The average markup or premium paid in a biotech M & A deal worth at least $500 million in 2006 was 60%. 60%! That's one of the most startling numbers you'll find in Ernst & Young's 21st Annual "Global Biotechnology Report".

The publication is consistently one of the most comprehensive assessments of the state of the industry. Among other notable bullet points from E & Y: Worldwide biotech revenue surpassed $70 billion last year for the first time, a record $23 billion worth of alliances were struck in '06, 99% of U.S. biotech CEOs say they plan to do a deal within the next couple of years. And the report points out that the bullish trends show no signs of letting up because "big pharma's voracious need to fill the pipeline in the shadow of blockbuster patent expirations--has clearly shifted the balance of power at the negotiating table toward biotechnology companies."

But E & Y is also concerned about the industry's future. Specifically, it says the "specter" of U.S. biotech drug price controls is "potentially devastating" in terms of its effect on R & D innovation. The report also says biotech IPOs will remain challenging with most of them recently pricing below their expected range. And long term, E & Y says the U.S. needs to do a better job educating kids about science in order to meet biotech's demand for researchers.

Regarding M & A, the report actually names names that at its press time were rumored to be possible takeout targets: MedImmune, Sepracor, Celgene and ImClone Systems. MedImmune hit another new high today after activist shareholder Carl Icahn said the company should be sold. He made those remarks after the company confirmed last week that it was entertaining offers. I've seen and heard several potential acquirers named by sources and in other press reports (none confirmed), including GlaxoSmithKline, Wyeth, Novartis and Merck. Many analysts believe that is soon as one big pharma pulls the trigger on a sizeable deal--whether a pharma/pharma or pharma/biotech--that there will be a quick domino effect.

In the meantime, Wall Street speculates and waits.

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