Yesterday, I met up with a health care venture capitalist. He mentioned that M&A is likely to be a big factor over the next few years. After all, major pharma companies will have a variety of their blockbuster drugs go off-patent.

Well, interestingly enough, we got a mega-deal today; that is, Takeda Pharmaceuticals (the top drug company in Japan) has agreed to pay $8.8 billion for Millennium Pharmaceuticals (NASDAQ: MLNM), which develops biopharmaceuticals for such things as cancer and inflammatory diseases (its top drug is Velcade). There is also a key strategic relationship with Johnson & Johnson (NYSE: JNJ).

No doubt, the Millennium deal is fairly rich - with a valuation at 17 times revenues. Then again, Millennium is growing quickly and has a promising stable of drugs. And as for Takeda, it has two major drugs -- Prevacid and Actos - that will come off-patent in 2009 and 2011. In other words, the company has really no other option but to pay up on deals.

In today's trading, Millennium's stock price is up 49.72% to $24.48.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Millennium's healthy valuation originally appeared on BloggingStocks on Thu, 10 Apr 2008 12:45:00 EST. Please see our terms for use of feeds.