Consolidation Wave Hits Canadian Health Care Sector

Strategic Insights -

As large biotech and pharmaceutical companies seek to bolster their pipelines, major acquisitions are on the rise in the Canadian health care sector. The recent $1.1-billion acquisition of Sirna Therapeutics Inc. by Merck & Co. Inc., along with a string of consolidations worldwide, has set off alarm bells among investors and analysts. With generic competition intensifying, companies are racing to expand their portfolios through mergers and acquisitions, paving the way for potential Canadian targets. Analysts warn of a potential acceleration in M&A activity, citing undervalued companies with late-stage, unpartnered drug programs.

Key Takeaways:

  • The Canadian health care sector is experiencing a wave of consolidation, driven by large and small biotech and pharmaceutical companies seeking to expand their pipelines.
  • Merck's acquisition of Sirna Therapeutics Inc. for $1.1-billion sets a precedent for the sector, with analysts predicting more deals to come.
  • ID Biomedical Corp.'s $1.3-billion acquisition by GlaxoSmithKline Inc. serves as an example of a successful exit strategy for Canadian companies.
  • Analyst Aaron Bennett of Westwind Partners recommends targeting Canadian companies with late-stage, unpartnered drug programs that appear under-valued by the market.
  • High-priority targets for M&A activity in the Canadian health care sector include Nuvo Research Inc., Cardiome Pharma Corp., CryoCath Technologies Inc., and more.
  • The consolidation trend is not limited to pharmaceutical companies, with contract drug makers and technology companies also potentially ripe for acquisition.

Statistics:

  • The $1.1-billion acquisition of Sirna Therapeutics Inc. by Merck & Co. Inc. represents a 100-per-cent premium over the stock price.
  • ID Biomedical Corp.'s capacity to make and distribute flu vaccine grew significantly before being acquired by GlaxoSmithKline Inc. for $1.3-billion.
  • Analyst Aaron Bennett believes that the recent activity points to a potential acceleration in M&A activity in the Canadian health care and biotech space.
  • The Canadian health care sector is experiencing a wave of consolidation, driven by 19 companies involved in mergers and acquisitions in the industry.

Sources:

  • Westwind Partners analyst Aaron Bennett, quoted in a recent industry report.
  • Merck & Co. Inc.'s acquisition of Sirna Therapeutics Inc. for $1.1-billion.
  • GlaxoSmithKline Inc.'s acquisition of ID Biomedical Corp. for $1.3-billion.
  • ID Biomedical Corp.'s growth in capacity to make and distribute flu vaccine before being acquired.
  • Biomira Inc.'s acquisition of ProlX Pharmaceuticals Corp. of Tucson, Ariz., for up to $40-million in cash and stock.
  • OccuLogix Inc.'s acquisition of a U.S. company with a new glaucoma treatment to expand its eye disease franchise.