Monday, September 27, 2010

12 Boston area biotechs profiled for their acquisition appeal

These days, Stinson Brand Innovation has been doing a lot more business in Boston.  So we’ve been following the deals (and talk of deals) in the area.

Here’s a look at what the Boston Globe recently said about the trend.

Genzyme Corp., which is locked in merger talks with French drug maker Sanofi-Aventis SA, is not the first major Massachusetts biotechnology company to be pursued by a major pharmaceutical company. And it likely will not be the last.

Analysts and industry executives note that drug makers and other life sciences companies have engineered a flurry of billion-dollar merger deals over the past few years as they try to expand their product lines, acquire cutting-edge technologies, and move into new markets — a trend that does not show any signs of letting up.

Last year alone, Thomson Reuters, a business information firm, tracked more than 1,400 life sciences mergers worldwide. They totaled about $206 billion, including 46 deals worth more than $5 billion in Massachusetts. In October, for instance, Japanese drug maker Dainippon Sumitomo Pharma Co. scooped up Sepracor Inc., the Marlborough company behind the Lunesta sleep aid, for $2.4 billion.

“It’s reality,’’ said Robert Coughlin, president of the Massachusetts Biotechnology Council, a trade organization based in Cambridge. “The industry is going through a roll-up and a consolidation.’’

And the deals keep coming. Last month, German pharmaceutical giant Merck KGaA completed its purchase of Millipore, a Billerica life sciences company, for $6.9 billion. Genzyme, the Cambridge company which has also reportedly received inquiries from other potential suitors, could ultimately fetch more than $20 billion.

Many of the biggest potential deals, such as Sanofi’s pursuit of Genzyme, involve giant pharmaceutical companies trying to buy mid-to-large biotech firms to lift their product portfolio as patents on blockbuster drugs expire.

“They have a lot of cash, but they are running out of product,’’ said Simos Simeonidis, a biotechnology analyst with Rodman & Renshaw LLC in New York.

Simeonidis predicted that pharmaceutical companies are most likely to buy companies that already have products on the market, such as Biogen Idec Inc. of Weston, or those that are close to winning approval for major drugs, such as Vertex Pharmaceuticals Inc. in Cambridge. Other prominent local firms with drugs on the market include Alkermes Inc. of Waltham, Amag Pharmaceuticals Inc. in Lexington, and Cubist Pharmaceuticals Inc. in Lexington.

Amag chief executive Brian J.G. Pereira said his company, which markets a treatment for iron deficiency in patients with chronic kidney disease, wants to build “a strong and vibrant company for the long run,’’ rather than look for a quick sale. But like other publicly traded companies, Amag has an obligation to shareholders to consider any offers that come along, Pereira said. The other companies declined to comment or could not be reached.

In addition to Sanofi, Simeonidis said a number of other drug companies could potentially be interested in a large acquisition, including European firms such as GlaxoSmithKline PLC, Novartis AG, AstraZeneca PLC, and Bayer AG, as well as American companies, such as Pfizer Inc., Bristol-Myers Squibb Co., and Eli Lilly and Co. GlaxoSmithKline, Pfizer, and Johnson & Johnson have all been cited as potential buyers for Genzyme if talks with Sanofi break down.

Still, the majority of biotech companies, such as Alnylam Pharmaceuticals Inc. in Cambridge, are years away from bringing a drug to market, making them less attractive to bigger firms looking to boost sales.

Cowen & Co. analyst Eric Schmidt agreed that large pharmaceutical companies will continue to buy promising biotechs but doubted there would be a sharp increase in acquisitions because of a Genzyme deal.

That is because, Schmidt said, a lot can happen between initial talks and final approval. Last month, Charles River Laboratories International Inc., a Wilmington company, abandoned its $1.6 billion bid for a Chinese drug research company, WuXi PharmaTech Inc., after shareholders objected.

“There’s no such thing as a wave of mergers and acquisitions,’’ Schmidt said. “For this thing to happen, it almost has to be a perfect storm.’’

In addition to the interest in Genzyme, takeover speculation has swirled around Biogen Idec because of activist investor Carl C. Icahn’s involvement in the company. Icahn successfully prodded Biogen Idec into briefly putting itself up for sale two years ago, though the company later said it could not find a buyer. Icahn’s team has since won three seats on Biogen Idec’s board, leading to speculation that it could be ripe for a takeover.

Jan Wald, a Boston analyst for the Noble Financial Group, said there will also likely be more acquisitions of medical device makers as companies try to expand by moving into new areas or buying competitors. “With the stock market the way it has been, there are a lot of cheap companies and larger companies can take advantage,’’ Wald said.

In particular, Wald sees potential for more consolidation among companies that make lasers and other devices to treat cosmetic conditions, such as Palomar Medical Technologies Inc. in Burlington. Palomar did not respond to a request for comment.

Some investors have also questioned whether Boston Scientific Inc. in Natick, one of the largest medical device makers in the state, might also be acquired because its stock has declined sharply over the past few years. Boston Scientific declined to comment.

But Wald said Johnson & Johnson, the most likely buyer, is unlikely to launch a bid because the two firms have become such fierce rivals. “I think it’s a cultural mismatch,’’ Wald said.

No comments: