Unless you have been under a rock the past few days, you could hardly miss all the activity in the biotech and pharma world involving buy outs, mergers, joint ventures, and divetitures or near misses of all kinds. The world has gone deal making mad the past few days. You need a score card and an active Twitter feed just to keep up. Since I was barred from making any posts by evil cyberattackers who prevented my access to Typepad -- I will try to recap some of the highlights here with a few minor comments:
Where do we even begin? Well first over the weekend it was revealed that Pfizer supposedly offered AstraZeneca $101 B to merge. Commentators have noted that Pfizer could buy some small countries with that price. AstraZeneca was deemed to be uninterested and talks have puportedly cooled to nothingness. Nevertheless, I found it surprising that Pfizer would make such an offer given their comments on the disruptiveness of megamergers in the several year wake of the Wyeth deal. They had supposedly taken "the pledge" to forgo such nonsense in the future. However, from a pure business standpoint both Pfizer and AZ could use a jolt with relatively weak pipeline and big losses of revenue due to patent expirations of key products. Pfizer apparently has more money than sense in this regard, and has a need to spend those bucks outside the US (lest they get hit with repatriation costs) so were willing to try something BIG. As the saying goes, "if you are going to eat sh*t, take a BIG bite." AZ may have saved Pfizer from itself.
Then our friends at Novartis really gave us a late Easter present with all their activities yesterday. Where to begin? Novartis of course acquired GSK's oncology assets and also secured a position of first to refuse for products that are in the pipeline. This was generally well perceived as positivies for both Pfizer and GSK. Novartis cemented its oncology portfolio and GSK dumped an oncology portfolio that had it in 14th place so was mainly a distraction on balance. That part of the deal was worth up to $16 B. GSK says it will give back $4 B to its shareholders (yeah me!).
On the flip side, GSK bought all of Novartis' vaccine assets except for its flu products. Again, this builds on GSK's stronger position in vaccines and whose to say wether they may not also nab the flu assets when those are sold off by Novartis through a separate process. Novartis for its part will exit a vaccine segment where it was not able to compete in the first tier with the likes of Sanofi, Merck and GSK. So this looks like the proverbial win-win for both companies.
GSK and Novartis also decided to enter a joint venture together with their consumer OTC lines. The combined entity has more than $10 B in sales. Novartis will have a 36.5% share of this business compared to the 63.5% for GSK. The board seats will be split 4:7 respectively. Finally, Novartis also sold off its animal health business to Eli Lilly for $5.4 B. This is another case of addition by subtraction for Novartis.
Last on the big news parade, was Valeant's hostile offer to buy Allergan for $45 B. Valeant's CEO has pledged to make this company a top 5 pharma by 2016 -- a task that would require that Valeant get up to $150 B in market cap. An acquisition of Allergan ($40 B cap) will go a long way toward this if Valeant can pull it off. So far Allergan seems less than enthused. The deal would give the combined entity a strong position in opthamology, dermatology, anesthetics, dental and emerging markets. Plus it can be partially funded by $2.7 B in annual cost cutting (dreaded synergies), 80% of which can be achieved in only 6 months according to Valeant sources. This will be another coup for Michael Pearson if he can pull it off.
That's All Folks....
Bruce Lehr April 23rd 2014.