SAN FRANCISCO—December 1, 2014—Actavis agreement to acquire Botox-maker Allergan for $66 billion topped another big month for life sciences M&A activity in what is already a record year of dealmaking. The agreement helped boost total M&A life sciences activity through the first 11 months of 2014 to a record $340.8 billion, up from $118.3 billion for the same period a year ago and well beyond the previous record set in 2009 of $189.7 billion for M&A transactions involving therapeutics, tools, diagnostics, and digital health companies, according to Burrill Media.
Actavis says the combined company will be one of the world’s top 10 drugmakers in terms of revenue. The deal, which appears to end efforts by Valeant Pharmaceuticals and hedge fund management company Pershing Square Capital Management to acquire Allergan, benefits from Actavis’ inversion last year, prior to September 2014 rules put in place by the U.S. Treasury Department aimed at curtailing tax advantages captured through inversions.
Actavis had been based in Parsippany, New Jersey until it acquired Ireland-based Warner Chilcott in 2013 and relocated its headquarters to Ireland to reduce its tax rate. As such, it is able to gain tax advantages through the Allergan acquisition despite new restrictions by the U.S. government that seek to eliminate benefits that U.S.-based companies can gain through acquiring foreign companies and then relocating their headquarters to more favorable tax environments.
“The Actavis acquisition reflects a continued effort by drugmakers to build their pipelines and revenue base through acquisitions and capitalize on synergies they can identify with potential targets,” says G. Steven Burrill, CEO of Burrill Media. “The accelerated pace of activity this year is an acknowledgement that companies can’t generate adequate growth through internal development of their own pipelines.”
The pace of global life sciences partnering deals also accelerated in November as companies in November announced deals with a total potential value of $7.1 billion, up from $3.9 billion during November 2013. Overall, partnering during the first 11 months of November increased to $47.9 billion, up from $35 billion during the same period a year ago. The largest partnering agreement announced in November came between Big Pharma brethren Pfizer and Merck. Under the blockbuster agreement, Pfizer will provide Merck with an $850 million upfront payment and up to a potential $2 billion in additional milestones to share rights to and co-develop Merck's experimental immunotherapy that works by preventing tumors from being able to hide themselves from the immune system.
The record breaking IPO activity continued in November with a total of 11 life sciences companies completing initial public offerings during the month to raise $1.2 billion globally. IPOs completed in 2014 are up an average of 13.5 percent. Ten of those IPOs occurred on U.S. exchanges where companies raised a total of $1 billion. For the first 11 months, a total of 101 IPOs have been completed on U.S. exchanges compared to 49 during the same period in 2013. IPOs completed in 2014 are up an average of 13.5 percent with 51 of those issues trading above their initial offering price and 50 below. Companies and investor expectations were generally in line in November, as only three of the offerings came modestly below the target range and one above. PRA Health Sciences, a contract research organization, was the biggest offering of the month having raised $351.4 million.
“The number of IPOs completed this year has exceeded the most optimistic expectations and has been unparalleled in the history of this industry,” says Burrill. “At some point, investors will grow concerned about the quality of offerings and raise the bar to go public. For now, though, companies are continuing to access the public market and will continue to take advantage of that opportunity as long as they can.”
Capital Raised by Life Sciences Companies in USD Millions
The continued strength of the IPO market came in a month where life sciences stocks in general delivered a subdued performance. The Burrill Select Index rose 1.17 percent in November, less than the modest gains posted by the major market indices. The Dow Jones Industrial Average rose 2.52 percent, the Standard & Poor’s 500 gained 2.45 percent and the Nasdaq Composite Index finished the month up 3.47 percent. Nevertheless, The Burrill Select has significantly outpaced the major market indices through the first 11 months of 2014 scoring a gain of 29.7 percent. That compares to the Dow Jones Industrial Average’s 7.55 percent increase, the S&P 500’s 11.86 percent rise, and the Nasdaq Composite’s 14.73 advance during the same period.
The ability of venture investors to reap gains from the robust M&A and IPO markets has helped fuel a strong year for venture investing as life sciences companies raised an additional $1.1 billion in November. During the first 11 months of 2014, life sciences companies raised a total of $15.3 through venture financings, up from $12 billion during the same period a year ago. The two largest venture financings for the month involved companies based outside of the United States as United Kingdom-based cell therapies company Cell Medica raised a total of $78.2 million in a series B financing and China-based cancer therapeutics company BeiGene raised $73.6 million in a series A round.
The U.S. Food and Drug Administration’s Center for Drug Evaluation and Research approved no new molecular entities or biologics in November compared to five compared to the same period a year ago. Nevertheless, year-to-date FDA approvals for 2014 stood at 34 at the end of November, more than the 27 approved in all of 2014.
Last, Royalty Pharma agreed to acquire from the Cystic Fibrosis Foundation rights to royalties the foundation holds in Vertex Pharmaceuticals’ cystic fibrosis treatments including the breakthrough drug Kalydeco for $3.3 billion. The foundation, which provided funding for the development of those drugs, said the transaction will allow it to more aggressively fund the development of new life savings therapies.
“This transaction is a reminder of the important role disease-focused groups are now playing in funding the development of important therapeutics,” says Burrill. “The spectacular return the foundation realized from its investment is likely to encourage other groups, rightly or wrongly, to leverage their funding as a way to generate returns that could drive greater investment into the diseases they care about.”
About Burrill, LLC
Burrill. LLC is a life sciences/healthcare focused firm focused exclusively on company building, using its almost 50 years of experience capital, network capital, and expertise to help build the next generation of life science leaders. Burrill’s global relationships with healthcare/life science leaders worldwide is without peer, providing Burrill portfolio companies and clients with sustainable competitive advantage.
Burrill Media is Burrill’s information, intelligence, and insight business, publishing weekly, monthly, quarterly and annually developments in the life sciences/healthcare ecosystem. Burrill Media also hosts meetings and events for the life sciences/healthcare industry.
November 30, 2014
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