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Pharmaceutical industry

Biotech Consolidation on the Horizon: Experts Anticipate Wave of Mergers and Acquisitions

Strategic Insights

— 1 min read

The big pharma mergers and acquisitions have dominated the headlines lately, but a quieter consolidation is brewing in the biotech sector. With many small biotechs facing cash flow issues, experts predict a wave of acquisitions by larger biotechs or even midcap biotechs with cash reserves. Roche's recent buyout of Genentech and Gilead's acquisition of CV Therapeutics are just the beginning, according to some industry analysts.

Key Takeaways:

  • Roche's buyout of Genentech and Gilead's acquisition of CV Therapeutics are indicative of a larger trend in biotech consolidation.
  • Michael Becker, president and CEO of MD Becker Partners, predicts that 120 biotechs will run out of cash in three months or less, leading to a wave of consolidation.
  • Jason Kantor, analyst with RBC Capital Markets, notes that small-cap biotech funding is broken, with many companies having to cut people and programs.
  • Biotechs are more likely to be acquired by fellow biotechs, as this allows for more innovative and entrepreneurial organizations to grow together.
  • Big biotechs like Gilead, Amgen, Celgene, and Cephalon are likely to do the acquiring, with a focus on companies with products in phase three clinical trials or already on the market.
  • The top target in the biotech sector is Ireland's Elan, developer of autoimmune and neurodegenerative therapies, according to Damien Conover, Morningside biotech analyst.

Statistics:

  • The deal between Gilead and CV Therapeutics is worth $1.4 billion.
  • 80% of biotechs acquired between 2005 and 2008 had products on the market or had completed phase three clinical trials.
  • Worldwide sales of Biogen-Idec's Tysabri reached $218 million in the fourth quarter of 2008, up from $129 million the previous year.
  • Biogen-Idec's multiple sclerosis drug Tysabri is approaching the $1 billion-a-year blockbuster threshold.

Sources:

  • Michael Becker, president and CEO of MD Becker Partners
  • Jason Kantor, analyst with RBC Capital Markets
  • Damien Conover, Morningside biotech analyst
  • PETER BENESH (original article)

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