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Saturday, June 28, 2008

The Perfect M&A Storm is Brewing.

I'm not going to write only about the financial side of cell therapy sector but I'm on a roll here so I'll continue on the theme for at least on more post.

I've been privy to a lot of conversations recently in which M&A is on the tip of everyone's tongue. I'm likely not going out on too much of a limb - and certainly won't be the only one on it - when I make the prediction that the next 12-24 months is going to see a spike in M&A activity at all levels in the cell therapy industry.

I don't think I need a hard data set to convince you that we've seen an increase in M&A activity over the past 6 months.

This I know:
  • There is a fair amount of M&A activity right now in the sector.
  • The M&A pendulum has now swung back to the "sexy" side after falling out of favor for some time.
  • A high percentage of companies in the sector are expressing interest in some level of merger or acquisition.
  • There are a lot of M&A discussions currently being explored.
Certainly we're seeing this in the larger biotech sector with Roche's offer for Genentech, MacroGenics' acquisition of Raven Biotechnologies, Lonza's purchase of Amaxa Biosystems, and Invitrogen's merger with Applied Biosystems as prime examples just in the past few weeks alone.

There is a perfect storm of factors brewing up the ideal climate for a spike in M&A. VCs are increasingly tightfisted and conservative about life sciences for now, capital markets are tough with predictions it won't get better for some time (see today's IN VIVO blog), and - to round out the trifecta - the sector's maturation translates into increasingly larger burn rates for a higher number of cell therapy companies in later stage trials.

I'm not in the business of spilling confidential information or spreading rumor so any companies mentioned below are used simply by way of example. Don't assume I know something you don't know about any of the companies referenced below.

So what might this potential M&A dustup look like?

It will certainly involve many smaller companies - think Onyvax, KeraCure, Aastrom, Memgen, ReNeuron, HemoGenix, Novocell, Opexa, IRX, BioLife Solutions, BioSafe, Cellerant, Eufets, Progenitor Cell Therapy, Angel Biotech, Epiontis, ISCO, Lifeblood Biological Services, Stem Cell Sciences, Thermogenesis, TiGenix - some of which will look to M&A to solve their fundraising needs and others will be M&A targets because of their revenue stream.

Larger companies are not likely to be immune from this swing of the M&A pendulum - say (for example!) Dendreon, Neurotech or even - might it be possible - Osiris? The newly improved, profitable, and growing Organogenesis might be a target for its revenue and Stem Cells Inc has been none-too-shy about its M&A intentions for some time. It may involve some bigger companies in the sector - say like Genzyme or Caridian BCT (formerly GambroBCT) which we know is almost certainly being positioned for a resale by the private group that bought it to maximize its value for resale.

What is not clear is who might be the buyers. Potential companies that pop to mind include BD , Celgene, and J&J. Might Amgen make a play? What about Shire, Schering, or any of a number of other pharma looking to diversify their sagging pipelines and bolster their lackluster innovation initiatives. There will likely be other players external to the field who use M&A as an entree into the sector - think Reliance Life Sciences

We know Hospira is making a play in the cell therapy space with several investments they won't yet disclose. They hiring key and experienced executives (e.g., K. Gunter from ViaCell some time ago and recent D. Perritt from J&J). It would appear they are positioning to make a significant play in the market and it would not be surprising to see it in the services side of the sector.

It is likely to be an interesting year or two for cell therapy. On the other side of it, the industry will likely look much different, be more robust, held by a much wider diversity of parent companies, investors, and shareholders, and likely somewhat more integrated with other biotech/pharma.

So...make sure your boat is tied up, get a good window seat (if you're a watcher) or a kite sail (if you're want to participate), and let's have fun. Let's make sure smart deals get done that get good technologies in the hands of companies that will make them work - as therapies, as the base of sold companies, and rewarding to investors with the cojones & foresight to put cell therapies in their portfolio.


Lee Buckler said...

I forgot to mention the merger of MedCell Bioscience Ltd and NovaThera Ltd to create a combined operation under the MedCell Bioscience name with a valuation of about £30m. Evidence of things to come?


Lee Buckler said...

I just watched an interview of Bill Kridel by Jean-Loup Romet-Lemonne on BioBusiness.TV that gives eloquent credence to the content of this blog. To view the interview go to

Title: Bill Kridel on the Role of M&A Today.

Bill Kridel discusses the strategic and rescue role of M&A today. Many companies leverage M&A for geographic and portfolio reasons - looking at some of the latest deals (Roche and Genentech, Daiichi and Ranbaxy). With the current market conditions M&A propositions from larger companies are becoming increasingly attractive.

This interview was conducted at the NASDAQ Marketsite, on July 23rd, 2008, in New York City.


* William Kridel, Managing Director at Ferghana Partners Group
* Jean-Loup Romet-Lemonne, President & CEO of BioBusiness.TV