AbbVie, Pfizer's Zoetis deals ignite enormous leap in M&A value

Pfizer's ($PFE) spinoff of its animal health business into Zoetis is the biggest IPO this year. And the spinoff that created the newest Big Pharma company, AbbVie ($ABBV), was no slouch. So it does not come as a surprise that M&A action in the first quarter was pretty impressive compared to early last year when everyone was so bummed out by patent cliff analysis that few wanted to buy anything. And according to a new report from consultants PwC, even if you factor those mega-deals out, 2013 so far is shaping up pretty impressively for deals.

The value of pharmaceutical M&A in Q1 2013 was up more than 500% from the same quarter a year ago, PwC says. There were 14 pharma deals valued at more than $71 billion. But excise "megadeals," those over $1 billion, and value was still up 137% from a year ago, the consulting firm says. That factors in 12 transactions in the first three months of 2013, compared to 5 a year ago, with the value for those deals hitting $2.9 billion, compared to $1.2 billion year-over-year.

And that was just in pharma. The report looks at biotech deals separately, where the action was a bit off. The first quarter of this year saw 5 biotech deals valued at about $1 billion compared with 6 biotech deals valued at just over $6 billion in the same quarter a year ago. "Deal volumes in the biotechnology sector likely will remain consistent or increase over the balance of 2013," PwC predicts.

While the M&A market was healthy even without the AbbVie and Zoetis transactions, they made up the most notable action for the quarter. AbbVie, which was the drug development side of Abbott Laboratories ($ABBT), was spun off after 15 months of planning. It created a mid-sized company with about $18 billion in revenue with a pipeline of more than 20 mid- and late-stage therapies. While those are being developed it has to rely on the health of essentially one drug, Humira. The global best-seller arthritis treatment is expected to generate about $10 billion this year. The Zoetis spinoff is part of Pfizer CEO Ian Read's trimming of that company. Pfizer sold off about 20% of the animal unit in the IPO, reserving the rest for now.

PwC thinks M&A will remain healthy this year "as serial acquirers turn outside for opportunities for growth and new 'pure-play' companies seek to acquire complementary assets." Just this week, Japan's Takeda Pharmaceuticals grabbed Fort Collins, CO-based Inviragen for its experimental dengue vaccine. That deal is valued at $250 million, with Takeda making a $35 million cash down payment and promising more in milestones.  

- download the report here

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