In contrast to other industrial sectors, biotechnology saw a record $27 billion-plus in mergers and acquisitions transactions in 2001. Recording the figures in its QuarterCAST(TM) report, Ernst & Young National Office West, in Los Angeles, states the trend is expected to continue through 2002.
This new high in the aggregate value of biotech M&A transactions was reached despite the decline in the number of transactions. The $27 billion in aggregate transaction value reflected about 60 deals, compared to $9 billion for 84 deals in 2000. According to E&Y, this healthy interest in biotech helped put the health sciences industry in the number two spot in terms of year-on-year increases in the number of M&A transactions, just following the insurance industry.
"Although the bulk of the biotech transactions, about $18.75 billion, represented four deals and took place just before the year's close, QuarterCAST is reporting that biotech, which in the US consists of 1,379 companies, could be a shot in the arm for transaction activity in 2002," says Gregory Soukup, Partner and EYNOW co-director.
"Some of the mega-sized mergers announced in December, such as Amgen's $16 billion cash and stock bid to buy Immunex, not only have raised the bar for other deal sizes, but are expected to stimulate additional merger and acquisition activity in the sector," adds Joseph Doloboff, Partner and EYNOW co-director.
"And although there are only a few biotech companies that can pull off an Amgen/Immunex-size merger, it appears that the momentum has carried into January, when over ten biotech deals were announced, more than double the number announced in the same period last year," continues Doloboff. "But unlike the mega-deals of December, we're seeing a series of smaller transactions in biotech that can create momentum for larger deals toward year's end."
Demographics – the ageing population demanding cures and lifestyle boosts – and big pharma’s near off-patent blockbusters desperately seeking replacements, suggest that 2002 could be another active merger year for biotech. There is also hope that product development cycles will shorten with biotech’s expanding use of scientific advances and tools such as bioinformatics.
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