Assistant

VANCOUVER, British Columbia - Their bright green tote bags filling up with presentation materials, executives from biotech and pharma rushed to schedule a few last-minute meetings with prospective partners as the BioPartnering North America conference drew to a close Tuesday,

Attendees moved from meeting room to meeting room at the Westin Bayshore hotel, talking up their respective programs and technologies. But even as they looked for opportunities that could lead to lucrative partnerships down the road, many undoubtedly kept an ear tuned to merger and acquisition possibilities. That growing trend, due in part to the low valuations in the current initial public offering environment, has become "part of the life-blood of this industry," said William Kridel, managing director at Ferghana Partners Group, who chaired a morning session looking at recent successes and failures in M&A.

While success can be difficult to measure - and some deals, like the late 2006 buyout of Sirna Therapeutics Inc. by Merck & Co. Inc. for $1.1 billion still await a verdict - the best acquisitions are those that benefit both parties. In 2005, Frazer, Pa.-based Cephalon Inc. paid $160 million for San Diego-based Salmedix Inc.

It was a good move for Salmedix, which at the time had a pending IPO that likely would have priced lower than expected, and Cephalon picked up rights to Treanda (bendamustine HCl), which delivered impressive late-stage data and is under FDA review for approval in non-Hodgkin's lymphoma and chronic lymphocytic leukemia.

In that case, Cephalon "did their diligence and got a great late-stage asset," said Matthew Plunkett, executive director at Oppenheimer & Co. As an added bonus, the stellar NHL data "gave a nice boost to Cephalon's stock price."

But, Plunkett warned, many M&A deals don't turn out so well. The aim of an acquisition is to increase shareholder value, he said, but "the vast majority of M&A transactions actually destroy" value.

Take PDL BioPharma Inc., of Fremont, Calif., which in March 2005 bought Edison, N.J.-based ESP Pharma Inc., picking up rights to a cardiovascular program. PDL's "biggest mistake," Plunkett said, "was trying to branch into" areas outside of its core antibody focus. "It was really a distraction and a drag on the rest of the company," he added.

PDL began trying to sell its ESP assets last year and announced Tuesday that it found a buyer. EKR Therapeutics Inc. agreed to pay $85 million at closing for rights to cardiovascular products Cardene and Retavase, with up to an additional $85 million in milestones and royalties on product sales. (See story in this issue.)

While it might take time for some deals to reveal themselves as losers, there are others that seem like a bad idea from the word go.

When OSI Pharmaceuticals Inc., of Melville, N.Y., paid $935 million for ophthalmic drug developer Eyetech Inc., disappointed investors sent OSI's shares down 20 percent, said Ferghana's Kridel.

"That was clearly a failure," he said. "And 15 months later, all the Eyetech assets are going out the door."

Richard Douglas, senior vice president at Cambridge, Mass.-based Genzyme Corp., which has made several notable acquisitions in the past few years, offered some lessons learned from those deals.

When Genzyme bought clofarabine partner Bioenvision Inc. last year in a deal valued at about $345 million, some Bioenvision shareholders were dissatisfied with the offering price. But Genzyme refused to up its bid.

"Sometimes you need to stick to your guns and not overpay," Douglas said.

Genzyme also garnered a lot of headlines in its 2006 bidding war with Millennium Pharmaceuticals Inc. for Vancouver, British Columbia-based AnorMed Inc.

Genzyme eventually won, paying $13.50 per share, or about $580 million for AnorMed.

That deal was "touted as the first hostile acquisition in biotech," he said, attributing part of the animosity to a controlling stakeholder of AnorMed that refused to endorse an earlier collaboration the companies had worked out for cancer drug Mozobil. It was a good example of the power that active shareholders have in companies today, he added.

But Genzyme was determined to get Mozobil, and so far, that determination has been justified.

Last year, the drug met its endpoints in Phase III studies in non-Hodgkin's lymphoma and multiple myeloma. If approved, Genzyme has estimated that Mozobil could generate peak annual sales of $400 million.

"When you find an asset that's compelling," Douglas said, "then you just have to go for it."