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* MD Becker Partners reporting live from the JP Morgan Healthcare Conference

This past week, nearly 6,500 registrants gathered in San Francisco, California for the JP Morgan Healthcare Conference to hear 25-minute presentations from 338 life science companies. For industry executives and investors, the annual event serves as a good barometer for the rest of the year.

We roamed the familiar halls of the Westin St. Francis Hotel to assess the mood among participants and also monitored online media commentaries throughout the event. In general, there was a flurry of activity, the plane flights and networking receptions were crowded as usual, and several industry observers “Tweeted” a sense of optimism for 2010. However, we sought to construct a less subjective assessment by analyzing year-over-year statistics from the conference.

Accordingly, we extensively reviewed company press releases issued during the JP Morgan Healthcare Conference in both 2009 and 2010, with a particular focus on identifying the number of mergers & acquisitions, licensing & partnering transactions, and financing deals announced each year during the four day event.

Merger and Acquisitions

In contrast to the absence of any significant M&A deals announced during the JP Morgan Healthcare Conference in 2010, several large M&A transactions with an aggregate value of $702 million were disclosed during the first two days of the event in 2009 [January 12-15, 2009]. The largest deal went to Cephalon, Inc. (CEPH), which announced an agreement providing the company with an option to purchase all outstanding capital stock of Ception Therapeutics, Inc., a privately held biopharmaceutical company. Under the terms of the option agreement, Cephalon paid Ception $100 million upfront for the option. If Cephalon exercises its option, the company will purchase all of the outstanding capital stock of Ception for $250 million along with additional payments related to clinical and regulatory milestones. Other transactions announced that year included:

  • Medtronic, Inc.’s (MDT) acquisition of privately held Ablation Frontiers, Inc. for an initial payment of $225 million plus potential additional payments contingent upon achievement of certain clinical milestones
  • The Medicines Company’s (MDCO) merger agreement with Targanta Therapeutics Corporation for $42 million in cash and additional regulatory and commercial milestone payments
  • NuVasive, Inc.’s (NUVA) option to acquire Progentix Orthobiology BV, a Netherlands based company focused on developing novel orthobiologics, consisting of an upfront investment of $15 million along with the obligation to purchase the remaining equity of Progentix for $45 million upon accomplishment of certain development milestones [with additional potential payments of up to $25 million upon the achievement of additional milestones and based upon NuVasive's sales success]

Licensing and Partnering

Kicking off the JP Morgan Healthcare Conference in 2010, privately held KaloBios Pharmaceuticals, Inc. announced a $290 million agreement with Sanofi Pasteur, the vaccines division of the Sanofi-Aventis Group (SNY), for the development and commercialization of KB001, an investigational new biologic for the treatment or prevention of Pseudomonas aeruginosa [Pa] infections. KaloBios, which is developing first-in-class human antibody therapeutics that offer advantages over other methods of human antibody creation in terms of immunogenicity, potency, and manufacturing yields, will receive an upfront payment of $35 million, plus development, regulatory and commercial milestones for a potential further $255 million, as well as royalties on eventual product sales.

While other licensing and partnering transactions were announced during the JP Morgan Healthcare Conference in 2010, they were substantially smaller or specific financial terms were not disclosed. These include:

  • Proteus Biomedical Inc. announced an exclusive worldwide license and collaboration agreement with Novartis AG (NVS) to develop and commercialize pharmaceutical products that incorporate Proteus’ novel sensor-based technologies in the field of organ transplantation along with certain option rights in cardiovascular and oncology product applications. Under the terms of the agreement, Novartis will make upfront cash and equity investments in Proteus totaling $24 million and Proteus will also receive royalties on worldwide net sales of any Novartis products incorporating its sensor-based technology.
  • Trillium Therapeutics, Inc., a biopharmaceutical company developing innovative immune-based biologics, announced that it has entered into a definitive license agreement with Biogen Idec, Inc. (BIIB), granting the latter exclusive worldwide rights to one of Trillium’s development programs. Under the terms of the agreement, Trillium will receive an upfront payment and is eligible to receive milestone payments based on achievements of specified clinical, regulatory and commercial accomplishments. Trillium will also receive royalties on global product sales. Biogen Idec will be solely responsible for clinical development, regulatory approvals, manufacturing and commercialization.
  • MedGenesis Therapeutix Inc., a biopharmaceutical company developing and commercializing innovative treatments for patients with serious central nervous system [CNS] diseases, announced an agreement with Amgen, Inc. (AMGN) that provides MedGenesis with an exclusive, worldwide license for glial cell line-derived neurotrophic factor [GDNF] protein in CNS and non-CNS indications. As part of the license agreement, Amgen now holds a small equity stake in MedGenesis. In parallel, Biovail Corporation (BVF) and MedGenesis concluded an agreement to collaborate on the development of GDNF in Parkinson’s disease and potentially other CNS indications. GDNF is a naturally-occurring growth factor capable of protecting and promoting the survival of dopamine producing nerve cells.
  • AstraZeneca Plc (AZN) and CrystalGenomics announced a research collaboration to discover and develop a novel anti-infective for use as a potential antibacterial agent. Under the terms of this agreement, Korea-based CrystalGenomics will receive research funding from AstraZeneca for two years. CrystalGenomics will also be eligible to receive future milestones and royalty payments associated with development and commercialisation of a drug candidate.
  • AnaptysBio, Inc., a privately-held therapeutic antibody platform and product company, announced it has signed an agreement with Roche (OTCQX:RHHBY) for the development of novel antibody therapeutics. Under the terms of the agreement, AnaptysBio will be responsible for generating novel antibodies using its proprietary somatic hypermutation platform and Roche will receive a worldwide license to develop and commercialize antibodies optimized by AnaptysBio. In addition to a signing fee paid by Roche, AnaptysBio will be eligible to receive milestone payments and royalties upon product sales.

The six transactions announced during the JP Morgan Healthcare Conference in 2010 with reported financial terms totaling $134 million pale in comparison to the ten deals reported at the meeting during 2009 worth more than $2.4 billion in aggregate value. These included a $1.1 billion deal between ZymoGenetics, Inc. (ZGEN) and Bristol-Myers Squibb Company (BMY), a $500 million deal between Peptimmune, Inc. and Novartis AG, a $396 million deal between Micromet, Inc. (MITI) and Bayer AG (OTCPK:BAYZF), and a $200 million deal between FORMA Therapeutics the Novartis Option Fund to develop inhibitors for an undisclosed protein-protein interaction target in the field of oncology, among others.

Financing

The quantity and aggregate dollar value of public and private financing transactions announced during the JP Morgan Healthcare Conference were essentially flat in 2010 compared with the prior year as reflected in the table below.

20092010
Company NameTicker$ Million RaisedCompany NameTicker$ Million Raised
Acclarent, IncPrivate26.00Cyclacel PharmaCYCC7.20
Mithridion, IncPrivate2.90Advanced Cardiac TherapPrivate5.00
Singulex, Inc.Private19.00VentiRx PharmaPrivate25.00
Soligenix, IncSNGX.OB2.28EntreMed, IncENMD2.50
Akorn, IncAKRX25.00BioLeap, IncPrivate5.00
Alseres PharmaceuticalsALSE.PK1.00Cell Therapeutics, IncCTIC30.00
Chiral QuestPrivate13.00BIND Biosciences, IncPrivate11.00
Rosetta Genomics LtdROSG5.10
TOTAL$89.18TOTAL$90.80

Outlook

At the start of 2009, we provided a positive outlook for biotechnology, citing the sector’s defensive characteristics, favorable technical aspects, and improving fundamentals, such as the number of new product approvals, products in clinical trials and the brisk pace of industry consolidation and licensing transactions. The latter was quickly reinforced by M&A transactions with an aggregate value of $702 million and licensing & partnering deals worth more than $2.4 billion in aggregate value announced January 12-15, 2009, during the JP Morgan Healthcare Conference.

While we believe that a positive outlook for 2010 is once again warranted, and the first two weeks of the year don’t necessary indicate a trend, hopefully the paucity of M&A activity coupled with the decline in both the quantity and value of licensing & partnering transactions announced during the JP Morgan Healthcare Conference in 2010 is simply the pause that refreshes and the action improves throughout the year.

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Disclosure: No positions

Source: Biotech Deal Activity Slows - The Pause that Refreshes?