Discounts in Biotech Keep Pharma M&A Rolling

It's not getting any easier to get drugs approved -- and with valuations frighteningly low and the inability to raise cash, it's the "perfect storm" for pharmaceutical companies interested in picking up new prospects, says Meyers.

While there's some urgency, "There's time between 2008 and patent expirations in 2012 to develop the next generation of larger opportunities," says Milner.

"Big Pharma can certainly take full advantage of the fragile global economy to buy assets at a discount," says Burrill. "They have the luxury of sitting back and waiting for the right opportunity and then acquire biotech companies at what represents 1990 prices."

In the meantime, "companies are shrinking to conserve cash and extend their runway ... unfortunately, headcount is their biggest expenditure, and as a result of the negative capital markets, many programs have been put 'in the refrigerator' until better times prevail...," he says. "If not restructuring, biotech companies will be acquired at bargain basement prices."

One place where money isn't flowing is sponsored deals. "I've never seen leveraged debt capital markets as dislocated as they are right now," Deutsche Bank's Meyers says. "While interbank lending has improved, lending to corporations and sponsors has not returned." But it will. Eventually.

"As far as sponsored deals are concerned, once you see the leveraged debt capital markets come back, we believe you'll see a new level of activity," he says. "You'll not only see activity in health care services, you'll also see a new sponsor interest in life sciences where there hasn't been leveraged buyout activity in the past."