Amid the flurry of multi-billion dollar deals taking place in the pharmaceutical sector, strategic buyers within the middle market remain on the hunt for M&A opportunities as well. “A lot of these companies are looking to team up,” says Neil Kaufman of Abrams Fensterman, citing the recent joint venture between Ohr Pharmaceutical (Nasdaq: OHRP) and Cold Spring Harbor Laboratory that created DepYmed Inc.
DepYmed’s progress in developing medicine that combats obesity and diabetes, for example, shows how pharmaceutical companies within the middle market are looking to innovate through dealmaking, Kaufman says. And with more products reaching the end of their patent life, there are bound to be more acquisitions taking place, he adds.
However, “the mega deals get a lot of headlines,” says Morrison & Foerster’s co-head of M&A, Spencer Kelin, citing artificial hip and knee maker Zimmer Holdings Inc. (NYSE: ZMH) which agreed to acquire rival Biomet Inc. for $13.4 billion to increase its range of products. The transaction was announced the same week as Valeant Pharmaceuticals International Inc.’s $47.48 billion offer to combine with Allergan Inc. in a stock swap. Pfizer Inc. (NYSE: PFE) is also in talks, proposing a $98.7 billion merger with AstraZeneca plc (NYSE: AZN), which would rank as the biggest-ever takeover of a U.K. company.
Meanwhile, mid-market players such as Cubist Pharmaceuticals (Nasdaq: CBST) are expected to be more aggressive in 2014 too, Klein adds. The company completed a $704 million purchase of Trius Therapeutics Inc. (Nasdaq: TSRX) in September and a $551 million acquisition of Optimer Pharmaceuticals Inc. (Nasdaq: OPTR) in October.
April was a busy month for Prestige Brands Holdings (NYSE: PBH). The Tarrytown, New York, company agreed to pay $750 million for private-equity-backed Insight Pharmaceuticals, the maker of home pregnancy test product EPT and other over-the-counter health products such as Monistat.
Prestige Brands, which owns over-the-counter products, including Beano and Dramamine, bought Hydralyte from The Hydration Pharmaceuticals Trust of Victoria, Australia, for an undisclosed price.
Also in April, Endo International plc (Nasdaq: ENDP) agreed to buy a migraine therapy business from Zogenix Inc., a San Diego manufacturer of pharmaceuticals, for $105 million.
The recent spate of deals is evidence of a consolidating sector that demands growth, according to a recent Ernst & Young report.
“Big pharma was largely absent from M&A in 2013,” notes Glen Giovannetti, the firm’s life sciences leader. “As they face significant growth challenges ahead, pharma companies will need to become more acquisitive.”
For more insights on pharma M&A, see Experts Corner: Pursuing Pharma Manufacturing and Icon Procures PE-Backed Clincal-Trial Designer Aptiv