Biotech have taken the front seat in the mergers and acquisitions conversation already in 2015. Transactions in the sector have been impressive just 5 months into the calendar year, causing the NASDAQ iShares Biotechnology index to jump 19% and 59% over the last 12 months. Previously covered on Johnjellinek.com, there have been biotech skepticism surrounding a possible bubble. This rumor seems to have been squashed over the last few months as 94% more transactions have been completed within the beginning months of this year, than last.
As of late April, the most recent biotech deal was announced between Teva Pharmaceuticals as they announced an offer to acquire Mylan for $82 per share. The cash and stock deal is estimated to be worth around $40 billion. That valuation makes it the largest deal proposed this year, almost doubling the most recent record holder, Abbvie’s offer to buy out Pharmacyclics for $21 billion.
In the generic drug maker’s section of the industry, they have conducted or announced about $100 billion in deals already this year. This is the largest number by 5 times within any year over the last decade.
The Teva deal has raised eyebrows due to a three-way proposal within the possible merging entities. Mylan, while being courted by Teva, is offering to buy Perrigo in a $29 billion agreement. Teva has countered this action by attempting to show the value of its proposal over the benefits from a Perrigo, Mylan merge. While the nature of Teva’s deal with Mylan does depend solely on the Perrigo merger, there are some questions that remain regarding how this tri-deal will play out.
Of course, major consolidation within any industry tends to hint towards “bubble” and the risk of negative ROI for shareholders. Proponents for the health of the industry are outlining hard earnings and company valuations as a grounds for the prolonged health in the sector moving forward as it is.