AstraZeneca ends 2020 with largest M&A deal in Q4 biotech blitz

Biotechnology companies accounted for a huge chunk of the M&A pie in the fourth quarter of 2020, with S&P Global Market Intelligence data showing that seven out of the 20 largest healthcare deals during the period targeted biotechs.

The global healthcare industry booked in a total M&A transaction value of $72.22 billion, with 674 transactions in the fourth quarter of 2020. That was a marked increase from the aggregate transaction value of $47.23 billion for 654 deals in the same quarter of the previous year, based on Market Intelligence's compilation of healthcare M&A data from 2015 to 2020.

However, valuation for the year declined to $192.53 billion from $324.87 billion in 2019. That was the sharpest drop since 2015. Deal volume was little changed year over year, with 2,229 transactions in 2020 compared to 2,303 in 2019.

In the largest biotechnology deal of the fourth quarter, Boston-based Alexion Pharmaceuticals Inc. will be acquired by AstraZeneca PLC in a cash and share deal valued at $15.16 billion. The U.K. pharmaceutical giant is expecting the acquisition to expand its product offerings with the addition of the biotech's medicines for rare diseases such as Soliris and Ultomiris. The transaction, announced Dec. 12, 2020, was the largest in the fourth quarter.

Similarly, Germany's Bayer AG bought Research Triangle Park, N.C.-based privately held biotech Asklepios BioPharmaceutical Inc. for $4 billion, while Merck & Co. Inc. — maker of blockbuster cancer drug Keytruda — purchased San Diego-based cancer therapy developer VelosBio Inc. for $2.75 billion.

Smaller pharmaceutical companies were also favorites, such as Brisbane, Calif.-based MyoKardia Inc., acquired by New York-based Bristol-Myers Squibb Co. for $12.24 billion, the second-largest deal, and Switzerland's NBE-Therapeutics GmbH, bought by German drugmaker C. H. Boehringer Sohn AG & Co. KG for $1.43 billion.

Private equity firm EQT Partners AB has made a $2.1 billion takeover bid for Swedish contract development and manufacturing solutions company Recipharm AB (publ), but an agreement has not yet materialized as the offer awaits shareholder acceptance.

Healthcare technology and services providers also saw significant deals during the period. Veritas Capital Fund Management LLC-backed Gainwell seeks to take ownership of cost containment service provider HMS Holdings Corp. in a $3.43 billion deal, while Philips Holding USA Inc. secured a deal to buy heart-device maker BioTelemetry Inc. for $2.75 billion. The increased demand for medical equipment and supplies amid the COVID-19 pandemic likely played a role in this trend, according to PwC's Global M&A Industry Trends in Health Industries report for the second half of 2020.

PwC said the volume of M&A deals in the second half increased by 25% compared to the first half of year, mainly due to five megadeals that have a combined value of $97 billion, including the top two mentioned above.

PwC foresees that mid-size biotechnology companies, including those focusing on cell and gene therapy, cancer, and next-generation biologics, will continue to attract interest from major pharmaceutical companies. The same is expected for companies providing medical devices, vaccines, therapies and diagnostics related to pandemic response.

Healthcare service providers, such as those focused on digital healthcare and medical information technology, are also likely to remain attractive M&A targets, Pwc said in its report.

Centerview Partners Holdings LP participated in the top two largest deals, with its subsidiary Centerview Partners UK LLP serving as financial adviser to AstraZeneca and its New York-based unit Centerview Partners LLC advising Bristol Myers.

Other financial advisers in the AstraZeneca-Alexion deal were J.P. Morgan Securities PLC, Evercore Partners International LLP, Ondra LLP, Morgan Stanley & Co. International PLC and BofA Securities Inc.

Guggenheim Securities LLC and Gordon Dyal & Co. LLC also played financial advising roles in Bristol Myers' purchase of MyoKardia. JPMorgan Chase & Co. and Credit Suisse (Deutschland) AG advised Asklepios and Bayer, respectively, in the companies' transaction.