Partneringreview 2006 – Financings

Summary

2005 was the year that mergers and acquisitions returned to biopharma dealmaking, with over 230 M&A transactions compared with 170 in 2004 and 150 in 2003.

Announcements of major acquisition deals in the healthcare sector marked both the beginning and the end of 2005. In January 2005, Procter & Gamble announced an all-paper transaction to acquire 100% of Gillette, the consumer health and home brands company, in a deal valued at $57 billion (based on closing stock values at deal announcement). A share buyback scheme over 2005 and 2006 will aim to convert the paper transaction into one where 40% of the acquisition price will be in cash.

At the latter end of 2005, Boston Scientific and Johnson & Johnson competed to gain control of Guidant, the medical device manufacturer. Johnson & Johnson originally announced an interest in Guidant at the end of 2004; however, the deal hit problems in November 2005 when Guidant filed a lawsuit against Johnson & Johnson for failing to fulfill obligations outlined in the original acquisition agreement. Johnson & Johnson and Guidant quickly agreed new terms for the acquisition, but by this time Boston Scientific sought to outbid Johnson & Johnson by making an offer 14% over that announced by Johnson & Johnson. By the end of 2005, the companies had not finalized a deal, but in early 2006 Guidant and Boston signed a merger agreement, a combined paper and cash transaction with an estimated value of $27 billion. Guidant and Johnson & Johnson terminated the acquisition agreement.

Boston Scientific's eventual acquisition of Guidant was not its only M&A activity of 2005. Boston also acquired Advanced Stent Technologies, CryoVascular Systems, Rubicon Medical and TriVascular as it sought to buy further into the cardiovascular devices sector. Johnson & Johnson was also active in acquisitions, acquiring Animas, Closure Medical and Transform Pharmaceuticals.

There were a number of smaller acquisitions in 2005, with Novartis in particularly acquisitive mood, acquiring Hexal, Chiron and Eon Labs for a combined $12.8 billion. Other companies making a number of acquisitions during 2005 included: Pfizer (Angiosyn, Bioren, Idun and Vicuron); Agilent Technologies (Computational Biology, Molecular Imaging and Scientific Software); Invitrogen (BioSource, Caltag, Dynal, Quantum Dot and Zymed); and Qiagen (Artus, Nextal, Shenzhen PG and Tainwei Times).

Deal and alliance activity in 2005 was slightly lower than 2004, but similar to 2003, with just over 2600 deal and alliance announcements (excluding M&As). The numbers are significantly lower than those seen at the peak of the biotechnology industry boom of the late 1990s.

GlaxoSmithKline and Novartis were the most active dealmakers of 2005 with 40 and 37 deal announcements, respectively, with Novartis doubling its deal activity over 2004. The world's largest pharmaceutical company, Pfizer, achieved just 34 deal announcements, up on the previous year but behind GlaxoSmithKline and Novartis. Roche returned to lower deal activity from its exceptional activity of 2004 when it announced nearly twice as many deals as its peer companies. Other companies making fewer deals in 2005 compared with 2004 included Abbott Labs and Merck & Co, the latter perhaps caused by issues associated with the withdrawal of Vioxx.

In general, most of the top 25 pharma companies announced more deals in 2005 than in 2004, emphasizing the growing reliance on alliance activity for healthy and robust pipelines. The top deal of 2005 in terms of headline value was the asset acquisition by Reckitt Benckiser of Boots' OTC and healthcare products business for 1.93 billion ($3.4 billion). Reckitt Benckiser competed against some of the world's leading OTC products companies, including Novartis and GlaxoSmithKline.

During 2005, more deals were announced in oncology and infectious diseases than in any other therapeutic areas (around 500 and 400 deals respectively). Cardiovascular, CNS and accident/trauma, each with more than 300 deals, followed these. The gastrointestinal area announced fewest deals, with around 100 (a similar number to 2004).

The phase of development when the deal is announced continued to be dominated by discovery deals, although the number was down on 2004, confirming the trend within the industry to hold back from dealmaking until data is available. This reduction in dealmaking at discovery stage, together with reluctance of investors to get involved at early stages, continues to be of significant concern for companies that have the ideas but not the funds to take their compounds through to proof of principle.

Novartis, Merck & Co and Pfizer made the most early stage deals (discovery and preclinical) during 2005, each with nine or more deals. Early and clinical stage deals were most frequent in oncology, followed by CNS, cardiovascular and autoimmune/inflammation. Novartis announced the most clinical stage deals (phase I-III) during 2005, with eleven deals.

In the remaining development stages, the number of deals announced gradually declined as the compounds advanced towards approval.

There was a large number of deals announced at product launch or marketing, with over 600 deals announced during 2005, versus nearly 800 in 2004. This is probably due to the nature of such deals; in marketing, promotion and distribution deals, a single asset may be the subject of a number of deals as originators seek to secure out-sourced revenue streams in non-core territories and markets.

Collaborative R&D was the most prevalent deal type announced in 2005, with nearly 1,800 deal announcements (versus 1,400 in 2004), followed by around 1,300 supply and distribution deals, which is just up on 2004. Government agencies and research institutes were in top organizations to announce collaborative R&D and supply/distribution deals.

Novartis, Pfizer, Crucell, GlaxoSmithKline, Merck & Co, Partek and Daxor each announced over 15 licensing deals, with Pfizer, Novartis, GlaxoSmithKline and AstraZeneca announcing over twelve marketing/promotion deals. In almost all cases, the number of deals announced by the leading companies was up on 2004, indicating a growing reliance on licensing to access pipeline candidates, as well as marketing/promotion deals to increase return on investment in non-core territories access additional products for commercialization.

Finally, Partneringreview 2006 includes a new volume, providing a comprehensive coverage of financings in the healthcare sector, from grants and awards through to IPOs.

The National Institutes of Health (including the National Cancer Institute and the National Institute for Allergy and Infectious Diseases), along with a number of other government agencies, were most prominent in the award of grants. The Bill & Melinda Gates Foundation made a number of significant donations into healthcare research.

During 2005, over 40 IPOs were announced, including Shire with a closing value of $2.98 billion, followed by Coley at $111 million.

There were also private financing rounds in 2005, with over 400 completed by the end of the year. The highest value was Wyeth, at $1.5 billion in the form of senior notes. Funds raised were to be used for general corporate and working capital purposes. This was followed by DaVita, with a value at closing of $1.35 billion. The private offering was made within the United States only to qualified institutional buyers, and outside the United States only to non-US investors. The following companies also raised over $500 million during 2005: Mylan Labs, Dade Behring, AmerisourceBergen and Medtronic.

Reasons to Purchase

This report will provide in depth knowledge of the deal making activity during 2005:

• Want to know what your competitors are doing?
• Want to benchmark your deals against others in your therapeutic area?
• See how the finances of different deal types compare?
• Want to know what the early, clinical and late stage developments are?
• Interested in new merger and acquisition activity over 2005?
• Curious about financing investments from lead investors?
• Partneringreview brings all the year's deals into focus in one place.

Scope of Report

The report includes:

• fully categorized overviews of deals, alliances and financings
• financial information where disclosed
• specialized indexes including deal type, therapy area, industry sector, financials and stage of development
• an alphabetical index of company activity
• interactive PDF format for easy exploration

Forecasts, Projections and Market Estimates

This report provides a series of charts detailing market trends in deal making over the period of 2004 and 2005.

Description

Partneringreview 2006 - Volume 3: Financings provides a comprehensive overview of over 1,100 deals detailing investment information in the form of grants, awards, private financings, loans, IPOs and public offerings. A clear and easy way to see the investment activities of any company. Every deal by every company listed alphabetically.

Every financing - grant/award deal is fully categorized, includes a detailed description, and includes financials such as headline value, upfront and milestone payments, where disclosed.

Each deal is annotated with a deal number, such as #43. This number links to the full deal in the deal listing at the rear of each report. When using the PDF format in Acrobat Reader, simply click on the number to move around the report.

All the year's deals at a glance.

Want to know what your competitors are doing? Want to benchmark your deals against others in your therapeutic area or see how the finances of different deal types compare? Partneringreview 2006 brings all the 2005's deals into focus in one place.
Partneringreview is a comprehensive summary of the year's deal announcements in a clear and accessible printable format. Every deal entry includes financial information where disclosed, such as headline values and upfront and milestone payments. A new addition of an overview of financings from investors is also included in this latest edition.

Partneringreview 2006 is the full report of all the deals data collected in 2005, providing a broad perspective of deal announcements, and incorporates all six volumes.

Volume 3: Financings

A review of financing deals detailing investment information in the form of grants, awards, private financings, loans, IPOs and public offerings.

Other volumes in the series:

Volume 1: Company deal index

A comprehensive overview listing deals by company, with a full index of all the deals including mergers, acquisitions and financings announced in 2005. A clear and easy way to see the activities of any company.

Volume 2: Therapy Area

Deals by fourteen therapeutic sectors, from autoimmune disease to trauma, with classification by industry sector, deal type and stage of development.

Volume 4: Stage of Development

A review of deals by stage of development-appreciate how deal values change from discovery to launch.

Volume 5: Deal Type

Access deal information by type of transaction-see who is licensing or partnering and using what type of deal. These are further listed by industry sector, therapy area and stage of development.

Volume 6: Industry Sector

A summary of over 2,600 deal announcements by nine industry sectors, including a breakdown by therapy area, deal type and stage of development.

Who should buy the report

This report is essential reading for individuals responsible for and interested in:

• Board and executive management
• Business development
• Licensing/partnering
• Deal making
• Business strategy
• Marketing and promotion
• Distribution and manufacturing (including contract services)

Companies Analyzed/Mentioned

Other companies mentioned in the report include the top 50 biopharma: Pfizer, GlaxoSmithKline, Sanofi-Aventis, Johnson & Johnson, Merck, Novartis, AstraZeneca, Roche, Bristol-Myers Squibb, Wyeth, Abbott Labs, Eli Lilly, Amgen, Takeda, Boehringer Ingelheim, Schering-Plough, Schering AG, Bayer, Eisai, Teva, Merck KGaA, Yamanouchi, Otsuka, Novo Nordisk, Baxter, Fujisawa, Sankyo, Forest Labs, Akzo Nobel, Altana, Serono, Solvay, UCB, Genzyme, Allergan, Mitsubishi Pharma, Shionogi, Watson, IVAX, Alcon, H Lundbeck, Biogen Idec, Mylan Labs, Shire, Ono, Tanabe Seiyaku, Daiichi, Barr, Gilead

Contents

• Volume 3: Financings
• Introduction: Deals announced by financing type
• Chapter 1: Grant/award
  • Deals in the financing - grant/award area by company
  • Deals in the financing - grant/award area by therapy focus
  • Deals in the financing - grant/award area by development stage
• Chapter 2: Equity investment
  • Deals in the equity investment area by company by development stage
• Chapter 3: Private placement
  • Deals in the financing - private placement area by company
• Chapter 4: IPO
  • Deals in the financing - IPO area by company
• Chapter 5: Public offering
  • Deals in the financing - public offering area by company
• Chapter 6: List of deals
  • Table 1 Top financing - grant/award type dealmaking companies in 2005
  • Table 2 Top equity investment type dealmaking companies in 2005
  • Table 3 Top financing - private placement type dealmaking companies in 2005
  • Table 4 Top financing - IPO type dealmaking companies in 2005
  • Table 5 Top financing - public offering type dealmaking companies in 2005
  • Fig. i.1 Financing deals announced by type
  • Fig. 1.1 Financing - Grant/Award deals by lead investor
  • Fig. 1.2 Financing - Grant/Award deals by therapy area
  • Fig. 1.3 Financing - Grant/Award deals by development stage