buyouts

Pharma cash to feed more M&A

Tracy Staton — Thu, 21 Aug 2008 10:58:49 -0400

Pharma's biotech-buying frenzy is likely to continue for the next few years, analysts say. That's partly because the weak dollar make U.S. biotechs cheaper for foreign drugmakers to buy, partly because the industry has surplus cash around. And, of course, there's the beefing-up-the-pipeline driver, but we're all familiar with that.

"There's a fair bit of money in the industry today, almost creating a pent-up capacity to do deals," a Deloitte life sciences expert told the Associated Press. That, plus the weak dollar and need for new products have created an environment favorable to a "reasonably long period" of M&A activity.

The good news for biotechs: valuations for buyout targets are likely to remain high. Bad news for pharma: the risks are considerable. They're not the kind of deals you can really put a pencil to, one analyst said. "There will be no MBA school analysis that makes any of these (deals) look intelligent," he said. "It's simply a bet of blockbusters coming out of the purchased pipelines." But the risks may be worth it. So watch that wheel spin.

--read the AP story

Zimmer mulls $250M in doc-contract buyouts

Tracy Staton — Mon, 19 May 2008 11:15:48 -0400

You've heard of sports teams buying out their coaches' contracts. Well, now there's a device maker considering buying out its deals with surgeons. In a move designed to clear up legal troubles over its contracts with doctors, Zimmer is considering cutting off royalty contracts with many of them. To get out of those long-term deals, the company would give those docs up-front payments. Though Zimmer won't say how much that's likely to cost, analysts estimate the buyouts might run to $250 million.

And that would come on top of a $169.5 million fine levied by the U.S. government last year, plus the $54 million Zimmer expects to spend on new compliance measures, such as disclosing doc payments in an online database.

- read the story in the Financial Times

Related Article:
Zimmer weeds out doc conflicts

Lilly wants to buy out 500 workers

Thu, 17 Apr 2008 06:59:58 -0400

Add up to 500 Eli Lilly workers to the pharma layoff toll. The Indianapolis-based pharma plans to offer buyout packages to 2,000 manufacturing and engineering employees who work on active ingredients for Humalog and Humulin insulin products and the Forteo osteoporosis med. The deals are designed to cut up to 500 jobs, primarily in manufacturing, but a few in R&D as well.

Lilly CEO John Lechleiter (photo) called the buyouts a necessary part of the company's strategy for cutting costs and improving productivity. "[W]e must align our production capacity with customer demands," he said. Humalog is set to lose patent protection between 2011 and 2014, but it still ranks fourth among Lilly drugs, with $1.5 billion in 2007 sales. Humulin brought in $985 million, while Forteo accounted for $709 million in sales.

Lechleiter also noted that Lilly has cut its headcount by 12 percent from peak levels in mid-2004, or about 5,500 jobs. It currently employs about 12,000 in Indianapolis.

- see Lilly's news release
- read the story in the International Herald Tribune
- check out the Pharmalot item

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Falling dollar, falling drugmaker prices

Tue, 15 Apr 2008 06:59:57 -0400

Is the U.S. drug industry bargain-basement land right now? Analysts say that the low, low dollar means low, low prices for pharma companies. Rivals in Asia and the Eurozone could snap up drug companies just like they've bought up Manhattan condos.

Takeda Pharmaceutical agreed to pay $8.8 billion for Millennium Pharmaceuticals--a 15 percent discount, as the dollar has fallen 15 percent against then yen since early 2007. Roche bought Ventana Medical for $3.4 billion--and though the price was higher than what the Swiss drugmaker originally bid, it still represented a double-digit discount because the dollar has sunk against the euro. Other examples, according to Pharmalot: Eisai's buyout of MGI Pharma for $3.9 billion, Novartis' 77 percent-stake acquisition of Alcon for $39 billion, and so on.

In Vivo worries that foreign buyouts might be against the national interest, considering the intellectual property at risk. Some U.S. companies might be able to get Congress to shield them from unwanted foreign takeovers, the blog suggests. Bioterror research, anyone?

- check out the Pharmalot item
- see the coverage from In Vivo

Related Articles:
Big Biotech emerges as a shelter in economic storm. Stock report
Rocky market puts freeze on biotech deal-making. Market report

Vasella touts Novartis' diversification

Mon, 14 Apr 2008 06:59:55 -0400

Novartis CEO Daniel Vasella (photo) talked up his company's prospects in an interview with the Swiss weekly Sonntag, saying that it's well on its way to returning to dynamic growth.

Vasella acknowledged that the pharma biz remains difficult, but he praised Novartis' pipeline and cited the new Alcon deal as evidence that the company will be strengthening itself through diversification. Last week, Novartis agreed to buy 25 percent of the eye care company for $11 billion and another big chunk by 2010 for $28 billion, giving it 72 percent controlling interest in the U.S.-based Alcon.

Meanwhile, Alcon announced that it's planning to build a manufacturing facility in Singapore as a beachhead for Asian distribution of its pharmaceutical products. The company plans to break ground in 2009 and have the plant fully operational by 2012.

- find the story in Forbes
- see the Singapore coverage, also in Forbes

ALSO: A new study shows that Novartis' Reclast/Aclasta bone drug outperformed Sanofi-Aventis' Actonel at increasing bone mass in patients whose osteoporosis was caused by steroids. Release | Report

Related Articles:
Novartis taps new U.S. pharma chief. Novartis report
Novartis discovery chief departs in shakeup. Novartis report
CEO: Novartis plans big restructuring. Novartis report
Novartis pledges $39B for Alcon. Novartis report
Cash-rich Novartis CEO mulls biotech buyouts. Report

What did Vasella see in Alcon?

Wed, 09 Apr 2008 06:59:55 -0400

Just why would Novartis pay $11 billion for one-fourth of an eye-care company and promise another $28 billion for another big chunk? The Wall Street Journal asked CEO Daniel Vasella (photo) just that. You've heard some of the reasons Novartis wanted Alcon: aging population, meaning more people with eye-care needs; and diversification. Here's another: The lack of pricing pressure on eye products. While insurers and government healthcare systems are twisting drugmakers' arms for pharma discounts, consumers typically are paying for the kind of eye-care products Alcon sells. "You can pass on price increases easier," Vasella said. "As soon as you get into regulated markets like pharma, it's more difficult."

And there lies the rub for much of the drug industry right now. Vasella predicts that pharma prices on the whole will decline--unless and until R&D innovation declines. "[T]hen society will have to make a decision: Do we want innovation or not?" he says.

- find more from Vasella in the WSJ
- check out an excerpt from that interview at Pharmalot

Related Articles:
Novartis: No more deals, no Roche sale.
Novartis pledges $39B for Alcon
Alcon faces setback on experimental AMD therapy
Cash-rich Novartis CEO mulls biotech buyouts
CEO: Novartis plans big restructuring

Novartis pledges $39B for Alcon

Mon, 07 Apr 2008 06:59:58 -0400

In a bid to diversify its business away from traditional pharma, Novartis has bought a 25 percent stake in Alcon and is eyeing the purchase of another 52 percent in 2010. The Swiss drugmaker paid $11 billion for this first chunk of the Texas-based eye care business and has an option to buy the rest for $28 billion more.

CEO Daniel Vasella (photo) called Alcon an "excellent" strategic fit with Novartis, which makes contact lenses and ophthalmic drugs. The deal furthers his strategy of drilling into high-growth areas of the market, he said. "Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population." Alcon makes eye drops, contact lens solutions, surgical equipment, and implantable lenses.

Analysts, however, said the deal wasn't a bargain and that it wouldn't deliver much to Novartis's bottom line, at least initially. It's a good strategic fit, a Landsbanki Kepler analyst told the Financial Times, "but they won't be able to reap much in synergies right away because they're only buying a minority stake." Meanwhile, Standard & Poor's lowered its long-term credit rating on Novartis because the company said it would go into debt to finance the second chunk of its Alcon purchase.

- see the Novartis press release
- read the article in the FT
- check out the ratings news at Orange
- get MSNBC's take
- find the coverage in Forbes

Related Articles:
Alcon faces setback on experimental AMD therapy. Report
Cash-rich Novartis CEO mulls biotech buyouts. Report
Novartis plots 2,500 more job cuts. Report
CEO: Novartis plans big restructuring. Report

Roche sales surpass Novartis'

Wed, 30 Jan 2008 06:59:56 -0500

Eat dust, Novartis. Roche just posted sales of $42.2 billion, $2.4 billion more than its Swiss rival's $39.8 billion. Strong sales of its cancer drugs helped boost profits by 25 percent to $10.48 billion. The rheumatoid arthritis and lymphoma treatment Rituxan alone delivered revenues of $5 billion, becoming the company's best-selling drug ahead of cancer meds Herceptin and Avastin.

The outlook for 2008 isn't all rosy, however. Tamiflu sales, which dropped 19 percent to $1.9 billion in 2007, will continue to fall off, and Herceptin growth is expected to slow, too. Overall, sales growth will drop to the single digits--and this after seven consecutive years of double-digit increases.

It's flush with cash, though, which it plans to use to accelerate R&D spending and to acquire small to medium-sized companies; it's looking primarily in the diagnostics area, but also would consider small pharma deals. Mega-mergers, however, aren't in the cards, CEO Franz Humer said. Of course, Roche has its Ventana deal to wrap up by the second half of 2008.

- see the release from Roche
- read the article in the Financial Times
- check out CNBC's report
- read the news on cash spending at CNN Money

Related Articles:
Roche invests $387M in biotech. Report
Roche to boost R&D spend, reorganize research. Report
Roche shakes up R&D, eyes new buyouts. Report
Big Ventana owners could nix deal. Report

Pharma noshes at the biotech buffet

Wed, 02 Jan 2008 06:59:55 -0500

If 2007 was the year pharma woke up to biotech, then 2008 will be time for brunch. Drug makers will continue to serve themselves from the biologics buffet, whether by gobbling up entire companies or by snacking on a bit of this candidate and a bit of that one through licensing deals. Plus, back in the R&D kitchen, Big Pharma is working on its own biotech recipes, though none of them are likely to be ready for sampling yet.

There's one potential wrinkle in the tablecloth, though: Reportedly, "momentum is building" for a new FDA pathway for generic biologic drugs (biosimilars). In June, a Senate committee approved legislation that would open that door; now, the House is preparing to consider a similar bill. And biosimilars already are taking hold in Europe. Last week, regulators approved a copycat form of Epogen, the blockbuster anemia drug made by biotech big wheel Amgen.

- here's more about Pharma's anemia-centric love for biotech
- see this article on biosimilar legislation in the U.S.

Related Articles:
Big Pharma makes its big leap into biotech. Report
Lines blur as Big Pharma crosses borders into biotech. Report
Who's next on the biotech buyout hit list? Report
Biotech stocks surge as investors anticipate buyouts. Report

Pharma goes mad for biotech deals

Fri, 21 Dec 2007 06:59:55 -0500

One word: Biotech. As if acting on some wise elder's tip-off, Pharma got its biotech groove on in 2007. The reasoning is clear. Biologic drugs are among the pharma industry's hottest performers. Pharma badly needs new blockbusters. So, hoping to pump up deflated pipelines, drug makers licensed in-development drugs or simply bought entire companies.

Some of the numbers are eye-popping. AstraZeneca shelled out $15.2 billion for MedImmune. Schering-Plough paid $14.4 billion for Organon BioSciences (FYI, that's a 37 percent premium). By comparison, the $2.65 billion Shire plunked down for New River Pharmaceuticals looks like pocket change. Then there's Merck's $1.1 billion buyout of Sirna Therapeutics; the additional $350 million for NovaCardia look like pocket change. Pfizer snapped up Coley Pharmaceutical Group for $164 million--plus it invested $50 million in biotech startups, and it launched a new bio-oriented research center in California.

Meanwhile, licensing deals are flying. Merck KGaA just made a $421 million deal with Idera for cancer therapies. AstraZeneca inked a $400 million deal with Silence Therapeutics, developer of siRNA technologies for use in respiratory diseases and cancer. GlaxoSmithKline paired up with OncoMed to the tune of $1.4 billion, hoping to turn one of its oncologic candidates into the next big thing. And many, many, many more. In fact, biotech is so big in the industry, the old chemical-based drugs are passé, to the point that career chemists are finding their places at the bench dwindling.

The big question is whether drug makers can cherry-pick enough biotech candidates to fill their new-product baskets. Is the old model of in-house R&D on its last legs? Is Big Pharma just too big to deliver real innovation? Stay tuned in 2008.

- see our report on the top five buyouts of the first half of 2007
- read about Big Pharma's love affair with biotech at CNN Money

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Should Pharma take the M&A cure? Report
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