The Gloves Come Off
In its self-proclaimed drive to become the leader in personalized medicine, formerly mild-mannered Roche emerged this year
as the leader in the hostile-takeover category. The new bully on the biotech block, the Swiss drug and diagnostics maker forced
medical-device maven Ventana to knuckle under in January, albeit for $3.4 billion. Six months later, the firm offered $43.7
billion for the 41 percent of Genentech that it doesn't already own. But the San Francisco–based firm is not surrendering
without a fight—or at least a bigger paycheck. (For more, see "Deal or No Deal".)
Deal or No Deal
At press time, global painkiller producer Alpharma announced that rather than girding for a threatened proxy battle, it would
accept King Pharmaceuticals' $1.6 billion buyout bid, after twice rebuffing specialty drugmaker's previous offers.
Fallout From the Financial Funk
For years, biotechs have been fetching ever-higher prices from Big Pharma, but that trend was thrown into reverse this year
as the credit markets seized up amid the Wall Street meltdown. Investors flew from high-risk biotech stocks, reversing the
dynamic from a sellers' to a buyers' market. The financing raised this year by these entrepreneurial spirits plunged to $8.2
billion through September, down more than half from $17.9 billion in 2007—the lowest tally in a decade, according to Burrill
& Company. In October, Rodman & Renshaw announced that 113 biotechs, or one-third of the publicly traded shops it tracks,
had less than a year's worth of cash. At least five biotechs went belly up.
Meanwhile, Big Pharma is perched on piles of cash. Pfizer has $26.2 billion; Novartis, $16.2 billion; and Lilly, $5.2 billion—or
it did until it took on debt to buy ImClone. Although more than a third of this wad is hiding from taxes in off-shore reserves,
that still leaves a lot of liquidity to grease the wheels of consumption.
"With biotechs running out of money, everyone expects a huge amount of acquisition activity over the next months or even years,"
says Lulu Pickering.
The only problem for drugmakers may be when to schedule the shopping spree for the best fire-sale prices. "The challenge is
to decide when the bottom in the biotech industry will hit. There may be increased turmoil over the next 18 months, so we
may not see a big rise in transactions yet," says Jeff Greene.
Only biotech powerhouses like Genzyme, Biogen Idec, Gilead, and Cephalon maintain their high valuations as potential takeover
targets. But their profits are likely to turn them into buyers, too. In November, Genzyme continued its acquisitive ways with
a $1.4 billion milestone alliance with Osiris, whose adult stem cell platform is on course to deliver the first ever FDA approved
treatment, Prochymal, currently entering Phase III in several categories. "Genzyme's strategy of using acquisitions to fuel
long-term growth is proving to be where the entire sector is moving," says Deutsche Bank biotech analyst Jenn Chao.
The Japanese New Wave
Also grabbing headlines was the new Japanese wave of global M&A. Even before the market's collapse, foreign drug companies
were taking advantage of the weak dollar by snatching up US shops. "Half of the top deals involved Japanese companies because
Japan was hit a little later by all the financial turmoil," says Jeff Greene.