KPMG Deal Capsule Life Sciences April 2021

Deal Capsule Transactions in Life Sciences April 2021

“

With a strong first quarter, the Life Sciences deal landscape in 2021 got off to a confident start with tailwinds. While in everyday life strategies are still being established to return to normality, M&A activity in Life Sciences is back on track, benefitting from increased investor attention.

”

CHRISTIAN KLINGBEIL | PARTNER, KPMG IN GERMANY

HIGHLIGHTS — Sustained tailwind in biotech and medical devices & diagnostics subsectors drove life sciences M&A activity in Q1 2021.

— Primarily due to one biotech blockbuster deal but also by robust growth across all subsectors, deal value exceeded prior-year quarter and builds on previous year’s catchup trend.

Trends in Life Sciences M&A 4.000

Y-o-Y Volume

597 467

3.000 265

2.000

222

296

+112%

285 87

41

1.000 0

Value

+33%

2,449 2015

2,530

2,832

2,768

2016 2017 2018 Number of Announced Deals

2,611

2019

3,161

671

893

2020 Q1 2020 Deal Value in US$ bn.

Q1 2021

Subsector public EBITDA multiples(a) Pharmaceuticals

— Following recovery over the last quarters in 2020, valuations have stagnated on a high level and thus offer acquisition opportunities across all life sciences subsectors.

Biotech 27.2x

13.3x

13.3x

Q4 2020

Q1 2021

Medical devices & diagnostics 25.9x

Q4 2020

Q1 2021

18.7x

18.8x

Q4 2020

Q1 2021

Deal Thermometer Q1 2021 — KPMG’s Deal Thermometer indicates warming up deal activities for the life sciences sector.

— Increasing deal appetite combined with an improved financing position due to lower indebtedness shapes the current deal environment.

DEAL APPETITE (Forward P/E ratio)

DEAL CAPACITY (Net Debt/EBITDA) HOT

MODERATE 17.5

20.4

31 Mar 2021 31 Mar 2022

Note: Source:

0.7x (b)

COOL

0.3x

31 Mar 2021 31 Mar 2022

(c)

(a) Refers to 90% quantile at respective quarter-end (b) Forward P/E ratio: net profit expected for 2022 to market cap in 2021 (c) Deal capacity: expected net debt to EBITDA in 2022 Thomson One, Capital IQ, KPMG Germany Analysis

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

1

LIFE SCIENCES SNAPSHOT Development of selected stock indices(a)

Setting the scene

145

In line with projected global economic growth of 5.5%, as per the IMF, 2021 continues to be a bull market since the strong recovery in March 2020. Despite a lowinterest rate environment, stock indices showed some volatility in Q1 2021, resulting from opposing factors.

This trend is expected to continue for the remainder of the year, driven by downside risks arising from slowerthan-expected vaccine rollouts, rises in inflation and interest rates stemming from current COVID19 government stimulus programs and the expiry of such measures. Market volatility also became visible in stagnating Q1 2021 subsector valuations, which between Q2 and Q4 2020 had climbed above pre-crisis levels of the record year 2019.

125 105 MSCI World Index

85

MSCI World Pharma, Biotech & Life Sciences Index MSCI World Biotechnology Index

65

MSCI World Health Care Equipment & Supplies Index

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2020

Note: Source:

2021

(a) Indexed to 100 with 01 January 2020 as base date Capital IQ, KPMG Germany Analysis

Q1 2021 M&A profile

M&A highlights

Announced deals by subsector and size 893

313

>US$ 1bn

26

317

US$ 87 BN

Pharmaceuticals

Biotech

US$ 500mn-1bn US$ 50mn-500mn <US$ 50mn

384

43

339

18

155

18

241 893 deals

19

Undisclosed deals

Medical devices & diagnostics

Share of acquirors by subsector 241

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

339

44%

58%

56%

Biotech

893

47%

51%

Strategic

53%

49%

Medical devices & diagnostics

Total

$bn

+8% 272

$bn

18 -1%

— Total deal value was largely driven by biotech deals, which accounted for USD 43bn or 50%, representing an overproportional rise over the volume of biotech deals.

— While private equity investors were mostly involved in biotech deals, almost every second life sciences acquisition was driven by private equity.

— Deal activities increased in Europe and Asia Pacific.

The current upswing in deal value compared to prior year predominantly resulted from transactions in North America, accounting for 8 out of 10 top deals.

Europe

+326% 56 #

— Of all announced deals, biotech accounted for 38% of deal volume, followed by medical devices & diagnostics targets (35%).

— Top 10 life sciences deals made up 45% of total deal value.

Deal volume and value by region(b) North America

M&A highlights in Q1 2021 can be summarized as follows:

— Small transactions dominated the deal landscape, as 62% of all deals with disclosed values were below USD 50mn.

Private equity

42%

Pharmaceuticals

313

Yet, in this economic climate, life sciences M&A activity built on pre-crisis level reflected in higher growth in deal value and volume, compared to Q1 2020.

+41% # 220

Asia Pacific $bn

+38% 12

#

+59% 379

OUTLOOK Latin America $bn

Africa

1 -23%

Note: Source:

#

14 -39%

$bn

n/a 1

#

+300% 8

(b) Intensity of blue color coding based on deal volume by target nation Thomson One, KPMG Germany Analysis

Based on a strong Q1 2021, a further surge in life sciences deal activity can be expected for the remainder of 2021, supported by an increase in P/E ratios and improved financing positions. Despite high valuations, market corrections offer acquisition opportunities across all life sciences subsectors.

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

2

LIFE SCIENCES SNAPSHOT The deal value of the global top 10 announced deals in Q1 2021 was

USD39.5 billion

Global top deals announced in Q1 2021(a) Bidder

Note: Source:

Target

Subsector

Therapy area

Announcement

Status

Value(b)

ICON plc

PRA Health Sciences Inc.

Biotech

Contractual research organization

24 Feb 2021

Pending

12.0

Jazz Pharmaceuticals plc

GW Pharmaceuticals plc

Pharmaceuticals

Cannabinoid products for rare diseases

03 Feb 2021

Pending

7.2

STERIS plc

Cantel Medical Corp.

Medical devices & diagnostics

Endoscopy and renal dialysis

12 Jan 2021

Pending

4.6

VG Acquisition Corp.

23andMe Inc.

Biotech

Genetic health

04 Feb 2021

Pending

3.5

Horizon Therapeutics plc

Viela Bio Inc.

Biotech

Autoimmune and severe inflammatory diseases

01 Feb 2021

Pending

3.1

Ceres Acquisition Corp.

Surterra Holdings Inc. – Parallel Inc.

Pharmaceuticals

Cannabinoid

22 Feb 2021

Pending

1.9

Amgen Inc.

Five Prime Therapeutics Inc.

Biotech

Oncology

04 Mar 2021

Pending

1.9

Merck & Co. Inc.

Pandion Therapeutics Inc.

Biotech

Autoimmune and severe inflammatory diseases

25 Feb 2021

Pending

1.8

Roche Holding AG

GenMark Diagnostics Inc.

Medical devices & diagnostics

Diagnostic technology

15 Mar 2021

Pending

1.8

GX Acquisition Corp.

Celularity Inc.

Biotech

Placental-derived cellular therapy

08 Jan 2021

Pending

1.7

(a) Financial investors are italicized (b) All numbers are in USD billion Thomson One, KPMG Germany Analysis

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

3

PHARMACEUTICALS Trends in M&A 1.200 1.000

Snapshot Y-o-Y

494 331

800 600 121

400 200 0

161

809 2015

Volume

Value

-2%

+66%

141

66

852

842

1,032

1,019

2016

2017

2018

2019

Number of Announced Deals

1,017 2020

16

26

247

241

Q1 2020 Q1 2021

Deal Value in US$ bn.

Top 5 deals announced in Q1 2021(a) Bidder

Note:

Target

Value(b)

Jazz Pharmaceuticals plc

GW Pharmaceuticals plc

7.2

Ceres Acquisition Corp.

Surterra Holdings Inc. – Parallel Inc.

1.9

Altaris Capital Partners LLC

Perrigo Co. plc – RX business

1.5

Sanofi S.A.

Kymab Ltd.

1.5

Teijin Pharma Ltd.

Takeda Pharmaceutical Co. Ltd. – non-core products in Japan

1.2

(a) Financial investors are italicized (b) All numbers are in USD billion

ø deal value(c) Median 25th %tile

75th %tile

6.6

25.2

96.1

(c) Based on 149 disclosed deal values

Public EBITDA multiples Q1 2021

12.6x

CAGR

Y-o-Y

+3%

+36%

11.5x

This revival of large deals explains the increased average deal value, yet still being far from the mega deals in 2019. Due to remaining downside risks arising from the consequences of the COVID19 pandemic, acquirers appear to take fewer risks with smaller deals regarding operational and integration challenges.

Compared to the other subsectors, Pharma targets exhibit the lowest valuations based on public EBITDA multiples. Valuations stagnated between December 2020 and March 2021.

Top deals Jazz Pharmaceuticals announced to acquire GW Pharmaceuticals, a biopharmaceutical company focused on novel therapeutics from its cannabinoid product platform for rare diseases associated with epilepsy for USD 7.2 billion in a cash and stock transaction with a premium of 50%. By adding the first FDA-approved marijuana-derived drug Epidiolex, Jazz expands its neuroscience business alongside sleep disorders and oncology. It expects double-digit revenue growth in the first year to rapidly deleverage.

The second largest deal is also related to cannabinoids.

Ceres Acquisition, a special purpose acquisition company (SPAC which are usually newly created listed shell companies to finance deals), announced to acquire the US cannabis operator Parallel for USD 1.9 billion.

The deal will provide Parallel the required capital to fund its expansion, improve its cultivation and production capacity and develop rare cannabinoids with therapeutic benefits.

Perrigo announced to sell its generic medical prescription business to the private equity firm Altaris Capital Partners for USD 1.5 billion in cash plus USD 50 million as R&D milestone payments and contingent purchase obligations. The deal allows Perrigo to specialize as a player in consumer self-care products and improve its financial flexibility.

+36% Y-o-Y Note:

Q1 2021 pharmaceutical deal activity followed its stable path from 2020. While deal volume remained subdued, deal value exceeded that of Q1 2020, driven by 2 deals placed within the top ten life sciences deals.

13.3x 13.3x 9.8x

OUTLOOK 2018

2019

2020

Source: Thomson One, KPMG Germany Analysis

Q1 2020

Q1 2021

The subsector analysis signals stable M&A activity supported by rising valuations and trends such as cannabinoids, SPAC and PE funding.

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

4

BIOTECH Trends in M&A

Snapshot Y-o-Y

1.200 1.000 800 600

77

55

46

81

0

+79%

+106%

43

21

580

605

702

732

668

1,010

2015

2016

2017

2018

2019

2020

Number of Announced Deals

Value

93

56

400 200

Volume

189

339

Q1 2020 Q1 2021

Deal Value in US$ bn.

Top 5 deals announced in Q1 2021(a) Bidder

Note:

Target

Value(b)

ICON plc

PRA Health Sciences Inc.

12.0

VG Acquisition Corp.

23andMe Inc.

3.5

Horizon Therapeutics plc

Viela Bio Inc.

3.1

Amgen Inc.

Five Prime Therapeutics Inc.

1.9

Merck & Co. Inc.

Pandion Therapeutics Inc.

1.8

(a) Financial investors are italicized (b) All numbers are in USD billion

ø deal value(c) Median 25th %tile

75th %tile

8.1

40.0

105.6

(c) Based on 212 disclosed deal values

Public EBITDA multiples Q1 2021

20.4x

CAGR

Y-o-Y

+15%

+19%

23.6x

27.2x 21.7x

Driven by these big-ticket transactions of which one has blockbuster status, average deal value registered a significant increase, partly driven by growing premiums paid. Potential reasons for this trend are heightened public attention since the pandemic outbreak, a growing focus of corporates to acquire early-clinical-stage targets, the availability of PE funding, and rising prominence of SPACs. While biotech companies recorded sharp rises in valuation during the pandemic, recent valuations stagnated.

Top deals ICON announced to acquire PRA Health Sciences, a contractual research company for USD 12.0 billion in a cash and stock transaction, with a premium of 30%.

With PRA’s mobile health platforms and data solutions, ICON aims to expand these capabilities due to their rising importance in conducting virtual clinical trials.

The combined entity is expected to generate doubledigit growth and annual run-rate cost synergies of USD 150 million.

VG Acquisition, a SPAC that was listed in 2020 as a blank-cheque company sponsored by Virgin Group, announced its merger with the 23andMe, a consumer genetics and research company offering OTC genetic testing. The transaction values the company at USD 3.5 billion. Through this deal, which functions like a reverse merger, 23andMe becomes publicly traded so that it is able to expand in growth initiatives of personalized healthcare.

Horizon Therapeutics announced the acquisition of Viela Bio, a biotech developing treatments for autoimmune and inflammatory diseases, for USD 3.1 billion in cash, financed through USD 1.3 billion external debt. Horizon Therapeutics pays a 53% premium to grow its rare disease medicine portfolio by adding among others UPLIZNA, an antibody for treating NMOSD, an autoimmune neuromuscular disorder.

+100% Y-o-Y Note:

The spotlight continues to shine on biotech, as deal volume and value showed resilient growth in Q1 2021, accounting for six of the ten largest life sciences deals of the quarter.

25.9x

OUTLOOK 2018

2019

2020

Source: Thomson One, KPMG Germany Analysis

Q1 2020

Q1 2021

The subsector analysis signals continuing strong M&A activity supported by increased valuations and trends such as digitalization, SPAC and PE funding.

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

5

MEDICAL DEVICES & DIAGNOSTICS Trends in M&A

Snapshot Y-o-Y

1.200 1.000 800 600

89

57

80

68

53

0

1,054

1,068

1,056

1,046

1,067

1,116

2015

2016

2017

2018

2019

2020

Number of Announced Deals

Value

+35%

+302%

51

400 200

Volume

5

18

231

313

Q1 2020 Q1 2021

Deal Value in US$ bn.

Top 5 deals announced in Q1 2021 Bidder

Note:

Target

Value(a)

STERIS plc

Cantel Medical Corp.

4.6

Roche Holdings AG

GenMark Diagnostics Inc.

1.8

CM Life Sciences II Inc.

SomaLogic Inc.

1.2

Hellman & Friedman LLC

Cardinal Health Inc. – Cordis division

1.0

NL1 AcquireCo Inc.

New Look Vision Group Inc.

0.8

(a) Financial investors are italicized (b) All numbers are in USD billion

ø deal value(c) Median 25th %tile

75th %tile

3.6

14.7

63.7

+63% Y-o-Y Note:

(c) Based on 144 disclosed deal values

Public EBITDA multiples Q1 2021 CAGR

Y-o-Y

+23%

+29%

16.6x

18.7x 14.6x

12.3x

Deal activity within the medical devices & diagnostics sector in Q1 2021 exceeded prior year in volume terms despite headwinds due to postponed surgeries caused by the pandemic. The subsector recorded significant increase in deal value, headed by the top deal of STERIS and Cantel.

Average deal value increased considerably. One potential source for this surge is to remain competitive. By investing in closing gaps in product lines and advance technologies, companies trigger higher demand and might pay more. Also, the improved COVID19 situation led them to venture into larger deals again. Even despite sharp rises in valuation since 2018, demand for medical devices & diagnostics targets increased.

Top deals STERIS announced the takeover of Cantel Medical, a provider of infection prevention products and services, primarily to endoscopy and dental customers, for USD 4.6 billion in a cash and stock transaction. Through the acquisition, STERIS aims to strengthen and expand its endoscopy offering and, with Cantel’s dental business, additionally enters a new customer segment. The combined companies intend to realize pre-tax cost synergies of USD 0.1 billion within four years.

Roche announced the acquisition of GenMark Diagnostics, a provider of multiplex molecular diagnostic solutions, for USD 1.8 billion in cash, representing a premium of 43% above the preannouncement price. The acquisition enables Roche to expand its molecular diagnostic portfolio by adding GenMark’s syndromic panel testing portfolio.

Another transaction in a series of life sciences-SPAC combinations, is the acquisition of SomaLogic by CM Life Sciences, which functions like a reverse merger. CM Life Sciences, a SPAC sponsored by affiliates of Casdin Capital and Corvex Management, announced its merger with SomaLogic, a provider of proteomics technology powered by a proprietary platform. The transaction values the target at USD 1.2 billion. The deal enables SomaLogic to expand its AI-based proteomics platform and improve growth initiatives in the field of proteomics.

18.8x

OUTLOOK 2018

2019

2020

Source: Thomson One, KPMG Germany Analysis

Q1 2020

Q1 2021

The subsector analysis signals M&A activity to rebound in 2021 due to rising demand in divers therapy areas, despite headwinds due to postponed surgeries caused by the pandemic.

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

6

BASIS OF DATA PREPARATION Values and volumes used throughout the report are based on announcement date as provided by Thomson Reuters’ database Thomson One as of 31 March 2021, extracted up to and including 1 April 2021, and supplemented by additional independent research. Data available after publication date is incorporated in subsequent editions and thus can deviate from previous editions. This edition presents revised data for the years 2013 to 2016.

This report includes disclosed and undisclosed values for M&A transactions including minority stake purchases, acquisitions of remaining interest, and recapitalizations and it explicitly excludes selftenders and spinoffs. Deviations from totals are due to rounding differences. The published numbers of deals and deal values are based on the analysis of target companies which operate in the following subsectors:

Imprint Publisher KPMG AG Wirtschaftsprüfungsgesellschaft Tersteegenstraße 19 – 23 40474 Düsseldorf Germany Contact Christian Klingbeil(a) Partner, Deal Advisory T +49 89 9282-1284 cklingbeil@kpmg.com

Life Sciences: — Medicinal chemicals & botanical products — Pharmaceutical preparations

Authors Alexander Awan Senior Manager, Deal Advisory, KPMG in Germany

— In vitro and in vivo diagnostic substances

Stephan Musfeld

— Biotechnology – biological products, except diagnostic substances

Manager, Deal Advisory, KPMG in Germany

— Pharmaceutical wholesale

Dr. Daniela Ruschak Assistant Manager, Deal Advisory, KPMG in Germany

— Medical devices and diagnostics — Plant sciences KPMG’s Deal Thermometer is based on financial data as provided by S&P Capital IQ of public companies in the same sector as noted above with a market capitalization at quarter end of at least a USD 1 billion. For the life sciences sector, this comprises 486 public companies.

Note: (a) Responsible according to German Law (§ 7 (2) BerlinerPresseG): Christian Klingbeil

Sources: — Thomson One (Thomson Reuters) — S&P Capital IQ — Various companies’ press releases

www.kpmg.de www.kpmg.de/socialmedia

© 2021 KPMG AG Wirtschaftsprüfungsgesellschaft, a corporation under German law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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