Buyout

Analyst calls Genentech-Roche deal 'inevitable'

Tracy Staton — Thu, 16 Oct 2008 10:05:56 -0400

Genentech disappointed analysts twice this week. Once was with earnings that didn't quite meet expectations (though they were pretty solid, especially in this economy). The second time was with a big fat "no comment" on the potential deal with Roche. On the third quarter earnings conference call, CEO Art Levinson (photo) said, "We will not be discussing anything further on the call today regarding the Roche proposal."

That didn't stop Eric Schmidt of Cowen & Co. from calling Genentech out for a "lack of transparency" on the deal. CFO David Ebersman basically said he felt Schmidt's pain, but the lawyers want Genentech brass to keep its lips zipped.

It also didn't stop Schmidt from upgrading Genentech yesterday, saying that he still believes a deal is "inevitable." The only hurdle, analysts now think, is the gridlock in credit markets, which could be temporarily interfering with Roche's ability to close. Schmidt pegs the price at at least $90; as you know, Roche offered $89 per share for the chunk of Genentech it doesn't already own. DNA shares are trading well below that number now, perhaps because of credit fears.

Meanwhile, as the Wall Street Journal Health Blog points out, Genentech's quarterly numbers only emphasize its allure. Genentech is doing what every drugmaker wants to do: raking in millions on cancer treatments. Avastin sales jumped 18 percent to $704 million; Rituxan was up 15 percent to $655 million; Herceptin also grew by 15 percent to $368 million.

- check out the column at Seeking Alpha
- read the Health Blog post

Bayer CEO scoffs at takeover talk

Tracy Staton — Tue, 16 Sep 2008 11:12:22 -0400

Market watchers can wag their tongues all they like, says Bayer CEO Werner Wenning (photo). The company isn't vulnerable to a takeover, he told a German newspaper, because its market cap of €42 billion is just too much for a suitor to swallow. Wenning acknowledged that "you can't rule out anything, especially not in the current environment," but allowing for a slim possibility isn't the same thing as admitting a fair chance.

You'll recall that last week, rumors of a Pfizer takeover boosted Bayer shares, in spite of the fact that Pfizer has been pooh-poohing talk of doing any big buyout deals. Wenning's reponse didn't stop traders from bidding up Bayer stock yet again, this time to a seven-month high.

Meanwhile, Bayer has been working on a deal of its own: It has agreed to acquire the German drug developer Direvo Biotech for $298 million. A protein engineering expert, Direvo will help beef up Bayer's capabilities in biologic drugs.

- read the Pharmalot item
- check out the AP story
- here's the release on the Direvo buyout

Japanese pharma to pay $1.4B for Sciele

Tracy Staton — Tue, 02 Sep 2008 10:17:54 -0400

In yet another Japanese pharma takeover, Shionogi has agreed to pay $1.42 billion for the Atlanta-based drugmaker Sciele Pharma. That's a $31-per-share cash offer, a 61 percent premium over Sciele's closing price Friday of $19.27.

Why is Sciele worth so much to Shionogi? The Japanese pharma is aiming to launch some anti-obesity and HIV meds in the U.S., and it likes Sciele's sales network. According to the Financial Times, 84 percent of Sciele's 970 workers are sales reps. "Establishing additional overseas sales infrastructure has become an urgent priority for Shionogi," the company said in announcing the deal.

Currently, the lion's share of Shionogi's overseas revenue comes from a licensing deal with AstraZeneca on its cholesterol med Crestor. Obviously, the Japanese firm is looking to diversify and enlarge that sales stream.

Shionogi is in good company. Since December, there have been three big Japanese deals in biopharma: Eisai/MGI Pharma ($3.9 billion), Takeda/Millennium ($8.8 billion), and Daiichi Sankyo/Ranbaxy Labs ($4.6 billion).

- check out the Shionogi release
- read the Financial Times piece
- check out the analysis in the Wall Street Journal

Higher Genentech bid, bigger exodus?

Tracy Staton — Thu, 21 Aug 2008 10:14:37 -0400

Would a bigger bid for Genentech just induce more scientists there to exit out the back door as Roche comes in the front? That's one of the questions arising about this potential mega-merger. In fact, evidence is starting to validate some early doubts about the match: Namely, that Roche might be unable to preserve Genentech's innovative culture, or, at the very least, that fears about losing that research-friendly feeling would send top talent packing.

Here's the worst-case scenario, according to bNet. A bunch of Genentech employees don't want to work for a big company like Roche, period (just check the boards at CafePharma for an unrepresentative sampling). But, more importantly, many scientists there have options that would fully vest in a Roche buyout, which would give them the money to leave. And it's not tough to get venture capital for startups with Genentech scientists at the helm, giving them even more financial incentive.

BNet does the math, and even at around $100, a Roche bid would offer some longtime Genentechers nice chunks of cash. And obviously, the higher the bid, the bigger those buyouts get. Recruiters and VCs have drawn up wish lists of coveted Genentech staffers and have been "ringing their phones off the hook," according to the San Francisco Chronicle.

But consider this, too: Roche will want to keep as many key players as it can. So a buyout could actually be a chance for those standouts to renegotiate a fatter pay package, bank their options money and see how things play out. The recruiters and VCs aren't likely to lose interest.

--read the BNet post
--see the San Francisco Chronicle story
--check out Derek Lowe's take at In the Pipeline

Update:
Genentech sets aside $371M in retention bonuses

Analysts: BMS lowballing ImClone

Tracy Staton — Tue, 05 Aug 2008 06:22:41 -0400

Who would you lay bets on: Carl Icahn or Jim Cornelius? The Bristol-Myers Squibb CEO has hit back at ImClone Chairman Icahn, with a contention that the company's $60-per-share offer is "full and fair." As for Icahn's insinuation that BMS somehow had inside info when formulating its bid, the company says no way. And Bristol says that, by its reading of its contract with ImClone, it does have rights to the experimental drug that Icahn said would compete with star performer Erbitux.

But war of words aside, BMS may very well end up having to pay more for its Erbitux partner. A Wall Street Journal survey of analysts found that they're valuing ImClone at anywhere from $62 a share to $73. And, the WSJ notes, historical premiums for oncology-company buyouts run more to 48 percent rather than the 30 percent Bristol is offering. At that historical premium, the price would be $65 to $70 a share. What do all those valuations have in common? They're all more than $60.

- see the Forbes story
- check out the post at the WSJ Health Blog
- read the CNN Money story

Icahn throws wrench into ImClone offer

Tracy Staton — Mon, 04 Aug 2008 10:50:20 -0400

Carl Icahn has spoken--and he's not satisfied. Bristol-Myers Squibb's $4.5 billion bid for ImClone, he says, is too low. And he's not just a big shareholder, he's ImClone's chairman.

The rest of the board weighed in, too, saying that though it's considering the offer, it also feels the $60-per-share price is too low. Investors appear to agree; they've been buying the shares like crazy, pushing up the price by almost 38 percent.

Complicating matters is the fact that ImClone's board had been chewing over a plan to split the company into two parts: One to manufacture Erbitux, the other to develop the meds in its pipeline. That plan, the board said, could boost shareholder value by itself.

And then there's Icahn saying he's "disturbed" by an unidentified company director who many have given BMS info about ImClone's pipeline and about the plans for the breakup. Apparently, there's an antibody in the pipeline that may have a "significant competitive effect" on Erbitux--and though Bristol has joint marketing rights on Erbitux, it may not have rights to that new prospect.

- see ImClone's release
- read the New York Times story
- check out the Wall Street Journal Health Blog item

Bid-happy analysts play matchup

Tracy Staton — Mon, 04 Aug 2008 10:20:11 -0400

Analysts just can't get their minds off which drugmakers might make a deal next. The most recent suspects are Bayer and Onyx, which are partnered on the liver and kidney cancer med Nexavar. One industry observer pointed out that both the Roche-Genentech offer and the Bristol-ImClone bid include lucrative cancer meds. And if you're looking at cancer meds, this one naturally comes to mind. Onyx shares leapt accordingly last week.

And then there's Johnson & Johnson and Vertex. They're partners; Vertex is working on a drug for hepatitis C, and J&J doesn't have those U.S. rights. So snapping up the whole company might be attractive. "Not cheap, but look what you get," one analyst wrote to investors.

Meanwhile, Deutsche Bank's Barbara Ryan threw some cold water on speculation that Eli Lilly might buy out Amylin for full access to Byetta, the diabetes med. New scrips for that drug have been flat lately, she said. Plus, Amylin is "a one-product story," whereas Genentech and ImClone have more to offer.

- read the post at the Wall Street Journal Health Blog
- check out the item at Pharmalot

BMS bid triggers deal talk

Tracy Staton — Fri, 01 Aug 2008 08:58:22 -0400

Have you noticed that one deal announcement inevitably leads to speculation of another? Well, yesterday's bombshell that Bristol-Myers Squibb had offered $60 a share for ImClone was no exception. Now, the talk goes a few ways: One, will the ImClone deal make BMS more attractive as a takeover target itself? Two, does this deal herald more pharma-biotech tie-ups in the near future?

The New York Times looks at the latter possibility, which at this point seems something of a no-brainer. Pharma's appetite for biotech deals is voracious right now, as drugmakers look to fill their anemic pipelines with promising meds and to make up future sales losses to generic competition. But the NYT names names--or at least names the companies that saw their stocks jump on the BMS announcement as investors bet that they might be bought out by their drugmaker partners. One example is Amylin Pharmaceuticals, which partnered with Eli Lilly on a diabetes med. According to the Wall Street Journal, Amgen options also saw a lot of action.

Then the WSJ Health Blog passes on an analyst assessment of Bristol's sellability post-ImClone buyout. Sanford Bernstein's Tim Anderson--who's pegged BMS as an acquisition target before--says that buying its Erbitux partner makes BMS "a more sellable company." It would not only have full Erbitux rights, but several experimental biotech meds, too. And BMS has been streamlining itself, which could make it more attractive to a buyer. Only problem is its size; at a $40 billion market cap, only a major player could swallow it.

- see the NYT story
- read the post at the Health Blog
- check out the WSJ article

ALSO: Wall Street has been in a tough spot these last few months, with the S&P 500 losing 9.5 percent over the course of June and July. But the biotech industry has emerged as a safe haven for investors in the face of poor performance in other sectors. Report

Roche offer could swallow Genentech

Christe Bruderlin-Nelson — Wed, 23 Jul 2008 10:36:51 -0400

Genentech is one of the earliest and most successful biotech companies out there, but can it stay biotech's golden child following a buyout by Roche? That's the question on at least a few industry minds in light of Roche's offer to buy the remaining 44 percent of Genentech. While its director's haven't responded to the bid, analysts are saying the offer of $89 per share (for a total of $43.7 billion) is too low.

At least one biotech analyst weighed in, and quite harshly, on the potential deal. In a note to investors, Geoffrey Porges wrote, "The most important part of Genentech's value is in soft assets--the world-leading scientists, the culture, the single site, the values and history," adding, "Many of these will walk out the door if the company becomes simply a research subsidiary of Roche. If this deal closed, we believe Roche will be judged in the future to have killed one of the great research entities in the industry's history." Porges is a biotechnology analyst at Sanford C. Bernstein.

Roche has owned the majority of Genentech stock for some time, but Genentech retained strong autonomy. With a full stock buyout, will Genentech be swallowed up by a pharma giant, as other biotechs have? Will it lose its California culture? Will it lose its most talented employees?

"We will do everything to preserve the unique and science-driven culture of Genentech, something which made Genentech so successful and something we want to build on," Severin Schwan, Roche's CEO, told the Wall Street Journal. Still, the employee question is one that awaits an answer. Members of the Roche management team tried to lay fears to rest earlier this week by focusing on the opportunities that the purchase would bring, but the likelihood of a move to California coupled with clashing cultures could mean some pretty big challenges are ahead for both companies.

We know you're following this story as closely as we are, so stay tuned.

- read more at Forbes
- here's what the New York Times has to say
- get the LA Times version
- check out this Pharmalot blog post
- find the WSJ blog post

Roche has ways to limit Genentech price

Tracy Staton — Tue, 22 Jul 2008 11:51:06 -0400

The Roche offer for Genentech is still reverberating through the news today, spawning all sorts of price speculation and predictions about Genentech's probable future if owned outright by the Swiss drugmaker. One story caught our eye, though, because of the widespread feeling that Roche will have to raise its bid--from $89 a share, a 9 percent premium--to nab the share of Genentech it doesn't already own.

The fact is that Roche has some protections built in to its original acquisition of 56 percent of its target. According to the Wall Street Journal Health Blog, Roche can keep other companies from getting into the game with higher offers--which would prevent a costly bidding war. Also, if Genentech's other shareholders nix the $89-a-share offer, Roche has the right to hire investment bankers to assign an acquisition price, and then go ahead with the deal without shareholder OK.

- see the WSJ Health Blog post

PPF leaves Zentiva to Sanofi

Tracy Staton — Tue, 22 Jul 2008 10:01:02 -0400

PPF Group has bowed out of the competition for the Czech generics maker Zentiva, saying it has "certain doubts about the real value of the company"--and that it doesn't want to end up in a bidding war with Sanofi-Aventis. The news prompted Sanofi to reiterate its 1,050 koruna-per-share offer, which values the company at $2.69 billion.

No word yet from Zentiva management, who quickly rejected PPF's lower offer--950 koruna--and, after some deliberation, came out against Sanofi's, too. As you know, Sanofi already owns 25 percent of Zentiva, while PPF together with an Italian insurer holds 19 percent.

- check out PPF's release
- read the story at MarketWatch

Roche bid may trigger a Genentech standoff

Tracy Staton — Mon, 21 Jul 2008 10:23:36 -0400

You've probably heard that Roche today offered $89 per share for the 44 percent of Genentech that it doesn't already own, or $43.7 billion. It's a premium of about 8.8 percent over Friday's close and 19 percent over one month ago. Immediately, some analysts deemed the offer inadequate. Investors seemed to think so, too; Genentech's Frankfurt shares quickly soared past $89, and in the U.S., shares climbed to $95.25 before the market opened.

So, are we set for another long-playing game of buyout poker? You'll recall that Roche spent months offering $75 a share for the diagnostics company Ventana, steadfastly proclaiming the whole time that it wouldn't up the price. But Ventana management held out, and so did its shareholders. Finally, in January, the two companies made a deal for $89.50 a share.

Wall Street seems to think a counteroffer is in order: One raised his Genentech price target to $105, saying that Roche could up its bid to $120 per share. Another said the offer undervalues Genentech's pipeline--and it's true that an 8.8 percent premium isn't much compared to Big Pharma's other bids for biotech firms. But in a letter to its independent directors, Roche called its offer "fair and generous," and in a press release pledged that combining the two companies would almost immediately benefit shareholders. We'll see how Genentech responds--and what Roche does after that.

- see Roche's release
- check out the story in the New York Times
- read the WSJ Health Blog item
- find the news in Forbes

It's Teva plus Barr in a $7.46B buyout

Tracy Staton — Fri, 18 Jul 2008 08:42:37 -0400

It's official: Teva and Barr are getting hitched. It's a $7.46 billion cash-and-stock deal that will combine the world's largest and fourth-largest generics makers into one big copycat drug powerhouse. Teva will get added strength in Central Europe and in fast-growing Eastern-European markets. And, as the Wall Street Journal notes, it will expand not only Teva's portfolio of generics, but its branded drug business. Barr has first-to-market rights for several new generics over the next few years, and it has a strong set of branded women's health meds. Plus, it will vault Teva forward in its strategic plan to reach $20 billion in sales with a 20 percent margin by 2012.

Under the terms of the deal, Barr's common stock will be converted to cash and Teva ADRs at a per-share rate of $39.90 and .6272 of an ADR, valuing Barr at $66.50. That's a 42 percent premium over Wednesday's price and a 16 percent premium to Thursday's--which includes a big jump in value on rumors of the takeover. Teva also will assume $1.5 billion of Barr's debt.

Just how big of a generics maker might the combined companies represent? Pro forma, 2007 revenues would have been about $11.9 billion. And together, the two companies would operate in more than 60 countries. In a note to investors before the official announcement, Goldman Sachs said a deal in the $8 billion range would quickly add to Teva's earnings on a cash basis. But, the analysts said, combining with Barr would give Teva more exposure to the U.S. market, where growth is expected to slow.

- check out Teva and Barr's release
- read the WSJ story
- see the news from the Associated Press
- get more on the financial side from Portfolio
- find Goldman's investor note in Barron's

Zentiva spurns Sanofi's buyout offer

Tracy Staton — Fri, 18 Jul 2008 08:09:51 -0400

Sanofi-Aventis hasn't been so lucky in its bid to buy the Czech generics maker Zentiva. The object of Sanofi's desire rebuffed the $2 billion takeover offer, as its board of directors told shareholders that the price doesn't fairly reflect the company's "underlying value" and "future prospects." Zentiva enumerates its reasoning--arrived at with the help of Merrill Lynch, which it hired to evaluate the offer--in a document available at the link below. Sanofi, as you know, already owns a 24.9 percent interest in the company, which it bought in 2006 for $523.9 million from Warburg Pincus.

You'll recall that last month a Czech financial company, PPF Group, offered 950 koruna per share for Zentiva, and the company promptly announced its contempt for that price. Sanofi then offered 1,050 koruna; we now know what Zentiva management thinks of that. And here's where things get really interesting: Will PPF come back with a higher offer? And if so, will Sanofi counter? Zentiva management seems to think that a bidding war is in order; we'll see whether its suitors do, too.

- read Zentiva's release
- see the story at Trading Markets
- check out the New York Times Deal Blog's take

Rumor mill: Teva mulling $7.5B deal for Barr

Tracy Staton — Thu, 17 Jul 2008 09:56:29 -0400

The world's biggest generics firm may be about to get bigger--a lot bigger. Teva is reportedly in talks to buy Barr Pharmaceuticals for upwards of $5 billion; some reports quote a price as high as $7.5 billion. The latter figure would be a 50 percent premium for Barr, which closed the regular trading day at $46.82 but after hours leapt 19 percent to $55.51 on the news.

Reports of the negotiations appeared in two Israel dailies, and a UBS analyst issued a note ticking off reasons a Barr buyout would make sense for Teva: It would give the Israeli company access to the oral contraceptive market, strengthen its European presence and boost efficiencies by "eliminating duplicate infrastructure in the U.S."--which sounds like shutdowns and layoffs to us, but given the fact that no deal's been struck, that's getting the cart before the horse.

This year Teva's already announced a buyout of Bentley Pharmaceuticals, which has a strong presence in Spain, and a deal for CoGenesys, a biotech. Though the company is sitting on some $3.6 billion in cash, a whopper Barr deal would require it to take on more debt and do some kind of equity payment, too, an Israeli investment bank predicted. Teva refused to comment on "market rumors."

- see the story at MarketWatch
- read the Globes article

Sanofi launches $1.92B Zentiva offer

Tracy Staton — Fri, 11 Jul 2008 09:44:31 -0400

Make way for Sanofi-Aventis. The French pharma has officially launched a $1.92 billion counterbid for Zentiva, the Czech generics maker. It's a 14.6 percent premium over Zentiva's closing price the day before PPF Group announced its buyout bid--and 1,050 crowns per share compared with PPF's bid of 950 crowns. At Sanofi's price, the value of Zentiva would be $2.69 billion.

Zentiva officials now say they'll comment on the offer, which they had avoided doing since Sanofi announced its plans to make a bid last month. Zentiva wasn't so shy when it came to PPF's lower offer; the Czech company flat out told shareholders that PPF's bid was too low.

You'll recall that Sanofi bought a 24.9 percent stake in Zentiva back in 2006 for $518 million. The new bid is for the remaining 75.1 percent--but PPF owns 19.2 percent in partnership with an Italian insurer. If Sanofi can assemble a patchwork of other major shareholders--including management and employees at 5.9 percent--it could reach a 48.5 percent share--and then would only have to get a few minority shareholders on board. The offer is contingent on Sanofi amassing more than 50 percent of the company.

- here's Zentiva's statement
|- read the CNN Money story

German firm pledges $4.6B for APP Pharma

Tracy Staton — Mon, 07 Jul 2008 08:37:33 -0400

A German company is snapping up APP Pharmaceuticals in a deal worth more than $4.6 billion. Fresenius, an $18 billion company that sells products and services to hospitals and home healthcare groups, says the buyout will expand its presence in the lucrative U.S. market.

APP, you'll recall, has been in the news this year as the sole remaining U.S. producer of the blood thinner heparin. When Baxter saw its heparin production contaminated, it stopped making most of its heparin products; APP didn't have the same contamination problems, so it ramped up to try to fill the supply gap. APP also makes other injectables such as vitamin supplements, hormones, and diruretics.

An interesting side note: APP's recently-ex CEO Patrick Soon-Shiong owns some 83 percent of its stock, so you can bet he's saying ka-ching! Also CEO and a major investor in Abraxis BioScience, Soon-Shiong's share of the APP buyout could amount to as much as $3.8 billion if certain performance targets are met.

- read the Wall Street Journal story
- see the article in the Los Angeles Times

Will Pfizer counterbid for Ranbaxy?

Tracy Staton — Fri, 13 Jun 2008 09:41:21 -0400

We could have a takeover battle on our hands, folks. Pfizer is reportedly mulling a hostile bid for Ranbaxy, which just inked a buyout deal with Japan's Daiichi Sankyo. Daiichi contracted to buy the Singh family's 35 percent stake in Ranbaxy, plus mount a tender offer for another 20 percent or more of the outstanding shares. It's a deal worth almost $5 billion.

But hold on. As the story goes, Pfizer would swoop in and offer to buy out Ranbaxy's institutional owners--about 41 percent of the company--and individuals, who account for about 21 percent of the outstanding stock. Presumably, Pfizer would up the ante over Daiichi's 737-rupee-per-share bid. Neither Pfizer nor Daiichi would comment; Ranbaxy said the Daiichi sale is a done deal. But the markets reacted to the rumors anyway. Both Ranbaxy and Pfizer's Indian unit saw their shares leap on the Indian markets, while Daiichi's stock dipped a bit in Tokyo.

Pfizer had been in buyout talks with Ranbaxy about a year ago, sources told India's Business Standard, but those proved fruitless. Why would it want to step in now that Ranbaxy is pledged to another? For the same reasons Daiichi wants it: A major foothold in India's hot emerging market, a strong generics portfolio, access to Ranbaxy's low-cost manufacturing and distribution network. And then there's the $10 billion drug Lipitor. Ranbaxy just got FDA approval--and 180-day exclusivity--to sell a copycat version beginning in March 2010. Why should Pfizer lose all that cholesterol-drug revenue when, with a buyout, it could recapture it?

- see the London Times story
- check out Forbes' rationale for a deal
- read the Wall Street Journal Health Blog post
- find the coverage at India's NDTV
- get the news from India's Economic Times

Rumor Mill: Pfizer eyeing MediGene

Wed, 14 May 2008 06:59:54 -0400

Rumors are swirling that Pfizer is looking to take over the German biotech MediGene. Shares of the smaller company leapt more than 12 percent today as reports of a possible deal hit the newswires. Neither company would comment on whether they've held talks, as reports suggest.

MediGene specializes in cancer, autoimmune disease, and skin disease; its two marketed products are the prostate cancer treatment Eligard and a genital warts med Veregen. European approval for a skin drug, Oracea, is pending. In the pipeline: A pancreatic cancer drug, Endotag.

- see the story in Forbes
- check out the brief at Thomson Merger News

Roche still confident on Ventana buyout

Wed, 10 Oct 2007 06:59:58 -0400

Does he know something we don't? Roche CEO Franz Humer says he's "very confident" that the company's $3 billion takeover bid for Ventana will be accepted.

Humer also told the Financial Times today that hedge funds have bought out Ventana's leading shareholders. And he has "no intention" of increasing the value of Roche's tender offer, despite the fact that the $75 buyout price is less than Ventana's current stock price.

- read the Financial Times article

Related Articles:
Roche asks, Ventana says no...again. Report
Roche wins round in battle for Ventana. Report
Roche note opens door to a higher Ventana bid. Report
Ventana spurns Roche's $3B hostile takeover bid. Report
Ventana shares soar on hostile $3B bid. Report

Read more on: Roche