Biotech buy-out fever strikes

Global quoted biotechnology sales topped a staggering £35 billion
last year and the recent success within the sector is being reflected
in record merger and acquisition premiums, informs a new report
from Ernst & Young.

Sales from listed biotechnology ventures burgeoned by 14 per cent to $73.4 billion (£36.7 billion) in 2006, the global industry raised $27.9 billion (£14 billion), compared with $19.7 billion (£9.9 billion) in 2005 and venture capital funding for the sector hit an all-time high of $5.4 billion (£2.7 billion). These surging prices paid for assets, according to Ernst & Young, reflect biotechnology’s pivotal position within drug discovery.

Tellingly, the average takeover premium paid in transactions worth more than $500 million (£250 million) was 60 per cent last year, more than twice the average paid between 2003 and 2005. Pharma heavyweights such as Pfizer, GlaxoSmithKline and Novartis are looking to acquire biotechs to boost in-house drug pipelines as biotech firms often have the most promising know-how for developing new medicines. This means high levels of interest in early-stage platforms and technologies from pharmaceutical giants rather than in late-stage products.

Glen Giovannetti, Ernst & Young’s global biotechnology leader, said, ‘We now have widespread recognition among buyers of the potential value in biotech’s platforms and pipelines. The industry in the US has never been stronger and we’re seeing its success story spreading to other parts of the world, particularly Europe.’

The US remains the biotech industry hub, although Europe and Asia are growing fast. The European biotech sector bounced back in 2006 with its market capitalisation increasing 43 per cent to £42.3 billion, while the smaller Asia Pacific biotech sector has enjoyed strong 46 per cent revenue growth to $3 billion (£1.5 billion) over the past year. Ernst & Young forecasts that the global industry will achieve revenues of
$100 billion (£50 billion) before 2010.