Aggressive midcap biotechs suit up for the M&A game

Biotech M&A isn't just a Big Pharma hunting preserve anymore. That's the word from Alta Partners' Ed Hurwitz, who tells Wall Street Journal dealmeister Brian Gormley that the recent string of midcap biotech acquisitions--with deals for Calistoga, Taligen and Alba--demonstrates that well financed biotechs are using buyouts to beef up pipelines and jump into new indications--just like pharma.

"There is more large-biotech interest on the acquisition [front] than we've seen historically," says Hurwitz. "It's not just a pharma game anymore."

Sure, the bigger biotech companies may not have the mountain of cash that pharma is sitting on. But they have enough money to go after targeted acquisitions, and they aren't slow to move. Some analysts, however, are leery that a shortage of attractive targets will prevent a sudden spike in M&A activity.

"The comments I get from midcap biotech [are that] there's a limited number of attractive acquisitions targets out here," said Alan Carr, an analyst with Needham & Co. "I don't think we're going to see explosive growth. I think we'll see a steady level" of deals.

The new interest from Big Biotech couldn't come at a better time. The IPO window has been cracked open, but investors have turned a cold shoulder to developers offering a big dose of risk. And RRD International Chief Business Officer J. Scott Tarrant tells the Washington Post that the absence of an IPO exit has made licensing and buyouts more important than ever.

"There basically isn't an IPO market. It's pretty much dried up," Tarrant said. "So the days of a company raising a lot of cash through an IPO...and taking products all the way through to market is not standard business practice anymore."

- read the story from the Wall Street Journal
- here's the Washington Post report