February 2019

1

About the HBM Pharma/Biotech M&A Report

The HBM Pharma/Biotech M&A Report covers all completed trade sales of US and European biotechnology and pharma (i.e. biopharma) companies with a therapeutic focus (Rx incl. generics as well as OTC). For 2014-2018, additional data for asset deals and transactions outside of the US and Europe is provided.

The report does not cover nutritional supplements, diagnostics, medical technology, digital health, life sciences tools, CROs, pharma manufacturing and services. Reverse mergers or minority investments are not included. Acquisitions that were structured as mergers for tax or other reasons are included.

Upfront transaction value is defined in this report as the upfront consideration in cash and/or shares. By contrast, the total transaction value also includes contingent (“biodollar”) payments linked to reaching certain milestones.

Additional data such as invested capital, 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.

Further information about the HBM Pharma/Biotech M&A Report including a list of all biopharma M&A transactions since 2006 can be found under http://www.hbmpartners.com/reports. 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 and Dr Emil Bujak, emil.bujak@hbmpartners.com

1) Shareholders of both companies approved the transaction before year end 2018. The deal officially closed in early 2019.

HBM Pharma/Biotech M&A Report 2019 Analysis of Biopharma M&A in 2018 (and previous years)

Key Findings

◼ Worldwide biopharma M&A volume of completed deals (including the $59 billion

Shire/Takeda deal1)) reached $149.3 billion in 2018 (up from $75.9 billion in 2017).

These numbers include contingent payments and as well as asset deals and sale of

business units.

◼ Besides the widely commented Shire/Takeda deal, there were only two further

transactions over $10 billion: GlaxoSmithKline bought out Novartis’ stake in their

consumer health joint venture for $13 billion and Sanofi acquired US-listed hemophilia

company Bioverativ for $11.6 billion.

◼ US deal volume (based on location of target company/business) in 2018 rose to

$48.7 billion (up from around $30 billion in 2017).

◼ In Europe the Shire/Takeda deal lifted deal volume to $97.3 billion, a number that is

roughly twice as high as in 2017.

◼ Average premiums paid for public biopharma companies rose to over 70%.

◼ As in the years 2016 and 2017, M&A transaction volume outside of the US and Europe

was modest in 2018 with a total deal value of only $3.3 billion.

◼ Private deal making in 2018 was dominated by trade sales of innovation-driven and VC-

backed companies, both in the US and in Europe.

◼ Return multiples to VC investors from M&A stayed at very high levels in 2018 with

average multiples on upfront proceeds alone now surpassing 5x.

HBM Pharma/Biotech M&A Report 2019

2

Worldwide Biopharma M&A Transaction Volume 2014-2018 (only for companies/deals with a therapeutic focus, see definitions page 1)

Worldwide Biopharma M&A Transaction Volume 2014 -2018

Completed biopharma transactions, including asset deals. Transaction volume including contingent payments. Europe includes Israel.

Shire/Takeda deal included in 2018 numbers.

Worldwide biopharma M&A volume of completed deals (including contingent payments and asset

deals) in 2018 rose to $149.3 billion (as compared to only $75.9 billion in 2017). The Shire/Takeda

deal lifted European deal volume to $97.3 billion (if one includes asset deals) and US deal volume

also rose to $48.7 billion.

In 2018, only three deals topped $10 billion:

◼ #1 Shire/Takeda: We included the $59 billion acquisition of Shire by Takeda in the 2018

numbers as the shareholders of both companies approved the transaction before year-end. The

deal was official closed only in early January 2019.

◼ #2 GSK/Novartis: GSK bought Novartis out of their consumer health joint venture, paying

$13 billion.

◼ #3 Bioverativ/Sanofi: Sanofi acquired US-listed hemophilia company Bioverativ for

$11.6 billion.

Further large public transactions were the acquisition of US cancer company Juno by Celgene for

$9 billion and US orphan disease firm AveXis by Novartis for $8.7 billion, followed by Sanofi’s buy

of Belgium’s Ablynx with its Nanobodies technology for $4.5 billion. And buyout fund CVC plus co-

investors bought a 51.8% stake in Italian drug maker Recordati for $3.5 billion.

The sale of VC-backed Impact Biomedicines to Celgene for $1.1 billion upfront and a total potential

“biodollar” value of $7 billion was by far the largest private deal.

In 2018, M&A transaction volume outside of the US and Europe was again low with only $3.3 billion

reported transaction volume. One should note, however, that not all Chinese M&A deals are reported

in the Western press and thus some such transactions might not be included in our numbers.

72.2

195.6

77.6

28.047.3

17.2

7.6

3.7

3.1

1.4

15.3

17.9

14.4

40.0

74.4

34.9

3.1

49.8

1.0

22.912.5

5.8

3.6

3.8

3.3

152.2

230.0

149.1

75.9

149.3

0

50

100

150

200

2014 2015 2016 2017 2018

Up

fro

nt T

ran

sact

ion

Vo

lum

e ($

bill

ion

)

ROW companies and assets* sold

European assets* sold

European companies sold

US assets* sold

US companies sold

Allergan

Generics/Teva

$40.5 billion

Allergan/Actavis

$70.5 billion

Actavis/Forest

$28 billion

Actelion/J&J

$30 billion

Shire/Takeda

$59 billion

5-Year Average

Largest

Transactions

* Transactions for assets, business divisions or subsidiaries

HBM Pharma/Biotech M&A Report 2019

3

Yearly Biopharma M&A Deal Values Compared

Most other M&A statistics published by investment banks etc. are based on announced transactions

(in any given year) and not on completed transactions as in the case of this HBM report. We use data

based on completed deals as not all announced deals are actually being completed. Below, we compare

our numbers with the data from EvaluatePharma.

HBM’s yearly M&A data of completed transactions are comparable to EvaluatePharma’s data of

announced deals. The Allergan/Actavis transaction ($70.5bn) was announced in 2014, but only

completed in 2015. The $40 billion Teva/Allergan generics deal was announced in 2015 and

completed in 2016. Thus, HBM’s 2015 and 2016 numbers are higher as compared to

EvaluatePharma. For 2017 and 2018, deal values are quite similar.

Worldwide Biopharma M&A Transaction Volume 2014 -2018

Worldwide biopharma M&A transactions, including asset deals and including contingent payments.

In the chart above, we also included the number of IPOs (on Western exchanges) as well as the

number of significant private transactions, i.e. trade sales of private biopharma companies for at

least $100 million (US, Europe, Canada, Australia). The receptive IPO environment seems to have

slowed such M&A transactions as more companies were able to or preferred to go public. While

IPOs provide longer-term upside (and downside), a good trade sale is likely to still provide the best

returns for investors in private companies (see analysis of IPOs vs. M&A for 2017 cohort on page

13).

Notes to table of 2018 biopharma M&A transactions (next page): Transactions ranked by upfront value Bayer dermatology/Leo pharma deal: estimated deal value, value was not disclosed! Regions/countries of targets: In case of whole companies sold = location of headquarters; in case of asset/division deals = main country of business (if available). “Asset/Div.” = Sale of assets, divisions and subsidiaries, “VC” = Trade sales of VC-backed companies, PE” = Trade sales of private-equity-backed companies, i.e. usually former buyouts. “Market” = Approved or marketed drugs | “NDA” – NDA filed | “1”, “2” and “3” = Phase 1/2/3, stage of lead product. “2019” = Major deals announced in 2018, but closed only in 2019

219189

10779

137152

230

149

76

149

97

78

45 50

68

51

67

54

37

21

0

50

100

150

200

250

2014 2015 2016 2017 2018

Tota

l Tra

nsa

ctio

n V

olu

me

($ b

illio

n)

Allergan/Actavis $70.5 billion

# of Private Company Trade Sales* >=$100 million

(HBM)

# of IPOs on Western Exchanges(EvaluatePharma)

Announced Completed

Completed transactions(HBM data)

Announced Transactions(EvaluatePharma data)

Allergan Generics/Teva $40.5 billion

Announced Completed

* US, Europe, Canada, Australia

HBM Pharma/Biotech M&A Report 2019

4

Table: Completed and Announced Biopharma M&A Transactions in 2018

See notes page 3

Year

Target Company/BusinessPublic/

Private

VC/PE-

Backed

Premium

Buyer

Upfront

Deal Value

($m)

Overall

Deal Value

($m)

Phase/Stage

of Lead

Product

Est. VC

Invest-

ment

Therapeutic Area(s)

2018 Europe Shire / UK Public 64% Takeda / Japan 59'000 59'000 Market Various

2018 Europe Novartis/GSK Join Venture / Switzerland Asset/Div. GlaxoSmithKline / UK 13'000 13'000 Market Novartis/GSK JV consumer business, OTC

2018 US Bioverativ / US Public 64% Sanofi / France 11'600 11'600 Market Orphan, hemophilia

2018 US Juno Therapeutics / US Public 91% Celgene / US 9'000 9'000 3 Cancer

2018 US AveXis / US Public 88% Novartis / Switzerland 8'700 8'700 3 SMA, orphan

2018 Europe Ablynx / Belgium Public 112% Sanofi / France 4'500 4'500 NDA Various

2018 Europe Recordati (FIMEI's 51.8% stake) / Italy Public CVC / UK 3'540 3'540 Market Various

2018 Europe Merck KgAa Cons. Health Busi. / Germany Asset/Div. Procter & Gamble / US 3'400 3'400 Market Consumer health business

2018 Europe Shire (oncology business) / UK Asset/Div. Servier / France 2'400 2'400 Market Oncology drugs

2018 Europe Zentiva (Sanofi generics) / France Asset/Div. Advent International / US 2'370 2'370 Market Generics

2018 US Endocyte / US Public 54% Novartis / Switzerland 2'100 2'100 3 Cancer, prostate cancer, radiolabelled antibodies

2018 ROW Medreleaf / Canada Public Aurora / Canada 2'100 2'100 Market Medical marijuana

2018 US Ignyta / US Public 74% Roche / Switzerland 1'700 1'700 2 Cancer

2018 Europe Armo / Belgium & US Public 68% Eli Lilly / US 1'600 1'600 2 Cancer

2018 US Impact Biomedicines / US Private VC Celgene / US 1'100 7'000 3 112 Cancer

2018 US Novartis US Derm and generics business / USAsset/Div. Aurobindo / India 900 1'000 Market Dermatology, generics

2018 Europe Wilson Therapeutics / Sweden Public 70% Alexion / US 855 855 3 Wilsons disease, orphan

2018 Europe Bayer (dermatology) / Germany Asset/Div. Leo Pharma / Denmark 750 750 Market Dermatology

2018 Europe Adapt Pharma / Ireland Private VC Emergent BioSolutions / US 635 735 Market 115 Opiod overdose

2018 Europe TiGenix / Belgium Public 82% Takeda / Japan 625 625 NDA GI, Crohn's

2018 US Cascadian Therapeutics / US Public 69% Seattle Genetics / US 614 614 3 Cancer, breast cancer

2018 Europe Allergan (dermatology portfolio) / Ireland Asset/Div. Almirall / Spain 550 650 Market Dermatology

2018 US Corium / US Public 50% Gurnet Point Capital / US 480 504 Market Drug delivery drugs

2018 US Visterra / US Private VC Otsuka / Japan 430 430 1 125 Kidney diseases, cancer, others

2018 US Syntimmune / US Private VC Alexion / US 400 1'200 2 75 Autoimmune orphan diseases

2018 ROW Viralytics / Australia Public 160% Merck & Co. / US 394 394 2 Various cancers

2018 Europe Leo Pharma (non derma products) / DenmarkAsset/Div. Karo Pharma / Sweden 317 317 Market Various, non derma products

2018 US The Medicines (infectious disease business) / USAsset/Div. Melinta Therapeutics / US 270 320 Market Anti-infectives

2018 US PaxVax / US Private PE Emergent BioSolutions / US 270 270 Market Vaccines

2018 Europe Vira Therapeutics / Austria Private VC Boehringer Ingelheim / Germany 245 245 Preclinical 20 Cancer

2018 Europe Sinclair Pharma / UK Private Huadong Medicine / Chile 220 220 Market Dermatology, aesthetics

2018 US Agilis Biotherapeutics / US Private VC PTC Therapeutics / US 200 945 2 8 AADC deficiency, orphan

2018 US Bonti / US Private VC Allergan / Ireland 195 285 2 35 Aesthetics

2018 US Somerset / US Private Endo / US 190 190 Market Generics, injectables

2018 US Potenza / US Private VC Astellas / Japan 165 405 1 40 Cancer, IO

2018 Europe SteadyMed Therapeutics / Israel Public 68% United Therapeutics / US 141 216 NDA PAH

2018 US BeneVir Biopharm / US Private VC Johnson & Johnson / US 140 1'040 Preclinical 8 Cancer

2018 Europe Prexton / Netherlands Private VC Lundbeck / Denmark 115 1'100 2 42 Parkinson's

2018 ROW AurKa / Canada Private VC Eli Lilly / US 110 575 1 Cancer, solid tumors

2018 ROW Aralez (Canadian spec pharma businss) / CanadaAsset/Div. Nuvo / Canada 110 110 Market Various

2018 US Celenex / US Private VC Amicus Therapeutics / US 100 452 2 Genetic, orphan

2018 Europe TxCell / France Public VC Sangamo Therapeutics / US 84 84 Preclinical Cancer

2018 Europe Tusk Therapeutics / UK Private VC Roche / Switzerland 81 760 Preclinical Oncology

2018 US Universal Cells / US Private Astellas / Japan 65 103 Preclinical Stem sell technology

2018 US Perosphere Pharmaceuticals / US Private VC AMAG Pharmaceuticals / US 50 430 2 12 Anti-coagulant

2018 US Rebiotix / US Private VC Ferring / Switzerland 50 50 3 36 Microbiome, C Diff

2018 Europe Vernalis / UK Public 45% Ligand / US 44 44 Market Various

2018 ROW Mirren / South Africa Private Cipla / India 33 33 Market OTC

2018 US Ichorion Therapeutics / US Private Cerecor / US 27 42 n.a. Inborn errors of metabolism (IMEs), orphan

2018 US Repros / US Public 43% Allergan / Ireland 27 27 2 Women's health, uterine fibroid

2018 US Zavante / US Private VC Nabriva / US 25 125 3 65 Anti bacterials

2018 US Vector Neuroscienes / US Private MeriaGTx / UK 22 22 2 Parkinson's

2018 ROW Cardiome (Canadian business) / Canada Asset/Div. Cipher Pharmaceuticals / Canada 20 20 Market Women's health, uterine fibroid

2018 US Element Genomics / US Private UCB / Belgium 18 30 n.a. Anti bacterials

2018 ROW Medexus / Canada Private Pediapharm / Canada 17 17 Market Parkinson's

2018 US Medac Pharma (US subsidiary) / US Asset/Div. Pediapharm / Canada 15 50 Market Cardiovascular, PAH

2018 US Inception 4 / US Private VC Ophthotech / US 10 10 Preclinical Drug discovery

2018 Europe Atlab Pharma / France Private Telix Pharmaceuticals / Australia 10 10 Preclinical RA, women's health, dermatology

2018 US Bayshore Pharmaceuticals / US Private Ipca Laboratories / India 10 10 Market Rheumatology

2018 ROW Mernova Medical / Canada Private Cresco Pharma / Australia 8 8 Market Retinal diseases

2018 US Adhaere Pharmaceuticals / US Private Gossamer Bio / US 8 70 Preclinical Prostate cancer, radiolabelled antibody

2018 Europe Ziylo / UK Private VC Novo Nordisk / Denmark 800 Preclinical Various, generics

2018 Europe Quethera / UK Private VC Astellas / Japan 109 Preclinical Pain

2019 US Tesaro / US Public 60% GlaxoSmithKline / UK 5'100 5'100 Market Cancer

2019 Europe UPSA (subsidiary BMS) / France Asset/Div. Taisho / Japan 1'600 1'600 Market Diabetes, drug discovery

2019 US Synergy (from bankrupcy) / US Public Bausch Health / Canada 200 200 Market Ophthalmology, gene therapy

2019 US Regentys / US Private VC Generex Biotechnology / US 0 15 Preclinical Cancer

HBM Pharma/Biotech M&A Report 2019

5

Trade Sales of US and European Biopharma Companies

Please note that the M&A transaction data presented in the next pages only relate to the sale of (entire) US and

European biopharma companies with a therapeutic focus for at least $5 million deal value. Asset deals, the sale

of divisions or subsidiaries, M&A transactions outside of the US and Europe, and transactions announced (but

not completed in 2018) are not included. Other M&A statistics might show higher deal numbers as they also

count very small deals or deals with undisclosed transaction values. Israel is included under Europe.

US Biopharma Company Trade Sales 2009-2018

Completed trade sales of US biopharma companies, >=$5m deal size

The number of US biopharma companies sold in 2018 was the same as in 2017 with an increase in

deal volume mainly on the public side. In 2018, VC-backed company trade sales accounted for most

of transaction volume on the private side.

European Biopharma Trade Sales 2009-2018

Completed trade sales of European biopharma companies, >=$5m deal size

5HBM Biopharma M&A Report

164.2

56.040.5

29.215.7

57.7

171.2

59.1

20.134.2

5.1

4.3

5.3

5.2

12.1

11.5

19.3

9.7

3.7

3.5

2.6

2.1

2.5

4.72.7

2.9

5.2

8.8

4.1

9.6

171.9

62.3

48.439.2

30.5

72.2

195.6

77.6

28.0

47.4

19

13 13

1011

13

18

13

8 8

14

24

18

26

20

26

29

27

20 20

0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Transaction Volume ($ billion)

Public Co’s

Total TV

Private Co’s

Upfront TV

Private Co’s

Contingent TV

# Public

Co’s

Sold

# Private

Co’s

Sold

Total Trans.

Volume

US - High Valuations in 2017 & 2018 Likely Slowed M&A

US Biopharma Companies Sold 2009-2018

TV = Transaction value

30

59

3.0 1.15.2

1.7

18.2

4.50.2

8.2

7.9

11.5

4.7 6.5

15.4

8.9

3.0

9.0

10.0

3.7

1.4

1.3

0.9 0.4

0.2

0.5

0.9

1.87.7 2.6

0.7

2.7

8.6 8.0

20.8

11.1

22.2

15.317.9

14.4

40.0

74.4

3

6

8

3

7

3

1

3

5

910

1110

1314 14

26

21

98

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Transaction Volume ($

billion)

Public Co’sTotal TV

Private Co’sUpfront TV

Private Co’sContingent TV

# PublicCo’s

Sold

# PrivateCo’s

Sold

Total Trans.Volume

TV = Transaction value

Actelion (2017),Shire (2018)

HBM Pharma/Biotech M&A Report 2019

6

The two “mega deals” Actelion (in 2017) and Shire (in 2018) drove European deal volume to record

levels. While the number of private transactions has now declined to under 10 deals per year, public

deals have become more frequent.

As in the US, VC-backed company trade sales generated most private deal volume in Europe. In some

earlier years, the sale of private-equity-backed and family-owned pharma companies generated

substantial transaction volume. Very few such transactions were reported in 2017 and in 2018.

See further analysis on page 8.

In 2018, private-equity-investors as buyers closed two major deals in Europe: A consortium led by

CVC acquired the FIMEI, the controlling holding company of listed Italian Recordati for $3.5 bilion

and Advent International snapped up generics-seller Zentiva, a subsidiary of Sanofi, for $2.3 billion.

The chart below shows that the number of company trade sales of all sizes (using upfront deal

values) has been declining since 2015, with a modest recovery in 2018 for larger transactions.

US and European Biopharma Trade Sales by Upfront Transaction Size

Completed trade sales of US and European biopharma companies.

4 2 1 3 410

20

63

62

2 5 13

9

6

8

425 11 5

5

6

10

7

9

12 96

12

13

54

10

14

17

9 1117

2724

1417

39

47

40

28 28

0

10

20

30

40

50

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

# o

f Tr

ansa

ctio

ns

<$100m

$100m - $499m

$500m-$999m

>=$1 billion

European Transactions US Transactions

HBM Pharma/Biotech M&A Report 2019

7

Premiums Paid for Public US and European Biopharma Companies

Premium = increase of stock price on the day of deal announcement. Only deals with an upfront consideration

of at least $100 million are included in this analysis. Given the high degree of variation in premiums paid, the

average numbers should be interpreted with caution.

Premiums Paid for US and European Public Biopharma Companies

Completed trade sales of public US and European biopharma companies with an upfront consideration of at least $100 million.

Non-weighted average premiums.

Average premiums paid in 2018 for public US and European biopharma companies jumped to an

average of 70% in the US and 77% in Europe. These higher premiums are a clear sign that the M&A

market has heated up and attractive public companies can demand high premiums.

One should note that average premiums paid for US companies during 2016 and 2017 would have been higher

if one includes the sale of Tobira in 2016 (premium paid 500%) and the sale of Dimension Therapeutics in 2017

(358%). Both deals were done at very high premiums at a time when the stocks of these two companies were

quite depressed.

As already reported last year, clinical-stage companies generally received higher premiums than

companies with approved or marketed products (see table below):

Average Premiums Paid for Public US & European Biopharma Companies Acquired 2014-2018

(for at Least $100 Million Upfront) by Stage of Lead Product

Phase 2 Phase 3 NDA Filed Approved/

Marketed

Total*

# of public companies sold 9 15 6 41 71

Average premium paid 169% 63% 65% 40% 64%

36%

109%

88%

70%

36%

47%

77%

57%

29%

60%

36%

70%

34%

70%

28%

36%

46%

25% 27%31%

64%

26%

77%

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ave

rag

e P

rem

ium

sP

aid

in P

ub

lic T

akeo

vers

US and European public

takeovers with upfront

consideration of at least

$100 million

US premiums incl. sale of Tobira to

Allergan in 2016 (500% premium)

and sale of Dimension to Ultragenyx

in 2017 (358% premium).

Premiums* Paid for Public Take-Overs 2009-2018

AveragePremiums

paid for

European

Companies

AveragePremiums

Paid for US

Companies

HBM Pharma/Biotech M&A Report 2019

8

Trade Sales of Private US & European Biopharma Companies

On the following pages we focus on trade sales of US and European private biopharma companies and especially

VC-backed companies. We thus exclude asset deals and sale of subsidiaries or business division. Private

companies are categorized into (a) companies financed by venture capital (VC-backed companies), companies

majority-owned by private equity or buyout funds (PE-backed companies) and family-owned or otherwise

privately-held companies (“other” private companies). We only include transactions where the reported value

is at least $5 million. Israel is included under Europe.

Trade Sales of Private US & European Biopharma Companies

Completed trade sales of private US and European biopharma companies, not including asset deals or purchases of divisions.

As noted previously, in 2018 private deal making was dominated by transactions with innovation-

driven companies, both in the US and in Europe. Most of these companies were backed by VCs. The

same is true for the years 2016 and 2017.

In previous years, transaction volume from the sale of “traditional” pharma companies that were

family-owned or private-equity-backed was quite high. After 2015, deal volumes in this company

category dropped dramatically. And in 2018 and 2017, only few such deals were reported with only

two noteworthy deals in that category in 2018:

◼ The sale of UK dermatology company Sinclair to Chinese Huadong Medicine for $220 million,

and the acquisition of US injectables producer Somerset by Endo for $190 million.

What led to this decline? Let’s analyse the roughly 40 such deals during the last 10 years. During

the 10 years 2009-2018, the buyers of “traditional” private pharma companies were mainly

medium-sized specialty pharma or generics companies (27 deals out of 36) or buyout funds (5

deals). And only 4 such companies sold during the 10 years were acquired by large pharma firms.

As the specialty pharma and generics business has become more challenging, buyer appetite seems

to have diminished.

During 2018 no significant privately-owned pharma company sold out to a private-equity fund.

Nevertheless, such funds closed two major deals in Europe: A consortium led by CVC acquired the

FIMEI, the controlling holding company of listed Italian Recordati for $3.5 bilion and Advent

International snapped up generics-seller Zentiva, a subsidiary of Sanofi, for $2.3 bilion.

7.8 6.82.1 1.0 1.7

6.4 4.4 1.5 1.0 1.2

1.714.7

10.9 10.3

10.518.2

2.2

1.8 2.3

4.0

2.8 3.4

5.1

7.4

9.8

3.8 4.0

2.9 2.4

2.6

4.6 3.4

3.3

12.1

11.2

4.8

12.2

13.4 13.2

23.4

19.2 18.8

25.3

42.2

24.7

10.0

17.724

35

28

39

34

40

55

48

30 30

0

10

20

30

40

50

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tran

sact

ion

Val

ue

($ b

illio

n)

VC-Backed Companies -Contigent Value

VC-Backed Companies-Upfront Value

PE-Backed Companies -Total Value

"Other" PrivateCompanies - Total Value

Number of

Private

Companies

Sold

HBM Pharma/Biotech M&A Report 2019

9

Trade Sales of VC-Backed US and European Biopharma Companies

While 2015 and 2016 have been the best “exit years”, so far, for VC-backed biopharma companies

2018 does look pretty good as well (see next pages).

Trade sales of the 19 venture-backed US and European biopharma companies generated upfront

proceeds of $4 billion and $16.2 billion in total deal volume (i.e. including contingent payments).

While these numbers are substantially lower than in 2016 and 2015, they are higher than in 2017.

By far the largest deal in this category on either side of the Atlantic was the sale of US cancer

company Impact Biomedicines to Celgene for $1.1 billion upfront and a further $5.9 billion of

contingent payments. A great deal for investors, considering that they invested only around

$100 million into the company. And, Impact had acquired the rights to the JAK2 inhibitor Fedratinib

from Sanofi only in 2017.

The acquisition of Irish Adapt Pharma by US Emergent Biosolutions for $635 million upfront plus

$100 million contingent payments was the largest VC-backed exit in Europe. Adapt was founded in

2013 to develop Narcan, a nasal spray for emergency opioid overdose treatment. Narcan was

approved by FDA in 2016.

Trade Sales of Private VC-Backed US & European Biopharma Companies

Completed trade sales of private VC-backed US and European biopharma companies.

1.11.9

3.6

2.1 2.4

4.53.5

8.1

3.1 2.93.14.0

6.1 6.6

4.8

7.2

8.7

16.8

7.2

12.4

8

17

14

18

12

1415

18

15

12

0

5

10

15

20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tran

sact

ion

Val

ue

($ b

illio

n)

Upfront transaction value Total "biodollar" value

Number of US VC-BackedCompanies Sold

Stemcentrx sale to AbbVie

for $5.8bn upfrontand

$9.8bn pot. total value

Impact Biosciences sale to

Celgene for $1.1bn upfront

and $7bn pot. total value

US

0.6 0.3 0.4 0.61.0

0.5

3.9

1.6

0.71.2

1.6

0.7 0.5 0.7

1.91.2

10.9

4.1

1.4

3.84

6 6

4

6 6

13

11

2

7

0

5

10

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tran

sact

ion

Val

ue

($ b

illio

n)

Upfront transaction value Total "biodollar" value

Number of European VC-Backed

Companies Sold

Acerta sale to AstraZeneca

for $2.5bn upfront plus $4bn pot. payments

Europe

HBM Pharma/Biotech M&A Report 2019

10

Trade Sales of VC-Backed Oncology Companies

Trade Sales of VC-Backed US and European Companies by Therapeutic Area

Completed trade sales of private VC-backed US and European biopharma companies. Total transaction volume including contingent

payments.

2016 was clearly the ”year of oncology” with the sale of 10 VC-backed private companies generating

close to $8 billion of upfront proceeds plus over $7 billion potential “biodollar” value. In 2017, with

a wide-open IPO window, the number and total value of oncology trade sales dropped strongly

(5 deals with a total deal value of $3.6 billion).

In 2018, only 6 VC-backed oncology companies were sold with Impact Biomedicines contributing

$7 billion to the $9.5 billion of total deal value.

The sale of private cancer companies generally generated higher multiples to investors (upfront

and total). It is therefore not surprising that a lot of money has been and is being invested in this

sector.

Average Upfront Multiples Paid (Upfront Proceeds/Invested Capital) for VC-Backed Companies

2014 2015 2016 2017 2018 5 Years

Cancer companies 7.0x 10.6x 9.1x 4.6x 10.9x 8.4x

Other companies 6.0x 6.2x 4.2x 4.8x 5.9x 5.5x

While oncology will - without question - remain a fruitful field for drug development with high unmet

needs, it might be more challenging for private cancer companies to sell out a high prices, except if

their products have demonstrated convincing clinical evidence or are targeting a promising new

mechanism of action.

Also, the number of private and public companies in the field has multiplied in recent years, but the

number of potent buyers (some of which already have full oncology pipelines) has not increased at the

same rate.

2.0 1.03.5 3.2 2.6 3.3

9.5

15.2

3.6

9.5

0.81.0

1.8 2.01.0

2.6

2.2

3.1

1.1

0.7

1.1 0.6

2.0

0.7

1.7

1.6

1.8 2.1

1.5 3.1 1.9

5.8

1.9

1.1

3.8

4.7 4.7

6.67.4

6.8

8.4

19.620.9

8.6

16.2

0

5

10

15

20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tota

l Tra

nsa

ctio

n V

olu

me

($ b

illio

n)

Other therapeutic areas

Auto-immune/Inflammation

CNS/Pain

Anti-Infectives

Oncology

HBM Pharma/Biotech M&A Report 2019

11

Average Investment Amounts and Deal Values (Trade Sales of VC-Backed Private Companies)

In 2018, acquirors paid on average $237 million upfront for VC-backed biopharma companies.

While this number is high, it is below the values reached in 2014-2016. Average total “biodollar”

deal values jumped in 2018 to over $800 million. The large $7 billion Impact Biomedicines deal

strongly influenced that number. Excluding this transaction, the average total “biodollar” deal value

would still be above $500 million.

One should note that median deal values are generally lower than average deal values.

Trade Sales of US & EU VC-Backed Companies – Av. Investment Amounts & Transaction Values

Completed trade sales of private VC-backed US and European biopharma companies.

Remarkably, average investment amounts (until the time of an exit) remained quite stable over the

years.

The increasing spread between upfront and total transaction values indicate that contingent

payments make up an increasing portion of the reported total deal values. On the one side, buyers

want to reduce their risk of overpaying, and on the other side, sellers want to profit from additional

upside if things work out as planned. Contingent payments in 2017 and 2018 were on average as

high as the upfront! And the percentage of contingent payments was high also in later-stage deals

(see table below).

Contingent Payments as % of Total Transaction Volume By Stage of Lead Product at Time of Sale

(Trade sales of UF & European VC-Backed Private Companies 2014-2019)

Stage of Lead product

(at time of trade sale)

Pre-

Clinical

Phase 1 Phase 2 Phase 3 NDA Filed

Approved

All

# of VC-backed companies sold 26 17 42 11 15 111

Contingent payments as

% ot total transaction volume

(non-weighted averages)

45% 53% 49% 46% 22% 45%

According to the latest study by SRS Acquiom (https://www.srsacquiom.com/resources/2017-srs-

acquiom-life-sciences-ma-study), about 40% of the milestones for such contingent payments are

usually reached, i.e. sellers can - on average- expect further payments corresponding to roughly 30%-

35% of the upfront proceeds.

194

390

203

332 335376

420

700722

505

853

129148

103

201

132

190

267 266

337

222 237

4474

5377 62 53 53 55 65 49 53

0

100

200

300

400

500

600

700

800

900

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ave

rag

e V

alu

es ($

mill

ion

)

Average Total Transaction Value

Average Upfront Transaction Value

Average Invested Capital

HBM Pharma/Biotech M&A Report 2019

12

Investor Returns from the Sale of VC-Backed Biopharma Companies

We have approximated the return multiples for venture investors from biopharma trade sales using

the ratio of upfront and total proceeds divided by invested capital. To calculate the average multiples

in a given year, we have divided the sum of exit values (upfront or including contingent payments) by

the aggregate VC investments. These averages, weighted by deal size, provide – in our view – a good

indicator of the overall exit performance in a given year. Non-weighted averages (included in the chart

below as well) were generally a bit higher and medians generally a bit lower.

The valuations paid by investors in private biopharma companies are generally higher than the

invested capital (as some of the fully-diluted equity belongs to founders, management etc.). Therefore,

the multiples shown here are about 15-25% higher than the actual investor returns.

Trade Sales of US and European VC-Backed Companies –Multiples on Invested Capital

Completed trade sales of private VC-backed US and European biopharma companies. Only for deals where respective information was

available.

◼ Investment multiples (non-weighted and weighted) have shown a significant upward trend

since 2010.

◼ In 2018 multiples were as high as the multiples in the “record years” 2015 and 2016. Excluding

the Impact Biomedicines deal with a potential multiple of up to 50x, the total “biodollar” multiple

for the other deals still remains above 10x.

◼ Also, as detailed in the last year’s report, trade sales of early-stage pre-clinical companies on

average generated the best multiples with only $20 million on average invested in such

companies until the time of exit. (Around $60 million on average has been invested in companies

with products in phase 1 or 2 at the time of sale and $115 million on average for companies sold

with phase 3 products.)

Deal multiples and corresponding investor returns have risen over the years on both sides of the

Atlantic with investors in US companies generally achieving better returns in most years (see chart on

next page).

5.3x

3.8x4.5x

6.3x7.1x

8.9x

12.8x

14.3x

10.6x

12.2x

2.0x 1.8x

2.8x2.3x

3.6x

5.4x4.9x

6.5x

4.2x

5.4x

2.3x3.0x

3.8x

5.1x

4.2x

6.5x7.2x

6.1x

4.8x

7.5x

0

5

10

15

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Val

ue

/ In

vest

men

t

Weighted-average investment multiple(on total transaction value)

Weighted-average investment multiple(on upfront transaction value)

(Non-Weighted) average investmentmultiple (on upfront transaction value)

20.2x

Note: Actual investor multiples

approx. 15%-25% lower!

Multiple

without

Impact

Sciences

deal

HBM Pharma/Biotech M&A Report 2019

13

Trade Sales of VC-Backed Companies – Investment Multiples US vs. Europe

Completed trade sales of private VC-backed US and European biopharma companies.

IPO vs. M&A – An Analysis of VC-Backed US Company “Exits” for 2017

A direct comparison of investor returns from trade sales and IPOs is not possible, as the effective receipt of

contingent payments in M&A deals is not known. Furthermore, we do not know when pre-IPO investors sell their

shares after an IPO. Also, the post-IPO performance of newly listed biopharma companies can fluctuate a lot

over time (unfortunately).

Nevertheless, we have compiled investment and (pre-IPO) valuation data for US biotech companies that went

public in 2017. We thus calculated the multiples on invested capital based on the IPO pre-money valuation. We

also calculated such multiples adjusted by the 1-year post-IPO stock performance (lock-up for pre-IPO investors

usually expires 180 days after the IPO).

US IPOs vs. US M&A 2017 US NASDAQ IPOs 2017 US Trades Sales

For VC-backed companies Multiples IPO Pre-Money

Valuation / Invested Capital

Multiples IPO Pre-Money

Valuation Adjusted by 1-Year Post-IPO Stock Performance / Invested Capital

Multiples Upfront Proceeds / Invested Capital

Multiples Total “Biodollar”

Deal Value / Invested Capital

Weighted average1 2.5x 3.0x 3.6x 9.6x

Non-weighted average 3.2x 5.3x 4.2x 12.0x

Median 2.9x 2.3x 4.1x 7.8x

Completed trade sales of private VC-backed US company and biopharma IPOs at NASDAQ

1 Aggregate pre-IPO values, aggregate upfront or total proceeds divided by aggregate investment amounts

27HBM Biopharma M&A Report

Average Investment Multiples On Upfront Deal Value – US vs. Europe

2.0x 2.0x

3.2x 2.7x3.4x

6.1x 6.0x

7.3x

3.6x

5.3x

2.0x

1.1x 1.2x1.5x

4.2x

2.6x

4.3x

3.2x

8.9x

5.6x

0

1

2

3

4

5

6

7

8

9

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Up

fro

ntV

alu

e / I

nve

stm

ent

US - Weighted-average investment multiples (on upfront)

Europe - Weighted-average investment multiples (on upfront)

Trade sales of private VC-backed US & European biopharma companies

Note: Actual investor multiples

approx. 15%-25% lower!

Trade sales of private VC-backed US &

European biopharma companies

Only for transactions where

respective information was available.

HBM Pharma/Biotech M&A Report 2019

14

As the table on the previous page clearly shows, trade sales – on average – seem to have provided

significantly better returns to VCs and other investors. For the management things might look

different as the preferred shares1 held by investors usually are converted in to common stock and

managers usually get additional options after the IPO as well as higher salaries.

* * * * * * * * * * * * *

Zug/Switzerland, February 2019

The authors of the report welcome any feedback or corrections:

Dr. Ulrich Geilinger, ulrich.geilinger@hbmpartners.com , Dr. Chandra Leo, chandra.leo@hbmpartners.com

and Dr Emil Bujak, emil.bujak@hbmpartners.com

Further HBM industry reports and a list of all biopharma M&A transactions since 2006 can be found under

http://www.hbmpartners.com/reports.

The use of data and charts is permitted with reference to “HBM Partners Pharma/Biotech M&A Report”.

1 Preferred shares, in some cases, can get a higher share of value in M&A as compared to common stock.

About HBM Partners

HBM Partners is among the global leaders in healthcare-focused investing with approximately $1.7 billion in assets under management. HBM focuses on development stage, growth and buy-out financings of private and public biopharma, medical device and diagnostics companies. Investments in private companies usually range between $10 million to $50 million.

HBM Partners advises HBM Healthcare Investments AG (SIX: HMBN) as well as other specialized private & public equity funds.

HBM Partners has been an active contributor to value creation in its portfolio companies, generating over 60 trade sales and IPOs since its inception in 2001.