Deal Statistics Quarterly, Q3 2003

In Vivo presents another installment of our quarterly reivew of dealmaking--in this case July-September 2003. Our data come from Windhover's Strategic Transactions Database. We include medical device financings by deal type; diagnostic financings by industry segment; pharma and biotech alliances by therapeutic category and industry segment; pharma and biotech financings by market segment, and pharma and biotech M&A.

In this issue, we present another installment of our quarterly review of dealmaking—for July-September 2003. Our data comes from Windhover's Strategic Transactions Database, which covers deal activity within the pharmaceutical/biotechnology, medical device, and in vitro diagnostics industries.

Some notes about our coverage: we limit our review to human health care (thus no animal health or agricultural transactions) alliances, mergers and acquisitions (where a definitive agreement has been signed), and fully completed financings. Transactions appear in all relevant categories, so one deal may be represented in more than one statistical compilation (e.g., a pharmaceutical compound that is being tested for both cardiovascular and cancer indications would be counted in each of those therapeutic categories). Thus, adding the number or value of deals for all categories will yield a total greater than the number or value of all transactions.

Medical Device Transactions

The device industry saw something of a public offering boomlet, with by far the three largest follow-on offerings of the year completed in the third quarter: Baxter International Inc. raised $644 million in September partially to fund its acquisition of Alpha Therapeutic Corp. 's assets (including recently FDA-approved emphysema drug Aralast) [See Deal], [See Deal]; paclitaxel-eluting stent developer Angiotech Pharmaceuticals Inc. raised $239 million in September (valuing it at $1.8 billion) [See Deal]; and intravenous delivery and monitoring supplier Alaris Medical Inc. raised $118 million in July as part of a restructuring [See Deal]. Device companies raised $560 million privately in the quarter, including $200 million raised in debt offerings by Bausch & Lomb Inc. [See Deal] and drug delivery firm Durect Corp. [See Deal]. The sector raised $1.6 billion in total for the quarter, nearly quadrupling the $407 million raised last quarter. (See Exhibit 1.)

European consolidation led to acquisition activity in devices (see "Big Device Deals Still Hot in Europe as Synthes Follows Zimmer and Geitinge Extends Its Reach," IN VIVO, September 2003 (Also see "Big Device Deals Still Hot in Europe as Synthes Follows Zimmer and Geitinge Extends Its Reach" - In Vivo, 1 Sep, 2003.)): Zimmer Holdings Inc. outbid Smith & Nephew PLC for Centerpulse AG , paying $3.2 billion in cash and stock to create the world's largest pure-play orthopedics company [See Deal]; Swiss orthopedic trauma companies Synthes-Stratec and Mathys Medical Ltd. combined in a $1.1 billion merger [See Deal]; and Getinge AB agreed to pay €150 million to acquire Siemens AG 's ventilator division Siemens LSS [See Deal]. These three deals represented the majority of M&A dollar volume for the quarter. (See Exhibit 2.)

In Vitro Diagnostics Transactions

Lab suppliers led diagnostics financings in the quarter: Fisher Scientific International Inc. raised $261 million in a private sale of 6.6 million shares to Banc of America Securities [See Deal] while Serologicals Corp. raised $110 million in a convertible debt offering [See Deal]. These deals accounted for 81% of the total money raised in diagnostics (i.e., $458 million, slightly down from the $482 million raised last quarter). (See Exhibit 3.)

Two of the largest acquisitions of the year in in vitro diagnostics were made this quarter: settling their long-standing litigation once and for all (see "Roche Pays $1.4 Billion for Igen and Gets Peace of Mind," IN VIVO, September 2003 (Also see "Roche Pays $1.4 Billion for Igen and Gets Peace of Mind" - In Vivo, 1 Sep, 2003.)), Roche agreed to pay $1.4 billion in cash and stock to acquire Igen International Inc. , the licenser of the Origen electrochemiluminescence technology Roche uses in its Elecsys systems [See Deal], while Invitrogen Corp. paid $325 million to acquire fluorescent reagent developer Molecular Probes Inc. [See Deal]. Nine other acquisitions rounded out the $1.9 billion total in diagnostics M&A volume for the quarter. (See Exhibit 4.)

Pharmaceuticals and Biotech Transactions

As in devices, follow-on public offerings rebounded in pharmaceuticals, totaling nearly $2 billion in dollar volume over seventeen deals. Baxter and Angiotech's offerings—also counted in the device follow-on offering totals—led the pack. But CNS-focused biotech Neurocrine Biosciences Inc. [See Deal] and cancer specialist MGI Pharma Inc. [See Deal] raised $188 million and $169 million, respectively—well surpassing between them the $262 million total raised in follow-on offerings the previous quarter. Nearly $3 billion was raised in convertible debt offerings, including $500 million dollar deals by both Chiron Corp. [See Deal] and MedImmune Inc. [See Deal]. (See Exhibit 5.)

The only $100 million-plus acquisition in pharmaceuticals (not counting the already-mentioned Invitrogen/Molecular Probes acquisition, listed here for its genomics and proteomics implications) was Genzyme Corp. 's nearly $600 million acquisition of SangStat Medical Corp. , marketer of immunosuppressive drug Thymoglobulin with revenues of $120 million. Still, total M&A volume for the quarter slightly topped that of last quarter at $1.4 billion compared to $1.3 billion. (See Exhibit 6.)

In contrast to the previous two quarters, where many of the top deals were purchases of late-cycle marketed products from Big Pharma by specialty pharma companies, all of the top pharmaceutical alliances in the quarter were Big Pharma/biotech development deals. Notably, Aventis SA committed nearly $600 million in two

cancer alliances in the quarter: it will pay Regeneron Pharmaceuticals Inc. up to $510mm (€460mm) for exclusive, worldwide rights outside Japan to its VEGF Trap (in Phase I for solid tumors and non-Hodgkin's lymphoma [See Deal]) and ImmunoGen Inc. up to $87 million for worldwide rights to a range of preclinical cancer antibodies [See Deal] (see "Aventis Antes Up in Antibodies," IN VIVO, September 2003 (Also see "Aventis Antes Up in Antibodies " - In Vivo, 1 Sep, 2003.) and "Aventis/Regeneron: Validation by Association," IN VIVO Europe Rx, October 2003 ). (See Exhibits 7 & 8.)