November 30, 2011

IN VIVO

2011 M&A of the Year Nominee: Daiichi/Plexxikon

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

In an era in which biotechs struggle to get financing and Big Pharma is hungry for new drugs (but typically favors deals that delay rewards), Plexxikon was dealt a top R&D hand and played its cards exceedingly well. Its strategy culminated in one of the priciest private buyouts in recent history, its $805 million up-front acquisition by Japan’s Daiichi Sankyo Co. Ltd. And if that don't scream M&A of the year, we don't know what does.

You want more? OK how about a deal that validates Plexxikon's previous partnering strategy, around a drug (the BRAF inhibitor Zelboraf/vemurafenib, which was at the time in pivotal studies) that wowed FDA so much the agency approved it later in the year in a brisk three and a half months? That drug was already half-owned by Roche, Plexxikon's partner since 2006, but the other half stayed at partner-rich Plexxikon, which cannily (some over the years would have said unnecessarily) hung on to its co-promotion rights.

Maybe what'll sway you even more is that little bit extra in earn-outs, cash that could take the value of the deal to $935 million? Or perhaps the estimated 12x return on the average venture investment dollar? (Plexxikon had raised only about $67 million from a syndicate that included Advanced Technology Ventures, Alta Partners and Astellas Venture Capital, thanks largely to its ability to bring in non-dilutive partnership dollars.) Or is it the surprise victor in what was clearly a competitive bidding process for Plexxikon, the seemingly suddenly deal-hungry Daiichi Sankyo?

The truth is there are many reasons to vote this deal to the top of a competitive DOTY field in the M&A category. Not least that Zelboraf, alongside Bristol-Myers Squibb's Yervoy, is one of only a pair of drugs approved to treat melanoma in a decade.  In a year of big approvals and some big deals, Zelboraf and the acquisition of Plexxikon are among the biggest.