Deal Making in 2012- What Next? Part 2- Mergers and Aquisitions




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Video title: Deal Making in 2012- What Next? Part 2- Mergers and Aquisitions
Released on: April 02, 2012. © PharmaTelevision Ltd
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Part 2:In this episode Helen Wright talks to Fintan Walton,CEO PharmaVentures, Shaun Grady, VP Strategic Partnering Business Development, AstraZeneca and Andy Richards, BioTech Entrepreneur about the M&A environment in 2012
AstraZeneca's merger and acquisitions strategy in 2012
Helen Wright :
Welcome to this PharmaTelevision special program where will be assessing current trends and gazing into our crystal ball to analyze the future shape of deal making in the pharmaceutical and biotech industries, with me Fintan Walton who is CEO of PharmaVentures who are experts in deals and alliances, Shaun Grady who is AstraZeneca's Vice President of strategic partnering and business development and on Skype Andy Richards, a biotech entrepreneur and business angel. Okay now let"s turn our attention now to mergers and acquisitions PharmaDeals Review shows that the level of M&A activity remains robust and the average value of M&A"s rose thirty percent in 2011 compared to the previous year and Shaun Grady do you think Astra will be involved in another big merger through 2012? Are we looking at another kind of Medimmune [PharmaDeals ID = 27024] situation?
Shaun Grady:
So I think David Brennan the AstraZeneca chief executive has been pretty clear on record that we are not expecting any mega mergers nor would I venture or we expecting to do an acquisition of the size and scale of Medimmune which is a very significant investment in biologics by the company following the earlier acquisition of Cambridge Antibody [PharmaDeals ID = 24261], so what we have been talking about is kind of bolt on acquisition so kind of small cap pharma to coin the phrase so what we are about as a company is improving the quality of our pipeline and extending the quality of our portfolio. So where we can we will access good quality programs that will eventually become registered products for patients. I guess you know BD all things being equal would follow the traditional sort of licensing route with upfront the milestones the royalties in my view because in that regard you are sharing risk with the perspective partner and its really the only way of accessing the asset and securing the asset is through acquisition, we tend to see acquisition as the preferred route, what also kind of happens in practice is you start engaging with the partner on a licensing collaboration type structure invariably that flips into a bit of M&A discussion sometimes it ends up in being prosecuted as an M&A for quite often in it also comes back to a partnering discussion so you kind of look at assets in a creative way from all perspectives to try and find the deal shape that works for us that works for the partner and reflects the specific asset that you are looking to bring into the company.
Focus on China and other emerging markets
Helen Wright:
And then China has been quite a focus for you in terms of acquisitions of late?
Shaun Grady:
Yeah so China is an important strategic market for AstraZeneca, we are the number two pharma in China but typically we have been operating in the so called big city big hospitals on the coastal region of China and we are now executing on what we call the broad market strategy so actually accessing the rural areas and going into the provinces to provide medicines for patients in those areas which actually requires a different product mix, so we made a small acquisition well not so small acquisition in the October time frame of a company to acquire for IV in infection products [PharmaDeals ID = 44383] which will be well suited to a broader offering as we take our strategy inland from the coast in China. So we will keep an eye up to do similar M&A in China under the strategic so called emerging markets for us such as Brazil and Mexico where we find the opportunity to great value.
PharmaVentures 's perspective on divestment and transformations in pharma industry business
Helen Wright:
Fintan Walton I know that PharmaVentures works with companies looking to divest, why are they selling at the moment?
Fintan Walton :
Well actually this is again part of the overall trend in the industry the industry as I said earlier is transforming and one of those transformations is rationalization of how the pharmaceutical companies do business. In the past pharmaceutical companies did everything they did their own manufacturing they did their own research and development, along the same theme where pharma companies are doing licensing and therefore externalizing their research and development in effect in the same way they are now rationalizing the type of manufacturing operations they have and so doing their divesting their manufacturing operations not simply just selling them off but often working with contract manufacturers under longer term relationships so there is still a relationship with the contract manufacturer. In the same vein pharmaceutical companies are also divesting their research and development facilities. We did a deal recently for Sanofi where we sold two of their research and development sites one at site Paris Porcheville and the second one in here in UK and that was sold to Covance [PharmaDeals ID = 37614] which is one of big CRO companies in the world and that deal was one where Covance had a contracting back of research and development activities back to Sanofi , so that was a true win win situation so basically what we are seeing then going forward is a pharmaceutical industry that is for the pharmaceutical companies that are leaner and meaner probably more effective in the end in both their ability to do research and development but also to be able to contain their costs in terms of manufacturing.
Andy Richards views on venture capitalists perception on landscape of mergers and acquisitions through 2012
Helen Wright:
Andy Richards I know you work alongside venture capitalists what do you see as their perception of the landscapes of mergers and acquisitions through 2012?
Andy Richards :
I think they see the hunger by the pharma industry continue buying companies as a way of acquiring pipeline and assets accessible, I think there are supply and demand issues their they know they have to create signals that are of the right quality threshold and reach the right stage and they also know that increasingly the sort of deal structures were their earn outs is part of that all or milestone based payments as part of those acquisitions will become the norm and I think they are wrestling with how do they settle this up, how do they make sure that quality is right, how do they incentivize the management and how do they build their relationships with the pharma industries and bigger biotech sectors such as that they know that they are creating things that will be acquired in the way that Micromet was recently acquired by Amgen [PharmaDeals ID = 45070]. I think there are some very interesting deal structures that are being created as part of that you mentioned earlier option deals I think there are single product vehicles single asset vehicle deals I think the recent deal that was done Third Rock Ventures and Greylock Partners invested in a company in the US with Sanofi already having an option to acquire was a fascinating development on that sort of model and I think we will see more of those sorts of deals.
Helen Wright:
So do you think M&A's are more important than ever before?
Andy Richards :
Absolutely its critical essential in fact it"s gone the pendulum spotted to be swung too far and you know we could do with a more balanced eco system when people where trying to create companies to grow them because there are supply and demand problems there I would be very interested to know what Shaun thinks about this but I think one can see another dwindling sector of companies between the one and ten billion mark which is actually is probably where other would prefer to acquire if it could what happens when the (indiscernable) of this world the BioMarins of this world do get acquired we think almost no companies in that part of the eco system one suppose to go earlier and earlier will be very interesting to see what his views on that one?
Helen Wright:
Shaun what are your thoughts on that?
Shaun Grady:
I agree absolutely and of course 100 percent with that Andy, the acquisitions that bolt on the small cap are much more likely to be where there is a very clear advanced late stage asset where people can get their mind around the risk that is involved in that investment. My feel that the danger is the further back you go with acquisition proposals to all intents and purposes you are doing in licensing through acquisition and then back to this question about risk and you know where the economic investments are made as the data emerges so we typically would prefer to partner and collaborate not at least to get the expertise and experience and capabilities of the partners we develop a molecule or a program together and now that said we made an acquisition of a French infection company Novexel a little over a year ago to access their beta-lactam program [PharmaDeals ID = 34427] which was quite an interesting deal because Novexel did a partnership with Forest laboratories [PharmaDeals ID = 29490] so while AstraZeneca made the acquisition we then immediately did a back to back and granted Forest North America rights for a sum of money that kind of equated to fifty percent of the acquisition cost. So I wouldn't really rule it out completely but I think its typically the early assets where the seller feels they've got hot property that they tend to engage a bank and go through that strategic review and very often I wouldn't be surprised if actually it comes back to a partnering type structure because of the reluctance of big pharma to put too much of an investment in some very early stage high risk programs through an acquisition.
Helen Wright:
Fintan Walton, Andy Richards and Shaun Grady thanks very much for joining us.
Helen Wright
Helen Wright has worked as a broadcast television journalist for several years, covering general news, business and politics and currently involved with PTVnews of Pharmatelevision.com. Helen Wright has also worked as ITV News education correspondent and covered disability affairs. She has reported from Europe and the US. She also researched, directed and presented films for a Yorkshire TV regional documentary programme. Helen Wright began her journalistic career in local radio in Bradford. She has a BA Honours Degree in English.
Fintan Walton
CEO
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Shaun Grady
Vice President
At the time of recording this PTV interview Shaun Grady serves as VP Strategic Partnering and Business Development at AstraZeneca. Shaun Grady has global responsibility for the Strategic Partnering and Business Development (SPBD) function, dedicated to broadening AstraZeneca's access to scientific innovation outside our own laboratories - a key strategic priority for AstraZeneca. The scope of his team includes in-licensing, acquisition and partnering activities from early stage Discovery through to on-market commercial opportunities. Shaun originally joined ICI as an attorney and held positions in the Pharmaceuticals, Petrochemicals, and Head Office Legal Departments. Upon the demerger of Zeneca from ICI he was appointed Assistant General Counsel, Corporate. He worked on the merger of Astra and Zeneca, the merger of Zeneca Agrochemicals with Novartis Agribusiness to form Syngenta, and the creation of Avecia.
Andy Richards
Chairman
At the time of recording this PTV interview Andy Richards serves as Andy Richards is a serial Biotechnology entrepreneur and business angel. He is currently Chairman of Altacor , Novacta, Abcodia and Ixico and is a director of Arecor, Summit Corp plc, PsychologyOn-line, Cancer Research Technology (commercial arm of CR-UK) and Babraham Bioscience Technology. Andy is a Cambridge graduate with a PhD in Chemistry who spent his early career with ICI (now AstraZeneca) and with PA Technology. He was a founder of Chiroscience and an executive director through to the sale to Celltech in 1999. Since that time he has been founding and investing in new Cambridge based biotechnology companies including several of those listed above as well as Arakis, Geneservice, Cambridge Biotechnology Ltd, Amedis Pharmaceuticals, Sirus Pharmaceuticals, Daniolabs and Pharmakodex, all of which were recently sold. He is a council member of the Biotechnology and Biological Sciences Research Council (BBSRC), a founder member of the Cambridge Angels, the founding Chairman of BIA Bioangels and an advisor to Vectura plc, CUTEC, 4D-biomedical and Toscana Life Sciences.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
AstraZeneca
AstraZeneca is a global, innovation-driven biopharmaceutical business with a primary focus on the discovery, development and commercialization of prescription medicines for gastrointestinal, cardiovascular, neuroscience, respiratory and inflammation, oncology and infectious disease. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide.
Altacor
Altacor is an ophthalmic specialty pharmaceutical company with marketed products and a diverse development pipeline. The products are focused in the following sub therapeutic areas: ocular surface disease, ocular anti-infection and glaucoma. The company differentiates products through, for example, formulation or reprofiling. ALT 005 (surgical) and ALT 020(ocular anti-infection), ALT 022glaucoma and ALT 401 for prevention of scarring in glaucoma surgery are examples. Altacor has five products marketed in the UK and Ireland (Clinitas and Clinitas range) which are commercialised through its own sales and marketing organisation and network. Clinitas and Clinitas GEL are prescription products; the former is for moderate dry eye conditions and has a uniquely high concentration of hyaluronic acid (0.4%) in the UK. It is gaining acceptance by clinicians nationwide. The OTC Clinitas range comprises Clinitas Hydrate, Clinitas Soothe and Clinitas Ultra 3which together address the major causes of dry eye.