Let's just wrap up this week with summaries on where we stand with various M&A activities -- with focus mainly on AbbVie and Shire, and Valeant and Allergan.
AbbVie CEO Richard Gonzalez is making the rounds talking about the strategic value a succesful Shire acquisition would bring to AbbVie and its shareholders. Mainly, he's focusing on how Shire's portfolio will help fill out that of AbbVie -- which is very dependent on Humira (57-60% of sales) -- with high value rare disease and orphan drugs. The influx of sales coupled with a gain of Ireland's more favorable tax status will allow AbbVie to invest more in R&D and will also throw off cash that could be sent directly to shareholders in dividends. Unlike Pfizer-AZ, there will be no need to consider staff cutbacks. AbbVie is keeping it all upbeat and seems to be trying to avoid any pitfalls of the failed Pfizer-AZ bid (replete with missteps re tax inversions, R&D cutbacks, budget cuts, etc). Most importantly tactically, Gonzo has refrained from ruling out a hostile bid should it come to that and is already polling major investors. See Fierce Biotech, PharmaTimes and Bloomberg.
Shire's CEO, Flemming Ornskov, is also takng to the road to hype the value of letting Shire remain independent and charting its own path to prosperity. He notes the company has grown from $19 B market cap when he was hired to its nw $44 B cap. He has consistently characterized the AbbVie bid as undervalued and used that as the basis of 3 prior rejections up till now. Further, he has all but promised Shire's shareholders that the company will rocket to $10 B in sales by 2020 without any takeovers -- just based on growth of exisiting drugs (up to $7 B) and its current pipeline (another $3 B). Analysts watching from the sidelines indicate that AbbVie could get this doen by raising their offer about 10% from $46.5 B to $51 B or so. See Fierce Biotech.
Next on the hit parade is Valeant and Allergan saga. It seems that CEO Pearson has been able to line up a few more biggie's amongst Allergan shareholders and now can count on Paulson & Co (and its 6 million shares) to back its play to acquire Allergan by calling for the special shareholders meeting. This will allow it to (hopefully for Valeant view) replace Allergan board members with friendly conspirators. In addition to Paulson, T. Rowe Price (9th biggest) is also said to be backing Valeant's play. If Valeant can get to the special meeting, they should prevail in their hostile takeover. See Fierce Pharma.
But not too fast, maybe. It seems US Senate is getting into the act peripherally. Seven US Senatorsare asking to federal regulators to look into potential impact of Valeant's hostile takeover of Allergan. The've asked FTC and DOJ to look into anti-competitive effects of proposed deal. They have also expressed worry of negative effects on drug pricing. Since we're talking about Congress, this is largely NOISE I presume but could have small chance of throwing wrench in Valeant's works. I would not hold my breath though. See Bloomberg.
Finally, a short piece from Herper's column in Forbes regarding Eli Lilly's insulation from takeover threat. The gist is that despite Lilly's lagging size and tough sledding in past few years, it is still largely protected from any takeover attempts due to an Indiana State Law that would make any hostile takeover complicated and expensive for an acquirer. Basically, it allows a State to block such takeovers of its large companies to prevent job and tax losses. Since its passage in 1986, no hostile takeover has occurred in Indiana -- and the Supreme Court upheld the law in 1987. Case closed for now. See Forbes.
Posted by Bruce Lehr June 27th 2014.