Mergers and acquisitions have been a regular staple in the industry, and throughout biopharma’s 40-plus year history we have grown accustomed to big pharmaceutical companies acquiring successful biotech companies in blockbuster transactions. It’s a sign of the times, and a reflection of the sector’s maturity, that in the past two years the headline-grabbing deals have belonged to Gilead Sciences Inc., with an $11 billion buyout of Princeton, N.J.-based Pharmasset Inc., and Amgen Inc.’s takeout of South San Francisco-based Onyx Pharmaceuticals Inc. for a purchase price of $10.4 billion. (See BioWorld Today, Nov. 22, 2011, and Aug. 27, 2013.)

The emergence of biotech companies as active dealmaking players is not the only change, according to Thomson Reuters Recap’s analysis of 2013 biopharma dealmaking; pharmaceutical companies and biotechs are altering how deals are structured. For example, options to acquire therapeutic assets are moving upstream, even to the point of a company’s formation. “Back end” load on asset value and future risk mitigation are less frequent, with fewer than one-fifth of M&As – 57 of 308 disclosed deals – keeping contingent value on the back end. (See BioWorld Today, Jan. 22, 2014.)

The analysis also showed that last year was the best in a decade for initial public offerings and licensing agreements as well as M&As. (Editor’s Note: Thomson Reuters is the parent company of BioWorld Insight.)

Among the high-level findings:

• Recap captured 2,315 life sciences deals in 2013 – a 30 percent increase above 2012. Licenses and joint ventures (JV) represented approximately 31 percent (n=714) of the deal universe; followed by supply, distribution and co-promotion deals at 17 percent (n=384); M&A at 13 percent (n=308); and grant, equity and royalty buyouts at 12 percent (n=271).

• Life sciences represented $158 billion in aggregate value, with M&A accounting for 70 percent of the total. Disclosed M&A deal value in 2013 nearly equaled the total disclosed biopharma deal value of $115 billion a year earlier. Licenses and JVs represented $25 billion, or 15 percent, of 2013 deal value, followed by asset purchases at $15 billion, or 9 percent.

• More than twice the number of privately held life sciences companies were acquired in 2013 as in the previous year – 258 in 2013 compared to 127 in 2012 – for the highest number of private life sciences acquisitions in more than half a decade. Fifty publicly traded life sciences companies were acquired in 2013 compared to 33 in 2012.

• Therapeutic products were the target of 55 percent of life sciences M&As, representing $60 billion in deals. Of these, diversified or broad focus therapies represented the largest segment, at $24.9 billion, or an average deal size of $1.3 billion. Cancer drugs accounted for $16.2 billion in aggregate M&A value, with an average deal size of $1.8 billion, while autoimmune and inflammatory targets rounded out the top three for aggregate deals of $4.4 billion, or an average deal size of $1.5 billion.

• Astrazeneca plc, together with biopharmaceuticals subsidiary Medimmune Inc., was the biggest dealmaker in the therapeutics space in 2013, with five acquisitions totaling $2.5 billion. Astrazeneca’s buyout of Omthera Pharmaceuticals Inc. to gain Phase III-validated Epanova, an anti-triglyceride therapy based on ultra-pure fish oil, represented the highest share price premium among acquisitions of public companies, according to Recap. The $443 million deal valued Omthera at an 85 percent premium to its share price over the five days prior to the transaction. (See BioWorld Today, May 29, 2013.)

• In terms of development stage, 23 percent of the lead therapeutic candidates at companies acquired in 2013 were in Phase II, compared to an average of 26 percent in Phase II at companies acquired over the five-year period from 2008 to 2013, and 49 percent of candidates were approved or marketed, compared to an average of 44 percent at that development stage over the five-year period.

According to BioWorld Snapshots, which charts biopharmaceutical-related deals in the life sciences universe, there were 77 M&A deals in 2013 for a collective total of $32.3 billion where financial terms were disclosed. Interestingly, this total was 35 percent less than the $49.7 billion in deal values in the same period of 2012. Helping swell the 2012 total were 11 transactions with a value greater than $1 billion, compared with 4 such deals in 2013.

PARTNERING GROWS

The Recap analysis found that the number of life sciences partnering and collaborative arrangements grew in 2013, encompassing 690 product and technology deals with an aggregate disclosed value of $21.9 billion. The fourth quarter had the fewest deals, at 151, but the highest aggregate value, at $8.2 billion. In 2012, there were 565 licenses and JVs in life sciences with an aggregate disclosed value of $23.2 billion. In addition:

• Of 365 life sciences licensing deals in which the development stage was disclosed at signing, 60 percent (n=220) were struck at the discovery or lead optimization/preclinical stages.

• Cancer therapies continued to dominate the deal space, representing one-third of licensing agreements in 2013 compared to 28 percent over the five-year period from 2008 to 2013. Infectious disease fell to 9 percent in 2013, from 13 percent across the five-year period, while 2013 licensing trends in other therapeutic categories generally reflected their five-year average.

• In dollar terms, Celgene Corp. was the biggest licensee in the biopharma space, accounting for $4.6 billion in deals, followed by Roche AG and Eli Lilly and Co. The top 10 licensees accounted for $16.2 billion, or 73 percent, of 2013 licensing dollars.

• Johnson & Johnson unit Janssen Pharmaceuticals Inc. and Astrazeneca were the most prolific dealmakers in 2013, inking 13 licenses apiece. Of the 22 most active dealmakers in 2013, each signing three or more licensing agreements, more than 80 percent of the agreements were struck at the preclinical to Phase I stages.

• Deals between biotechs dominated the licensing and JV landscape, representing 52 percent of total agreements in 2013 compared to 42 percent during the five-year period from 2008 to 2013, largely due to the growing licensing activity among big biotechs, according to Thomson Reuters Recap. Licenses and JVs between pharmas and biotechs actually shrank to 24 percent of the universe in 2013, from 39 percent over the five-year period, while alliances between biotechs and academic institutions grew to 18 percent of the universe in 2013, compared to 13 percent during the five-year period.

• Astrazeneca’s 2013 license deal with Moderna Therapeutics Inc. represented the largest of the top 10 biopharma deals, ranked by up-front payment. Astrazeneca has an option to select as many as 40 drug candidates for clinical development, and Moderna stands to gain milestone payments related to clinical and commercial progress, along with royalties on drug sales for each product. (See BioWorld Today, March 22, 2013.)

Pharmas and biotechs are approaching dealmaking in a manner not seen in years past, according to Vinay Singh, senior deals analyst at Thomson Reuters Recap. He cited the desire of both parties to mitigate risk through licensing arrangements, noting that collaboration deals now comprise more than 50 percent of these structures. Straight collaborations involving shared responsibilities dropped to 84 percent of these deals in 2013, he said, from 89 percent the year before, while collaborations with back-end license options grew to 16 percent of such deals in 2013 from 11 percent the year before.

“We’re seeing a very creative, cohesive, collaborative mindset from both sides of the negotiation table,” Singh said.