Last year was heavy with M&A activity, and as it drew to a close, Jason Kantor, analyst with RBC Capital Markets, predicted more of the same for 2006, expecting keen interest in firms with antibody technology.
He's been dead on.
"Yeah, I stand by that," he recently told BioWorld Today. "I made these predictions late last year, that the M&As we saw [in 2005], which was a big step up, would continue," with special attention paid to antibody firms.
BioWorld's Snapshots Industry Data show an overall increase of nearly 20 percent in merger and acquisitions worldwide in 2005, up to 179, and through May this year, there have been 72 completed, which extrapolates to about 175 for the year. But while 2006 has progressed apace, the past 12 months have seen an antibody feeding frenzy, with six sizable acquisitions, and two of the three top biotech antibody firms acquired.
A combination of factors fuels the fire, but revenue plays the largest part. New York-based RBC's research shows there were 18 antibodies on the market in 2005, with U.S. sales totaling about $8.5 billion and 30 percent expected growth in 2006.
Pharma historically has sat on the antibody sideline, scared off by the high cost of manufacturing, the challenges of reducing immunogenicity and increasing potency, and facing a regulatory path not well worn. But pharma has decided it's time to get in the game, and it's easier and quicker to buy technologies than build from the ground up.
Other factors: Pharma used to in-license its biologics, but many small biotech companies already have partnerships and royalty obligations, and therefore are less attractive for licensing. Also, with the public markets placing little value on platform firms, M&A is an increasingly viable exit strategy, and biotechs are ready to listen to buyout talks.
As an example of pharma's dire need to compete in the antibody arena, note that only Humira, majority owned by Abbott Laboratories, of Abbott Park, Ill., cracks RBC's list of antibody drugs with heavy-hitter sales, coming in at No. 5.
Ahead of Humira on the list is Remicade, Rituxan, Avastin and Synagis; directly behind is Herceptin, Erbitux and Xolair - all developed by biotech firms.
Platforms 'Can't Be Ignored'
The spate of antibody buying goes back to July, when F. Hoffmann-La Roche Ltd., of Basel, Switzerland, bought Glycart Biotechnology AG, of Zurich, Switzerland, paying $183 million to pick up the firm's GlycoMAb glycosylation technology.
But as 2005's end drew near, Amgen Inc., of Thousand Oaks, Calif., said it was buying Abgenix Inc., of Fremont, Calif., for $2.2 billion, bringing in house the firm with which it already had established a relationship. That acquisition closed in April. (See BioWorld Today, Dec. 15, 2005.)
May saw Merck & Co. Inc., of Whitehouse Station, N.J., announce plans to purchase Abmaxis Inc., of Santa Clara, Calif., and GlycoFi Inc., of Lebanon, N.H., both private firms, for $80 million and $400 million, respectively. The moves give Merck Abmaxis' monoclonal antibody technology and GlycoFi's glycoengineering platform. (See BioWorld Today, May 10, 2006.)
AstraZeneca plc, of London, also in May revealed its plan to buy Cambridge Antibody Technology Group plc, of Cambridge, UK, for $1.3 billion, adding CAT's royalty stream for Humira (adalimumab), three pipeline products and six antibodies being developed with partners. (See BioWorld Today, May 16, 2006.)
Just last week Novartis AG, of Basel, Switzerland, said it was buying NeuTec Pharma plc, of Manchester, UK, in a deal valued at about $569 million. Novartis, which has signed a flurry of big deals with biotech (four since March), brings aboard two late-stage antibody products through the merger. (See BioWorld Today, June 8, 2006.)
Looking at those transactions, Bassil Dahiyat, president and CEO of Xencor Inc., of Monrovia, Calif., an antibody firm, said that although some acquired companies have candidates, "a lot of the deals are about buying the company's technology."
"The driver is the ability [for pharma] to keep building antibody drugs," he told BioWorld Today, adding that although it's been "products, products, products" for some time, "technology is coming back."
So while Novartis gets Mycograb, for systemic fungal infections, and Aurograb, for methicillin-resistant Staphylococcus aureus infections, in the NeuTec buyout, it also gets the FabTec platform behind the drugs.
Novartis said it would keep NeuTec's R&D team on board, as well as retaining all staff for at least two years.
And while CAT's slice of Humira now goes to AstraZeneca, CEO David Brennan expects that from 2010 onward, one-quarter of all products in AstraZeneca's pipeline will be biological therapeutics, with CAT as AstraZeneca's foundation for an international presence in biologics.
Although the antibody pool is shrinking, RBC lists 29 other firms in the space, public and private, with varying antibody technologies, everyone from Ablynx NV, of Ghent, Belgium, to XOMA Ltd., of Berkeley, Calif. No doubt those firms have been watching the action and noting purchase prices, which have been impressive.
Amgen paid a 54 percent premium for Abgenix shares, AstraZeneca offered a 67 percent premium for CAT, and Novartis is giving a 109 percent premium for NeuTec.
It's a seller's market, and pressure could drive up prices as the number of antibody firms are reduced - on the day news broke of the CAT buyout, shares of antibody player Medarex Inc., of Princeton, N.J., spiked 10 percent on acquisition rumors before settling back at $11.64, up 5.8 percent, with trading volume nearly twice its average.
In such a hot area, what's an antibody firm to do?
"You can't ignore it," Dahiyat said. "But you can't try to re-orient your company to hope and wait for [a buyout]. You have to go build the best company you can and respond to the business environment."