Within the past five years, foreign companies spent $12.2billion acquiring U.S. drug and biotechnology companies, withSwiss companies accounting for one-quarter of all foreigninvestments, according to a KPMG Peat Marwick survey ofworldwide mergers and acquisitions in the biopharmaceuticalindustry.

The survey, released on Monday at the annual meeting of theNew York Biotechnology Association and on Wednesday at theBioPartnering '93 conference in London, found that from 1988to 1992, Swiss companies invested more than $3.7 billion inU.S. biopharmaceutical companies. This includes Hoffmann-LaRoche's $2.1 billion investment in Genentech Inc. in 1990 forcontrol of 60 percent of the South San Francisco, Calif.,company.

Switzerland is followed by France, which invested $3.3 billionin mergers and acquisitions, and Japan, with $2.1 billion in U.S.investments.

The amount of foreign investment is more than half of the$20.8 billion that U.S. drug and biotechnology companies spentacquiring other U.S. companies. U.S. drug and biotechnologycompanies spent $23.6 billion on completed mergers andacquisitions from 1988 to 1992. The report said this represents49 percent of the $47.98 billion total worldwide expendituresin the industry.

European countries, which include one-third of thepharmaceutical market, accounted for 40 percent ofexpenditures for mergers and acquisitions. Peat Marwick said"the big surprise is Japan, which is exceptionallyunderrepresented in deals during this time frame." While thecountry is the second-largest pharmaceutical market, with 17percent of total sales, it spent only 5 percent of globalexpenditures on pharmaceutical deals. Purchases inside Japanwere less than 1 percent of total money spent, the surveyreported.

Peat Marwick said the reason for this small investment is thefact that Japan has "a slowly developing biotechnologyindustry, and while the country's major pharmaceuticalcompanies are receptive to making deals with American andEuropean firms, other Japanese industries are diversifying intobiotech at a quicker pace."

According to the survey, there were 760 deals completedduring the 1988-1992 period worldwide, but the top 10 dealsaccounted for 60 percent of the money spent; 71 percent of alldeals involved $50 million or less.

During the five-year period, "1989 clearly emerges as the yearof the mega-deal, with $26 billion of completed deals, morethan three times the value in transactions for any other year,"the report says. This was the year of Bristol-Myers' $12.3billion acquisition of Squibb.

So far in 1993 there have been 53 worldwidebiopharmaceutical deals valued at $4.9 billion. These includeMcKesson Corp.'s acquisition of 23 percent interest in Mexicanpharmaceutical distributor Nadro S.A. de C.V. for $50 millionand British drug company Medeva plc's $22 million marketingagreement with Matrix Pharmaceutical Inc. and $77.5 millionacquisition of the German company Ribosepharm.

The report said "1993 looks like a gangbuster year for smalland medium-sized deals, with many valued at less than $15million.

According to industry experts, there has been particularemphasis on trans-Atlantic cooperation among medium-sizepharmaceutical companies. There is also likely to be somenontraditional partnering among pharmaceutical andbiotechnology companies and other health-care industrysegments in the wake of President Clinton's reform package."

KPMG believes that "30-50 percent of the funds spent by thebig companies on research and development will be directed tobiotechnology companies over the rest of the decade."

The report adds: "The big drop in U.S. pharmaceutical andbiotechnology stock prices due to upcoming health-care reformand clinical product failures has made American stocks cheapto foreign investors, especially the Japanese. This has also madebiotech companies hungry for capital, as new stock offeringshave no takers."

-- Brenda Sandburg News Editor

(c) 1997 American Health Consultants. All rights reserved.