HBM Pharma/Biotech M&A Report 2013

Transcription

1 January HBM Pharma/Biotech M&A Report Trade Sales of European and North American Biopharma Companies - Key Findings Total (upfront) transaction value reached $. billion (vs. $.6 billion in ), not including $. billion value of deals that were announced, but not yet completed. European deal volume more than doubled to $. billion. Four multi-billion deals completed (Onyx-Amgen $. billion, Bausch & Lomb-Valeant $.7 billion, Elan-Perrigo $.6 billion, Warner Chilcott-Actavis $. billion). Highest number of transactions () with an upfront of at least $ million closed. Premiums paid for public companies dropped to % (down from % in and 6% in ). Mid-sized pharma and large biotech companies (mainly from the US) were the most important buyers, accounting for % of transaction volume. Biopharma trade sales generated the best returns for US and European VCs (since ). About the HBM Pharma/Biotech M&A Report The HBM Pharma/Biotech M&A Report covers all completed trade sales of US, Canadian and European biotechnology and pharma (incl. generics and OTC) companies since. The survey does not cover diagnostics, medical technology or life sciences tools & services companies. Reverse mergers, minority investments and the purchase of assets or subsidiaries are not included in the survey. Acquisitions that were structured as mergers for tax or other reasons are included. Unless mentioned otherwise, transaction value is defined in this report as the upfront consideration in cash and/or shares. By contrast, the overall transaction value includes contingent ( biodollar ) payments linked to reaching certain milestones. Additional data such as investment by venture and private equity investors, exit multiples, stage of lead product etc were collected from various sources. Please note that such data may be based on estimates and may not have been available for all transactions. Also, the results presented in this report may deviate from our earlier reports due to subsequent reclassification or correction of data. Further information about the HBM Pharma/Biotech M&A Report including a list of all transactions can be found under The use of data and charts is permitted with reference to HBM Partners Pharma/Biotech M&A Report. The authors of the report welcome any feedback or corrections: Dr. Ulrich Geilinger, ulrich.geilinger@hbmpartners.com Dr. Chandra Leo, chandra.leo@hbmpartners.com

2 Upfront Transaction Value ($ billion) Trade Sales of US, Canadian and European Biopharma Companies in was a banner year for public biopharma companies. Stock performance, especially in the US, was very strong. The NASDAQ Biotechnology index surged by 6%. Large pharma stocks also continued to perform well. In the US, the IPO window for biopharma companies was wide open and in the course of, biotech companies went public, raising close to $ billion! As a consequence, the IPO route has been and still is a viable and attractive alternative to a trade sale for private US biopharma companies. M&A activity in was also quite strong: The aggregate upfront transaction volume for the 7 US, Canadian and European biopharma companies sold last year exceeded that of, reaching just over $ billion (or $.6 billion including biodollars ). If one added the 6 announced, but not completed deals, upfront transaction volume would have been over $6 billion. European deal volume more than doubled to $. billion ( deals), while the US trade sales generated $7. billion upfront, a bit less than in the previous year. The Public trade & Private sales Pharma/Biotech of Canadian Companies companies (US, Canada, added Europe) $77 million of deal value, in line with previous years. Upfront Transaction Volume of Pharma/Biotech Trade Sales Chart : Upfront Transaction Value Biopharma M&A (US, Canada, Europe) 6 Number of transactions Canadian targets US targets European targets Announced, but not completed deals. Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe HBM Partners In terms of transaction sizes, was remarkably similar to, with only one deal over $ billion (acquisition of US-based Onyx by Amgen for $. billion). In, the only transaction over $ billion was the purchase of Pharmasset by Gilead Sciences for $. million. Other transactions over $ billion in were the acquisition of private-equity-backed Bausch & Lomb by Canadian Valeant for $.7 billion, the purchase of Elan (Ireland) by Perrigo (US) for $.6 billion and the sale of Warner Chilcott (Ireland) for $. billion to Actavis (US). The latter transactions were corporate inversions with the new headquarters based outside of the US, resulting in sizeable tax benefits for the combined entities. transactions in reached an upfront value of $ million or more compared to such transactions in. The number of public takeovers increased to in, after that number had dropped to in. The number of private trade sales decreased from in to. And in, only exits of private-equity backed companies (former buyouts) were counted, down from the record number of such deals in. The average premium a paid for the public biopharma companies during was %, down from an average premium of % in (and 6% in ). As in previous years, premiums paid for US companies were again higher than premiums paid for European companies (% vs. 7%). a Premium to the stock price on the day prior to the deal announcement

3 Table : Largest Biopharma M&A Transactions During (US, Canada, Europe) Target Company Private/ Public VC/PE- Backed/ Premium Buyer Upfront Deal Value ($ m) Overall Deal Value ($m) Stage of Lead Product Onyx (US) Public 7% Amgen (US) ' ' Market Bausch & Lomb (US) Private PE Valeant (Canada) '7 '7 Market Elan Corp (Ireland) Public % Perrigo (US) '6 '6 Market Warner Chilcott (Ireland) Public % Actavis (US) ' ' Market Map Pharmaceuticals (US) Public 6% Allergan (US) NDA Pronova (Norway) Public % BASF (G) Market Astex (US) Public 7% Otsuka (J) 6 6 Phase Trius Therapeutics (US) Public % Cubist Pharmaceuticals (US) 7 NDA Xellia Pharmaceuticals (Norway) Private PE Novo A/S (DK) 7 7 Market Est. VC Invest. ($m) Aragon Pharmaceuticals (US) Private VC Johnson & Johnson (US) 6 ' Phase Hi-Tech Pharmacal (US) Public % Akorn (US) 6 6 Market Actient (US) Private PE Auxilium (US) 6 Market Pearl Therapeutics (US) Private VC AstraZeneca (UK) 6 ' Phase Optimer Pharmaceuticals (US) Public -% ) Cubist Pharmaceuticals (US) Market YM BioSciences (Canada) Public % Gilead Sciences (US) Phase Prolor (Israel) Public % Opko Health (US) Phase Doc Generici (Italy) Private Charterhouse (UK) Phase Acino (CH) Public % Pharma Strategy (S) Phase Thornton Ross (UK) Private Stada (G) Phase Obagi Medical Products (US) Public % Valeant (Canada) Market Omthera (US) Public % AstraZeneca (UK) Phase Okairos (CH) Private VC GSK (UK) Phase Rosemont Pharmaceuticals (UK) Private PE Perrigo (US) Market Ceptaris (US) Private VC Actelion (CH) Market 6 Amplimmune (US) Private VC AstraZeneca (UK) Pre-clinc. Boca Pharmacal (US) Private Endo Health Solutions (US) Market Spirogen (UK) Private VC AstraZeneca (UK) Phase 7 Ethical Oncology Science (Italy) Private VC Clovis Oncology (US) Phase 6 Incline Therapeutics (US) Private VC Medicines Co (US) Market Medicago (Canada) Public % Mitsubishi Tanabe Pharma (J) 6 6 Phase SARcode (US) Private VC Shire (Ireland) 6 6 Phase 76 Uteron Pharma (B) Private VC Watson Pharmaceuticals (US) NDA Rempex (US) Private VC Medicines Co. (US) 7 Phase Acton Pharmaceuticals (US) Private VC Meda (S) Market 6 Intercell (A) Public % Vivalis (Valneva) (F) Phase Savient (US) Public ) Crealta (US) Market Laboratorios Casen Fleet (Spain) Private Recordati (Italy) Market Cypress Pharmaceutical (US) Private Pernix Therapeutics (US) Market ProFibrix (NL) Private VC The Medicines Co (US) Phase Cytochroma (Canada) Private VC Opko Health (US) Phase ^ Premium in case of public takeovers CH = Switzerland, A = Austria, G = Germany, J = Japan, S = Sweden, F = France ) Discount to current stock price with further contigent payments ) Asset sale

4 # of Transactions # of Transactions Significant Transactions With At Least $ Million Upfront Value As mentioned, only four deals in had a value of more than $ billion. However, the year set a new record with significant Public & Private transactions Pharma/Biotech (i.e. Companies deals (US, with Canada, an upfront Europe) of at least $ million). Number of Pharma/Biotech Trade Sales >=$m Upfront Transaction Volume Chart : Significant Biopharma Trade Sales (Upfront of at least $ million) Public companies Other private companies PE-backed private companies VC-backed private companies Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe HBM Partners Over the past years, the number of significant US transactions has usually been - per year (see chart below). The respective number for Europe has been about half of that (i.e. about transactions p.a.), but in, this number jumped to 6. As the European IPO market has not opened yet for smaller biopharma companies, Public M&A & Private is often Pharma/Biotech the only Companies exit option (US, Canada, for private Europe) European biotech firms. Number of Pharma/Biotech Trade Sales >=$m Upfront Transaction Volume Chart : Significant Biopharma Trade Sales (Upfront of at least $ million) Canada US public US private Europe public Europe private Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe HBM Partners

5 Average Premium Paid for Public Takeovers Premiums Paid for Public Biopharma Companies The premiums paid for public US and European biopharma companies in were substantially lower than in the three previous years, when premiums had been very high (at least in the US). In this analysis, we only included US and European companies that were bought for an upfront consideration of at least $ million. The premium is defined as the difference between the offer price as compared to the stock price before the takeover announcement. Over the last five years ( to ) premiums paid averaged 6% for the 6 public takeovers with an upfront of at least $ million. No systematic correlation of premium and transaction size was observed. We also did not find significant differences in premiums paid in the various therapeutic areas with the exception of anti-infectives, were premiums averaged over % (mainly driven by the very high prices paid for anti-viral companies). Also, companies with biologics assets on average received a % higher premium than those with small molecules. As the chart below shows, premiums for US companies were generally higher than those for European companies. This difference has narrowed in as premiums for European companies have edged up and the high US premiums came down. The lower US premiums in as compared to and probably reflect the run-up in valuations of most biopharma companies during the last - months. Of course, there is a high degree of variation in premiums paid ranging in from % (premium for Onyx) to % (premium for Omthera) a and the conclusions drawn from averages should be interpreted with some caution. Public Pharma/Biotech Companies (US, Europe) Average Premiums Paid for Public BioPharma Companies - Chart : Premiums Paid for US and European Public Biopharma Companies % % US and European public takeovers with upfront consideration of at least $ million 76.% US deals US & European deals 7% European deals 6% % % %.% 6.%.%.%.% 6.% 6.%.%.%.6%.6% % 7.% 7.%.% % Comment: Trade sales of public US and European pharma/biotech companies with an upfront consideration of at least $ million. Premium calculations Source: exclude HBM Pharma/Biotech Optimer which M&A Report was acquired at a % discount on upfront with significant HBMcontingent Partnerspayments. As might be expected, premiums paid for clinical-stage companies were higher than premiums for companies with approved or marketed products (see chart on next page). In this context, we can also note that the number of public takeovers of clinical-stage companies rose strongly in and. Apparently, buyers recently have been more willing to acquire earlier-stage companies with the associated clinical risks. An alternative interpretation would be that high(er) valuations of more mature biopharma companies have made those targets less attractive. a The respective minimum and maximum numbers in were % (premium for Ista and Amylin) and 6% (premium for Inhibitex). In, Optimer was sold with a discount on upfront with further contingent payments.

6 Upfront Transaction Value ($ billion) # of Transactions Public Pharma/Biotech Companies (US, Canada, Europe) Premiums Paid for Public BioPharma Companies Chart : Premiums Paid for Public Biopharma Companies By Stage US and European public takeovers with upfront consideration of at least $ million 6% Premiums paid for companies with phase I-III / NDA products Not applicable 67% % % 76% % % % Comment: Trade sales of public US and European pharma/biotech companies with an upfront consideration of at least $ million. Premium calculations Source: HBM exclude Pharma/Biotech US-based M&A Optimer Report (which was acquired at a % discount, but involved significant HBM Partners contingent payments) Location of Buyers 7 Approved/Marketed Phase III / NDA Phase II Premiums paid for companies with approved/marketed products It is no surprise that, in, US companies were again the dominant buyers (see chart below), as the US has by far the highest number of potent pharma and biotech companies that can engage in significant transactions. Also some European large pharmas such a Novartis, Roche or Sanofi did large acquisitions in recent years and may not be ready yet to engage in further big deals. Japanese pharma companies were almost absent as significant buyers in. Canadian Valeant drove up the transaction volume of Canadian buyers in ($.7 billion acquisition of Bausch & Lomb). The company also was the dominant Public & Private Canadian Pharma/Biotech buyer Companies in previous (US, Canada, years. Europe) Pharma/Biotech Trade Sales - Location of Buyers Chart 6: Location of Buyers Pfizer/Wyeth Merck/Schering P Japan Canada US Europe Comment: Trade sales of US, Canadian and European public and private pharma/biotech companies. HBM Acquisitions Partners by buyers located in the rest-of-the-world were insignificant and are not shown in this chart. 6

7 % of (Upfront) Transaction Value Type of Buyers We already noted in our M&A Report a year ago that large pharma companies (market cap over $6 billion) have become less important as buyers of other biopharma companies. In, large pharma only bought companies with a transaction value of just over $ billion (% of total upfront value). Large biotech firms (market cap over $ billion) such as Amgen, Gilead, Biogen Idec or Celgene spent over $ billion on acquisitions in, already having been very active the previous year. Mid-size pharma companies (market cap $ billion to $6 billion) such as Allergan, Takeda, Valeant or Shire had the highest share of deal value in and three of the four multi-billion deals were done by this group (Bausch & Lomb- Valeant, Elan-Perrigo, Warner Chilcott-Actavis). Smaller pharma (market cap below $ billion) and small biotech companies (no significant sales) Private & did Public the Pharma/Biotech majority Companies of the deals (US, Canada, (6 out Europe) of 7) but only accounted for about % of deal volume. Buyers of Public & Private Pharma/Biotech Companies (% Trans. Vol.) Chart 7: Share of Upfront Transaction Value by Type of Buyer % % 6% % % % 6% 7% % % % % % % % 6% % 7% % % % 7% % % % 7% % % 6% 6% % 7% % 7% 6% % % % % % 66% % 6% % 6% % % % % % 6 7 Other buyers Small biotech Smaller biopharma (<$bn) Mid-sized pharma (>$bn) Large biotech (>$bn) Large pharma (>$6bn) Large pharma "mega deals" Comment: Other buyers: Non pharma buyers including PE funds. Small biotech: Small biotech companies with no significant sales. Smaller HBM Partners biopharma companies: Pharma companies with a market cap of $ billion or lower. Can include companies with biologics products. Midsized pharma: Pharma companies with a market cap of $-6 billion. Large biotech: Biotech companies with market cap $ billion or higher. Large pharma: Pharma companies with a market cap of $6 billion or higher. Large pharma mega deals : Pharma acquisitions and mergers with a deal value over $ billion. Large pharma have stayed on the sidelines in for several reasons: Some of them may still be digesting their mega-transactions done just a few years ago (black bars in chart above). Also, several pharma companies have recently re-organized their R&D structure and/or refocused their strategy. Furthermore, we assume that in some transactions, large pharma firms may have been outbid by more aggressive bidders. Therapeutic Areas It is no surprise that deal making in oncology has heated up after the strong drug approval numbers recently: The trade sales of cancer companies in generated a total upfront transaction volume of $. billion (up from $. billion the year before). The 7 deals in the CNS space generated close to $ billion deal volume (we grouped Elan in this category, thus the high value). Another active area was anti-infectives with transactions and a deal volume of $. billion (higher deal volume in ). The sale of Bausch & Lomb for $.7 billion drove up deal volume in ophthalmology. The only other significant eye care deal was the sale of SARCode to Shire for $6 million. 7

8 Upfront Transaction Value ($ billion) Upfront Transaction Value ($ billion) Trade Sales of Private Biopharma Companies The private biopharma companies sold in generated an upfront transaction value of just over $ billion, a number previously only topped in. During the last three years, PE- and VC-backed companies generated the bulk of deal value. In, more than % of private deal value was generated by the $.7 billion sale of Bausch & Lomb to Valeant. Other private transactions with an upfront of over $ million were the sale of PE-backed Xellia to Novo A/S ($7 million), the sale of VC-backed Aragon to J&J ($6 million, $ billion including biodollars), the sales of PE-backed Actient to Auxilium ($ million) and the sale of VC-backed Pearl Private Therapeutics Pharma/Biotech Companies to AstraZeneca (US, Canada, Europe) ($6 million, $. billion including biodollars). Trade Sales of Private Pharma/Biotech Companies Chart : Trade Sales of Private Biopharma Companies VC-backed co's PE-backed co's Other private co's 6 7. Number or private companies sold Comment: Trade sales of US, Canadian and European private pharma/biotech companies. HBM Partners The number of significant private transactions (with an upfront of at least $ million) was again high in with such transactions (see chart on page ). As mentioned, only PE-backed biopharma companies were sold in as compared to such deals in. Thanks to the large Bausch & Lomb exit, transaction volume in this category Private still PE-Backed exceeded Pharma/Biotech $ billion. Companies More (US, Canada, details Europe) on these transactions can be found on the next page incl. $.7 bn Bausch&L./ Valeant incl. $.7 bn Nycomed/.. Takeda incl. $.6 bn Actavis/ Watson 6 7 Trade Sales of Private PE-Backed Pharma/Biotech Companies Chart : Trade Sales of Private PE-Backed Biopharma Companies incl. $.7 bn Nycomed/ Takeda. Number or PE-backed private companies sold.6. Upfront transaction value Comment: Trade sales of US, Canadian and European private PE-backed pharma/biotech companies. HBM Partners incl. $.6 bn Actavis/ Watson.. incl. $.7 bn Bausch&L./ Valeant 6 7

9 Upfront Transaction Value ($ billion) Trade Sales of Private Equity-Backed Pharma Companies During (ranked by transaction value) In May, Canadian Valeant announced the acquisition of Bausch & Lomb for $.7 billion. This is the largest deal so far for Valeant, a specialty pharma company that has grown mainly by buying other companies. Ophthalmology company Bausch & Lomb was taken private by Warburg Pincus in 7 in a $.7 billion buyout. Welsh Carson was a co-investor. Investors injected $. billion in equity at that time. Warburg Pincus (owning 7% of Bausch & Lomb) was reported to have received $. billion from the sale. Thus, the investor return from the deal is estimated to be around x (including a substantial dividend payment in early ). Norwegian Xellia Pharmaceuticals, a pharmaceutical group focusing on the development, manufacturing and global commercialization of anti-infective therapies, was acquired in May for $7 million by Novo A/S, the holding company of of Novo Nordisk and Novozymes. Xellia was established in when i bought NYSE-listed Alpharma's API business. The company was transformed into a fully integrated specialty pharma company. i reported to have made.x on its investment. In April, NASDAQ-listed specialty pharma company Auxilium completed the acquisition of US-based Actient for $ million plus $ million in contingent payments. Actient was founded in by private equity firm GTCR together with Ed Fiorentino with the goal to purchase specialty pharma products. Actient was reported to generate revenues of $ million in, mainly with urology products. GTCR reported plans to invest up to $ million into Actient. While the actual investment amount was not disclosed, it can be assumed that the transaction generated a good return for GTCR. In February, mid-market private equity firm CBPE sold Rosemont, a UK developer, manufacturer and supplier of liquid medicines, to listed US-based Perrigo. CBPE is reported to have sold the business for.x the amount of million invested in 6. Trade Sale of Family-Owned Private Biopharma Companies As usual, there were quite a number of other private (mostly family-owned) biopharma companies sold in. These deals generated a modest deal volume of only $. billion. The largest deal in this category was the sale of Italian generics company Doc Generici to buyout fund Charterhouse for $ million, followed by Thornton Ross, Private a UK ( Other ) seller Pharma/Biotech of mainly Companies OTC products, (US, Canada, Europe) which was acquired by German Stada for $ million. Trade Sales of Other (Family-Owned) Private Pharma/Biotech Companies Chart : Trade Sales of Other (Family-Owned) Private Biopharma Companies incl. $. bn Hexal/Novartis incl. $. bn Stiefel/GSK incl. $. bn Ratiopharm/Teva Number of other (family-owned) private companies sold.. Upfront transaction value. Comment: Trade sales of US, Canadian and European private family-owned pharma/biotech companies. HBM Partners

10 Upfront Transaction Value ($ billion) Transaction Value ($ billion) Trade Sales of VC-Backed Biopharma Companies Overall, was a good exit year for VC-backed biopharma companies. While the number of transactions fell slightly short of previous years, upfront and overall biodollar deal values were high again. The chart below also shows that the number of significant transactions (upfront of at least $ million) has been gradually increasing Private VC-Backed and has Pharma/Biotech reached Companies a new (US, high Canada, in. Europe) VC-Backed Companies Sold Trade Sales of VC-Backed Private Pharma/Biotech Companies Chart : Trade Sales of VC-Backed Biopharma Companies With upfront transaction value of at least $ million Number of VC-backed companies sold Comment: Trade sales of US, Canadian and European private VC-backed pharma/biotech companies. HBM Partners 6 The number of VC-backed trade sale exits in the US has declined. This is not a surprise, considering the strong IPO markets in the US. The overall deal value nevertheless has increased. The two largest trade sales of VCbacked biopharma companies by far were the sale of Aragon to J&J for $6 million upfront plus $ million of contingent payments and the sale of Pearl Therapeutics to Astra Zeneca for $6 million upfront and a overall biodollar Private VC-Backed value of Pharma/Biotech $. billion. Companies (US, Canada, Europe) VC-Backed Companies Sold Upfront transaction value Overall value Trade Sales of VC-Backed Private Pharma/Biotech Companies Chart : Trade Sales of VC-Backed Biopharma Companies Europe & US..... Number of European trade sales European trade sales Number of US trade sales US trade sales Comment: Trade sales of US, Canadian and European private VC-backed pharma/biotech companies. HBM Partners 7

11 Weighted Average Values ($ million) was a good year for European VC-backed biopharma companies with an above-average number of such companies sold and an upfront overall deal value of $ billion, the highest value since 6. The sale of vaccine developer Okairos (Switzerland/Italy) generated proceeds of $ million and Italian oncology company Ethical Oncology Science sold out to Clovis Oncology for $ million plus $ million of potential milestone payments. Only one Canadian VC-backed biopharma company was sold in (sale of Cytochroma to US Opko Health for $ million upfront and $ million overall value). Average Deal Values of VC-Backed Biopharma Trade Sales Average deal values in, both in Europe and the US, were higher than the -year average. In, VCbacked European biopharma companies were sold for an average upfront of $ million (vs. $ million as the -year average) and overall deal values reached an average of $77 million (vs. $ million as the -year average). In, US deals reached an upfront of $6 million and overall deal values of $ million, both numbers being % over the -year averages. The chart below shows the average investment and deal values for VC-backed biopharma companies sold over the years. Average investment amounts by VCs have been quite steady at around $-7 million per company. Average upfront deals values have jumped from around $ million in the years - to over $ million thereafter. Average overall deal values (including contingent payments) have been over $ million Private since VC-Backed and Pharma/Biotech are roughly Companies twice (US, Canada, as high Europe) VC-Backed Companies Sold as the upfronts. Average Investment / Average Upfront and Overall Deal Values Chart : Trade Sales of VC-Backed Biopharma Companies Europe & US 6 7 Average Total Transaction Value 7 7 Average Upfront Transaction Value Average Invested Capital Comment: Trade sales of US, Canadian and European private VC-backed pharma/biotech companies. Only for transactions where respective information was available. HBM Partners Most sales of VC-backed biopharma companies are today structured as staged deals, whereby a significant portion (sometimes the majority) of payments are linked to the achievement of defined milestones. Whereas in the years up to, only few deals were staged, contingent payment structures are now common (see chart on next page). And in, contingent payments were higher than the upfront in over half of the transactions! This is not necessarily bad news for venture investors as the upfront multiples on invested capital have gone up as well. And private investors in staged deals can reap significant additional returns if the acquired products are successful in terms of clinical development, approval and/or commercial milestones.

12 Ratio / Multiple # of Transactions Public & Private Pharma/Biotech Companies (US, Canada, Europe) Contingent Biodollar Payments as % of Total Deal Value Chart : Contingent Biodollar Payments as % of Overall Deal Value (VC-Backed Companies) Over % contigent payments Up to % contigent payments No contigent payments Comment: Trade sales of US, Canadian and European private Only VC-backed for transactions pharma/biotech where respective companies. information was available. HBM Only calculated Partners for transactions where deal values were available. Return for Venture Investors Wherever possible, we have estimated the return multiples for venture investors from biopharma trade sales using the ratio of invested capital to upfront proceeds as a proxy. We have also calculated the potential maximum multiples if all milestones payments would be reached. The multiples in the following analysis can, of course, deviate from the actual VC returns and not all investors in a company will have had the same returns (see also explanations Private VC-Backed in box Pharma/Biotech on next Companies page). (US, Canada, Europe) VC-Backed Companies Sold Average & Median Multiples On Upfront and Total Deal Value Chart : Upfront & Overall Deal Values Divided by Invested Capital 7 6. Weighted-average overall multiples Median overall multiples 7. Weighted-average upfront multiples 6. Median upfront multiples Comment: Trade sales of US, Canadian and European private Only VC-backed for transactions pharma/biotech where respective companies. Overall multiples refer to overall deal HBM Partners information was available. value (including contingent payments) divided by invested capital. Upfront multiples use upfront payments only. The multiples on invested capital have strongly increased since the low point in. Average and median upfront multiples have in reached over x for the first time. Even if investors in VC-backed biopharma companies sold in only receive a portion of the contingent payments, average multiples would jump to x or more, quite a good number.

13 % of Transactions (With Return Estimates) Deal Values, VC Investments and Investor Returns Deal values were available only for about % of the 7 deals (VC-backed biopharma companies sold - ). Especially for small deals, transaction press releases do not always mention deal values. Therefore, the average deal values quoted in our reports are probably somewhat overstated. In addition to upfront deal values and overall deal values, we have also wherever possible collected information about the capital invested by venture (and other) investors. Investment information was available for close to % of deals. A proxy for investor return is the upfront (or overall) deal value divided by the investment amount. In our report, we have calculated such multiples weighted by invested capital (i.e. dividing all upfront or overall values by total investment amounts). In this way we reduce the effect of outliers. We have also calculated median multiples. Very little information is available (or can be disclosed) about the company valuations (and the investment terms) in the various financing rounds. Thus, it is impossible for us to report exact returns for the various investors. Also, we do not know if contingent payments were made in staged deals and such additional payments can make a big difference. We estimated return multiples in about % of the VC-backed exits. These return estimates do not take into account any contingent payments. Such return estimates are quite close to the multiples (upfront value / invested capital) and the average values are almost the same. The chart below shows the same trend of improving exit performance: In, exits generated estimated returns for VC investors of x or more. Thus in the majority of deals where return estimates were possible, VC have done quite well even based on the upfront payments alone. In the years before, such multiples were only reached in about Public a & Private third Pharma/Biotech of the cases, Companies and (US, losses Canada, were Europe) more frequent. Number of Pharma/Biotech Trade Sales Chart 6: Estimated VC Return Multiples (on UpfrontConsideration) % % 6% % % 6 Number of transactions Loss ~x <x x-x >=x % 6 7 Comment: Trade sales of US, Canadian and European private VC-backed pharma/biotech companies. % refers to the number of HBM Partners transactions where we were able to estimate returns. During investor returns from European VC exits by trade sale were outstanding as four significant transactions (Ethical Oncology Science, Spirogen, Uteron Pharma, Okairos) reached record multiples of an estimated 6x or more, not even counting contingent payments. With an average multiple of x (upfront value vs. invested capital), US returns were in line with previous years.

14 Estimated Multiples Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe) Estimated Investor Return Multiples US vs. European Trade Sales Chart 7: Upfront Deal Values Divided by Invested Capital US vs. Europe x x.x.x.x.x.7x.x.x Average upfront multiples US x x.7x.x.x.x.x.x.x.x.x.x.x Average upfront multiples Europe x 6 7 Comment: Trade sales of US and European private VC-backed Only pharma/biotech for transactions where companies. respective Upfront multiples are calculated by dividing information was available. HBM Partners 7 upfront deal value by invested capital, i.e. averages are weighted by invested capital. Outlook was one the best years in recent memory for emerging biopharma companies, and public as well as private market investors enjoyed a nice ride. The US IPO market has been booming, post-ipo performance has been strong and trade sales of private biopharma companies generated excellent returns. It is hard to predict, however, if and for how long this party will go on. The positive environment for public companies helps to fuel the M&A bonanza in various ways: On the one hand, publicly listed acquirers enjoy high valuations themselves, raise lots of cash through follow-ons and benefit from a low cost of capital. On the other hand, publicly listed target companies accept acquisition offers as their own stock prices are near all-time highs, even at modest acquisition premiums. And private companies with unique assets can for the time being pursue a dual-track process (at least in the US) to bring potential acquirers to the negotiation table. The M&A landscape in has been dominated by mid-sized US specialty pharma companies and the larger biotech firms. By contrast, large pharma predominantly stayed on the sidelines. We expect large pharma to become more active again as buyers, especially if valuations drop to more normal levels. We could then also see more large buyouts funds picking up private pharma companies. The supply of suitable buyout candidates in the US and Europe is, however, limited. Overall, the pharma/biotech M&A market has proven to be relatively stable over the years. Some of the largest transactions actually have been done during or just after the financial crises. As the number of potent buyers has increased and the cash for significant transactions is available, we expect M&A activity in to be at least as strong as in. January Please address questions, comments or corrections to the authors of this report: Dr Ulrich Geilinger, ulrich.geilinger@hbmpartners.com and Dr Chandra P. Leo, chandra.leo@hbmpartners.com HBM Partners AG, CH-6 Zug, Switzerland, phone + 7 7

15 About HBM Partners HBM Partners is a globally active, healthcare-focused investment management group headquartered in Switzerland. HBM Healthcare Investments AG and other funds advised by HBM Partners invest in private and public companies across North America, Europe, India and China. Since, HBM has generated more than trade sales and IPOs of pharma/biotech, medtech and diagnostics companies. More information can be found at