outlays greatly skews the apparent valuation of some deals. Seattle’s Illumigen Biosciences, for instance, sold itself to Cubist Pharmaceuticals (Nasdaq: CBST) in December for the announced total of up to $341.5 million – apparently the second-largest life-science acquisition in the quarter. The actual cash value of that deal, however, was only $9 million; the remainder consists of potential milestone and royalty payments that may never materialize if Illumigen’s experimental hepatitis drug doesn’t pan out.
Venture M&A Activity – 4th Quarter 2007
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