Now that AstraZeneca has made the bold — or impulsive — decision to snap up MedImmune for $15.6 billion in cash, one big question is whether the U.K. pharmaceutical giant has kicked Big Pharma’s appetite for biotech acquisitions into high gear.
The green-eyeshade types are generally still scratching their heads over the rich price, which amounted to a 21 percent premium over MedImmune’s close on Friday. The biotech was known primarily for Synagis, an antibody-based drug that prevents a common respiratory infection in babies, and FluMist, a so-far underperforming influenza vaccine that’s delivered via a nasal spray instead of injection. MedImmune has next-generation versions of both drugs in development, but neither seems likely to set the world on fire. The company also reportedly has more than 40 other experimental drugs in its pipeline, but of course it’s far from certain that any of them will ever even make it to market, much less become the blockbusters that AstraZeneca is presumably looking for.
In fact, odds are good that AstraZeneca fell victim to the “winner’s curse,” the well-known tendency of bidders to overpay, sometimes dramatically, in competitive auctions. The WSJ reports that at least four large companies, including Eli Lilly, had been involved in the MedImmune bidding — a classic blueprint for overheated competition. Somewhere, Carl Icahn is smiling.
So, of course, are other biotech investors, who have to be hoping that whatever fever AstraZeneca came down with continues to spread. The WSJ story notes that the deal is “sure to push up valuations for similarly sized companies,” and indeed the Amex biotechnology index bumped up almost two percent on the news. Other blogs are now rife with speculation over which companies might now be in play — the WSJ Health Blog thinks Biogen Idec, Medarex and some specialty pharma companies could be next, while over at Pharmalot, Ed Silverman tosses ImClone Systems, Xoma, PDL BioPharma and Telik into the mix.
Should the expected free-for-all materialize, it will obviously have major implications for venture investors, who are already plunging more deeply into the sector. At the same time, I’d also expect to see more blood on the floor on the pharma side, as it’s far from clear to me that buyers like AstraZeneca really understand what they’re getting into. I suspect that many biotech acquisitions by pharma don’t end well — the cultures are very different, and it’s very easy for even a substantial biotech like MedImmune to get lost inside the vast structure of a $26 billion behemoth like AstraZeneca.
That, at least, was generally the logic behind the rage for pharma-biotech partnerships, in which drug companies could trade cash for future rights to experimental drugs without all the messiness that acquisitions entail. But it seems the desperation of Big Pharma knows no bounds these days.
One additional point: Little noted in all the hoopla is the fact that the acquisition takes out the last North American maker of flu vaccines, following last year’s purchase of Chiron by Novartis and that of Canada’s ID Biomedical by GlaxoSmithKline the year before. So far, the concentration of vaccine production in the hands of European pharmas hasn’t seemed to concern U.S. regulators much. And it probably won’t, either — at least until the next avian-flu scare, that is.
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