These are notes on money-musical-chairs among drug companies. Big-time money.
Clues as to why there is such a tidal wave of cash:
One: Consolidation, of course. Fewer giant companies, who have greater control over the market, are too big to fail, and have more lobbying power with governments.
Two: The companies are making deals left and right to temporarily give stockholders and prospective investors the impression that “something good” is happening, while concealing the fact that numerous new drugs in the testing pipeline are failing to produce beneficial results, and are unsafe. Sleight of hand.
Three: The companies are making very favorable loan deals with banks, enabling them to buy out other drug firms. Before the loan repayments are completed, the companies will have sold themselves (and the debt) to bigger fish.
Four: A drug company knows its development of a new drug is fraudulent, and is riddled with illegal practices, such as lack of informed consent in recruiting volunteers for clinical trials. So it sells the research unit for that drug to another company, making it their problem.
Here are $$ details. Follow the astonishing money trails.
“Other bidders may have dropped out of an auction for Sanofi’s European generics unit, but that doesn’t mean it hasn’t found a buyer. The drugmaker is nearing an agreement and could announce a sale in the next several days, Bloomberg reports.
“Sanofi’s board could meet as soon as Monday to vote on a deal worth about €2 billion ($2.48 billion), according to the news service’s sources. Of course, the sources note that the deal isn’t final and that it could ultimately fail to materialize.
“The news follows previous decisions by private equity firm Nordic Capital and Indian drugmaker Torrent Pharma to bow out of negotiations, worried that the unit is too pricey, according to press reports. PE firm Carlyle Group and Brazil’s EMS remained in deal talks through final bidding, according to Bloomberg.
“And that’s not the only deal Sanofi has had in the works. The company has been toiling to reshape itself for several years, and as part of that effort on Monday sold 12 “noncore” pharma brands to Cooper-Vemedia for €158 million, a spokesperson confirmed.
“The drugmaker talked about selling the business in 2015, but CEO Olivier Brandicourt made other M&A moves after coming on board instead. In 2016, Brandicourt offloaded Sanofi’s animal health unit Merial in an asset swap with Boehringer Ingelheim, getting BI’s consumer health business in return.
“The drugmaker hasn’t only slimmed down, though. Sanofi purchased nanobody biotech Ablynx for $4.8 billion and hemophilia-focused Bioverativ for $11.6 billion in sizable deals early this year. Afterward, Brandicourt said the acquisitions “dramatically reshape our portfolio in specialty care” and boost the company’s R&D presence.”
“With suitor Takeda circling Shire, the Dublin-based target has pulled off a deal of its own.
“On Monday, Shire announced it had agreed to hand its oncology business to France’s Servier for $2.4 billion, a move it said would sharpen its focus on rare diseases. And more streamlining deals are likely on the way.
“While the oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire’s longer-term strategy,” CEO Flemming Ornskov said in a statement, adding that “we will continue to evaluate our portfolio for opportunities to unlock further value … with selective disposals of nonstrategic assets.”
“Meanwhile, Servier will land an “immediate presence” in the U.S. with products such as Oncaspar, which Shire nabbed in its Baxalta buyout. Baxter had bought the med to diversify its pharmaceutical portfolio before spinning it off into Baxalta, which Shire later picked up after a monthslong pursuit.
“The oncology move makes things interesting for Japanese drugmaker Takeda, which late last month made its buyout interest in Shire public.
“The deal should … boost Shire’s negotiating position on asking price in the current offer period with Takeda, in our view,” Jefferies analyst Peter Welford wrote in a note to clients.”
“Pfizer may have run into snags trying to sell its consumer health business, but Merck KGaA may be in advanced discussions with a player over its own for-sale unit. And that player is Mylan, according to reports.
“The two companies are negotiating a price between $4.3 billion and $4.9 billion, Reuters says, although there’s no certainty they’ll lock down a deal. The German drugmaker has also reportedly chit-chatted with private equity groups about a sale, according to the news service.
“Mylan, for its part, denies the report. “Although it’s Mylan’s policy to not comment on rumors or speculation, given the egregious inaccuracy of reports issued this morning, the company is compelled to confirm that the Reuters article is untrue,” the company said in a statement.
“It’s not the first time Mylan has gone after a deal in the consumer biz. It spent the better part of 2015 in hostile pursuit of store-brand specialist Perrigo, whose shareholders ultimately rejected Mylan’s offer. And in the wake of that offer, it snapped up Sweden’s Meda.
“It’s also not the first time Mylan and Merck KGaA have talked transaction, Reuters noted. Back in 2007, Mylan took Merck’s generics unit off its hands in a $6.7 billion deal that also sent severe allergy blockbuster EpiPen over to the copycat.
“Meanwhile, Pfizer, which boasts a larger OTC business than Merck’s, has been watching its own sale options dwindle as retail kings such as Amazon threaten OTC drugmakers’ sales. Late last month, both Reckitt and GlaxoSmithKline withdrew from the bidding process, though rumor has it there’s a small chance the New York drugmaker could still unload the asset to Procter & Gamble.”
And now, here is a list of top pharma mergers and acquisitions in the past several years:
10. Abbott-Alere, $5.8bn, 2016
“At the start of February American pharmaceutical giant Abbot agreed to buy Alere Inc. for $5.8bn or $56 a share to become the lead holder in the market for medical tests and diagnostics. Alere which has annual sales of about $2.5bn makes tests for infections such as malaria, HIV, dengue fever and tuberculosis. Abbott stated that at the end of 2015 its diagnostic sales were $4.6bn, a figure which would now exceed the $7bn-a-year mark. Abbott currently has more than 73,000 employees and revenues in 2015 reached $20.405bn.”
9. Mylan-Meda, $7.2bn, 2016
“February, 2016 saw Mylan agree a takeover of Swedish drug maker Meda for $7.2bn. The new company is expected to have 2015 sales of $11.8bn, and the deal also boosts Mylan’s range of branded and generic medications and gives it an additional leg-up in the area of over-the-counter medications that will now achieve sales of around $1bn a year. Mylan had been in pursuit of Meda for a while before the deal closed, having two offers rejected in 2014 that were valued at $6.7bn. Mylan is a global generic and specialty pharmaceutical company registered in the Netherlands with headquarters in the UK. It currently provides more than 30,000 pharmaceutical jobs.”
8. Celgene-Receptos, $7.2bn, 2015
“In August, 2015, American biotechnology company Celgene acquired Receptos for $7.2bn and its phase III autoimmune treatment for ulcerative colitis and multiple sclerosis. If all goes to plan the drug could end up bringing in peak sales as high as $6bn. Celgene was founded in 1986 and currently has more than 4,100 employees. In 2015 the company achieved a 21% year-on-year growth in product sales reaching $9.2bn.”
7. Endo International-Par Pharmaceutical, $8.1bn, 2015
“Endo International, headquartered in Ireland and the USA, is a global specialty pharmaceutical company employing more than 6,200 people. In September last year, it completed its buyout of Par Pharmaceutical in a deal worth $8.1bn. The acquisition firmly establishes Endo as one of the world’s fastest growing and notable generics businesses and will help the company to position itself for strong growth in the years to come.”
6.Alexion Pharmaceuticals-Synageva BioPharma, $8.4bn, 2015
“In June, 2015 Connecticut-based Alexion Pharmaceuticals successfully completed its acquisition of Synageva BioPharma for $8.4bn. The acquisition strengthened Alexion’s global leadership in devastating and rare diseases, and created one of the strongest rare disease portfolios in the biotech industry. Alexion was founded in 1992 and employs more than 3,000 people serving 50 countries worldwide.”
5. Valeant-Salix Pharmaceuticals, $15.8bn, 2015
“March, 2015, saw Canadian-based Valeant acquire Salix Pharmaceuticals for $15.8bn, adding to its portfolio of gastroenterology drugs. The $158-per-share deal came after reports that Valeant had been competing with Shire for a takeover of Salix. In addition to the $15.8bn price tag, Valeant would absorb $5bn in debt and the merger would provide $500m a year in cost-saving opportunities and cut the tax paid on Salix revenues which stood at 35%. Valeant currently employs around 17,000 individuals and achieved revenues of $10.5bn in 2015.”
4. Pfizer-Hospira, $17bn, 2015
“US-based pharmaceutical giant Pfizer agreed to buy Hospira in a $17bn takeover that would expand its portfolio of drugs and add Hospira’s portfolio of sterile injectable treatments and biosimilar drugs to Pfizer’s broad offerings. At the time Hospira had 11 biosimilar molecules in its pipeline, with the market value for biosimilars and sterile injectables set to reach around $90bn by 2020. The deal was expected to provide around $800m a year in cost-savings by 2018. Pfizer achieved revenues of $49bn last year and currently provides more than 78,000 pharmaceutical jobs.”
3. AbbVie-Pharmacyclics, $21bn, 2015
“In May, 2015, AbbVie closed a deal to buy California-based Pharmacyclics for $21bn. The massive deal would boost AbbVie’s cancer portfolio substantially. AbbVie currently relies heavily on its ageing $10bn-a-year auto inflammatory drug Humira, and 2 years earlier split from its partner Abbott in the hopes of finding large merger deals to fill its sparse drugs pipeline. One of the driving factors for the merger was Pharmacyclics blood cancer drug, Imbruvica, which is expected to achieve worldwide sales of $5.8bn by 2020. AbbVie achieved revenues of $22bn in 2015 and currently employs more than 28,000 people.”
2.Shire-Baxalta, $32bn, 2016
“In January 2016 Shire finally closed a deal to acquire Baxalta for $32bn after 6 months of negotiations. Shire stated that the new firm would be able to achieve double-digit sales growth to over $20bn by 2020, with about two-thirds of this revenue coming from immunology, neuroscience, haematology, lysosomal storage disorders, gastrointestinal diseases and heredity angioedema. Both companies are predicting around $500m in annual cost-savings within the first 3 years, with the combined tax rate down 7% to 16%.”
1.Teva-Allergan Generics, $40.5bn, 2015
“July, 2015, saw Israeli firm Teva buy Allergan’s generics unit for a massive $40.5bn in cash and stock. The deal meant that Allergan received $33.75bn in cash and Teva shares valued at $6.75bn, giving it a 10% stake in Teva. Investors had been pressuring Teva to make a major deal as generics erosion meant that the firm could face severe losses from its $4.2bn a year multiple sclerosis drug Copaxone. Teva hopes that the deal with Allergan generics will establish a foundation for long-term sustainable growth and assist in building a strong portfolio of products in both generics and specialty areas. Teva achieved revenues of around $20bn in 2014, and currently employs more than 40,000 individuals.”