M&A crystal ball

At least six biotech companies will disappear as the result of M&A activity last week, leading some to wonder whether the oft-talked about consolidation is upon us. The answer: don't bank on it. Even though there is a horde of hungry mouths and little sign that a window will open, market watchers polled by Ebb & Flow point out that the big, strategic buyers - pharma and profitable biotech - remain cautious about dinging EPS. And with valuations still in flux, it's hard to peg what some companies are worth.

Lazard banker David Low noted that the metrics bankers traditionally use to assess value are more or less useless. "The comps are all beaten down, you can't do a DCF [discounted cash flow analysis] on these companies and the last financing valuation is unusable as a benchmark. So the three comps we use either don't apply or point to a low number." ...