Veteran deal-maker Fellner drives UK biotech M&A
By Mark Potter
LONDON, March 21 (Reuters) - The long-awaited drive for consolidation in Britain's bombed-out biotech sector gathered pace on Friday as veteran deal-maker Peter Fellner made his second corporate strike in as many months.
British Biotech Plc (LSE: BBG.L - news) , which suffered a string of failed deals before Fellner joined as chairman in December, said it had agreed to buy privately owned RiboTargets for 26 million pounds ($41 million) and that it was looking for more tie-ups.
Less than a month earlier, Celltech Group Plc , which Fellner built into Britain's biggest biotech over the past 13 years via a string of deals as chief executive, triggered the first bid battle in the sector's 20-year history with a 101.4 million pound swoop for Oxford GlycoSciences Plc (LSE: OGS.L - news) .
That trumped an agreed offer for OGS from Cambridge Antibody Technology Group Plc , which could still raise its bid.
Analysts and investors have long been urging biotech firms to join forces to cope with a slump in equity valuations, which has left many without enough money to take their medicines to market and few able to withstand inevitable drug setbacks.
But hardly any deals have been closed so far as biotech chief executives, many of whom also founded their businesses, have been reluctant to give up their positions. Attempts at cross-border transactions have also fallen flat.
Fifty-nine year old Fellner, who will move to chairman at Celltech (LSE: CCH.L - news - msgs) when a new chief executive is named, is determined to change this.
"We're creating a platform for further consolidation," he told Reuters in an interview about British Biotech's deal with RiboTargets.
The tie-up will create a firm with about 50 million pounds of cash, a strong bargaining chip in an equity market reluctant to stump up funds, particularly to technology-based firms.
Analysts and investors welcomed Fellner's determination.
"We finally seem to be getting some movement, and I think we've got to thank Peter Fellner for a lot of that," said Sam (Paris: 4449.PA - news) Fazeli, a biotech analyst at investment bank Nomura.
But they also said there was a long way to go, and that deals proposed so far were more about amassing cash for future acquisitions rather than building strong drug pipelines.
"We're seeing the deals that are easy to do," said June Scott, a director at Sagitta Asset Management, which has around $80 million invested in healthcare companies.
"What we need to see is a company that's prepared to part with its assets, and that's going to be much more difficult to achieve," she said.
THE FELLNER WAY
Fellner, who is taking on executive responsibilities at British Biotech when he changes jobs at Celltech, said Britain's biotech firms had to learn from past experience, which showed it was much more difficult to close cross-border transactions than mergers and acquisitions at home.
British Biotech itself failed to close a merger deal with Germany's MorphoSys AG (Xetra: 663200.DE - news) in October last year, while talks between British vaccines firm PowderJect Pharmaceuticals Plc and U.S. healthcare firm Chiron (NASDAQ: CHIR - news) collapsed in November, according to industry sources.
"You need to stick to deals that are easier to do, at least in the first instance," Fellner said, adding there were 10 to 12 listed British biotech companies and a handful of unlisted firms that could benefit from consolidation.
British Biotech, a flagship of the UK biotech sector that fell from grace when its leading drug hope failed clinical trials, planned to close another deal "during this calendar year, or even before the latter part of the year", Fellner said.
Analysts said cancer specialists Xenova Group Plc (LSE: XEN.L - news) and KS Biomedix Holdings Plc were good examples of firms with little cash but pipelines of interesting experimental medicines.
However, they were also sceptical the sector was overcoming the reluctance of its chief executives to step aside.
"Biotech chief executives seem to have enormous egos," said Sagitta's Scott, pointing out that British Biotech did not have a chief executive and so was able to smooth the deal with RiboTargets by giving the post to its chief, Simon Sturge.
Richard Parkes, an analyst at ING Financial Markets, also said biotech firms still seemed to be in the mind-set of only doing deals when they were desperate.
"I think we will see more deals. But that won't necessarily be for the right reasons or the best for the sector," he said... |
