A recent article in the London Times newspaper lead with the headline “Hello Dolly, but things aren’t looking swell”. It is true that the European Biotech sector continues to face some serious challenges in accessing capital. In addition, there is a feeling that a number of companies, particularly some smaller cap companies listed on AIM, remain undervalued and under capitalised. However; companies, both public and private, have increasingly taken advantage of the concern that larger pharmaceutical companies have – that their development pipelines are not sufficiently advanced to replace existing products that they will lose patent protection. This has lead to the completion of a number of high profile M&A and licensing deals. The good news is that the sector has seen a number of exits where Pharma has been willing to part with cash to secure exclusive access to technology either through M&A or partnering transactions. Does biotech face a challenging environment? The answer is yes. Can biotech still succeed in the European market? Yes!
M&A has been king over the last 12-18 months. Larger biotechs and pharmaceutical companies are increasingly looking to acquire smaller entities in order to access potential new products to boost their development activities. This trend has been supported by the inability to list biotechs which are not sufficiently mature, coupled with the desire of investors to end their financing commitments by securing an exit. This had led to transactions such as the acquisition of Oxxon Therapeutics by Oxford BioMedica and the acquisition of Paradigm by Takeda. The desire of VC’s to move companies forward without further exposure to funding those companies has also lead to a number of structured deals. Plethora Solutions entered into an interesting arrangement with Metris in 2006. Plethora licensed two clinical stage compounds from Metris. The VC investors in Metris subscribed £750,000 in new Plethora shares.
Pharma has been very active in M&A. KuDOS Pharmaceuticals and Arrow Therapeutics were both acquired by
In 2006 there were more alliances between pharma-biotech and biotech-biotech than any year in the industry’s history. On one analysis, by
Dolly has not quite turned to lolly. Though the public markets continue to be challenging there is a lot of opportunity in the market place. Perhaps the biggest dilemma is how early stage companies are going to be funded to allow them to develop into the CAT’s and Shires of the future. The surge in M&A activity has almost prevented Europe from producing the European equivalent of Genzyme or Amgen. Promising companies, even substantive companies like CAT, have increasingly been seen as good opportunities by larger pharmaceutical companies.