PHARMA DEALS DURING OCTOBER 2014

(Part 1 out of 3)

by Roger Davies

 

Following on from last month's initiatives from the US Treasury to modify the tax guidelines, there has been a distinct change in the deal flow. One of the big acquisition stories of 2014 has reached closure now that AbbVie is drawing a line under its planned acquisition of Shire and other companies are backing off or restructuring planned M&A

Tax inversions—quo vadis?

It has been interesting to see how the various companies have reacted to the US tax guidance changes in terms of their M&A strategy. Even though the integration teams were hard at work in Shire/AbbVie, AbbVie announced the termination of the acquisition based on the Board's withdrawal of its support for the deal. The company specifically commented that the ongoing uncertainty around the tax position such that if further measures were taken by the US government, this would impact the financial viability of the deal.

Of course this has had an impact on both businesses [Shire's shares initially fell by almost 30%] with the sole remedy for Shire being the $1.6 bn termination fee. However AbbVie is showing clear intent to put other strategies in place ahead of the Humira patent expiry [2106] and the company has not ruled out further acquisitions albeit of a lower value. AbbVie is also keen to keep shareholders on side, announcing an increased quarterly dividend and share repurchase scheme. By reducing the amount of share capital this increases the earnings per share in the future. 

Another company which was not successful with its planned acquisition strategy is Pfizer which is also busy buying back its shares with an $11 bn share repurchase scheme. The company is also stating its interest in securing a big deal irrespective of the new tax guidance. So watch this space.

The need to keep the shareholders happy is paramount as evidenced by the rather unexpected dispatch of Sanofi's CEO Chris Viehbacher following concerns over the impact of the pricing environment on its key diabetes franchise in the US.  So how will the various US businesses invest any significant amounts of non-US cash sitting around in operating subsidiaries?  One option of course would be to deploy this into local deals and acquisitions but would this keep the shareholders happy if it only generates more non-US profits which cannot be easily repatriated?  Local deals are often not reported and generally do not deliver the required big headlines. On the plus side, non US acquisitions certainly do not attract the same amount of shareholder activism and litigation.

Other companies sticking firmly to their M&A plans include Mylan with its purchase of Abbott's generics business for $5.3 bn but the deal has been re-structured with better pricing terms for Mylan plus 5 m more shares; Mylan will own 78% of the company.  Medtronic is also pressing ahead with its takeover of Covidien and, as in the case of Mylan, this deal has required restructuring with Medtronic borrowing $16 bn in place of the cash accrued in overseas subsidiaries. 

In contrast though, a casualty was the Salix acquisition of Cosmo Pharmaceuticals with a breakup fee of $25 m. Similarly, another pending deal was the intended acquisition of QLT by Auxilium now abandoned.  In a major about face, after adopting a poison pill strategy following receipt of an unsolicited offer from Endo, Auxilium has capitulated and the $2.6 bn acquisition by Endo is moving ahead. A cash and stock transaction, this gives a value of $33.25 per share, a 55% premium. Deemed to be the best solution, QLT is no longer of interest and is left out in the cold with a $28.4 m termination fee and the need to look at other strategic options. 

Topping this month's table is the acquisition of CareFusion by Becton Dickinson with a $12.2 bn deal of cash and stock valued at $58 per share [a premium of 26%].  Medtech deal activity continues apace with consolidation in the top players in this sector.  

So M&A activity aside, what is happening on the licensing front?

Building on existing partnerships

This month sees several deals that build and develop on existing relationships.  

First up is the ever deal active Celgene closing a transaction with Sutro Biopharma for the almost customary headline value of $1 bn. An oncology deal for multispecific antibodies and antibody drug conjugates [ADCs], this transaction builds on the original deal signed in December 2012 with a headline of $500 m. Sutro receives an upfront of $95 m with a further $90 m in additional payments. A key feature is Celgene's exclusive option to acquire Sutro, including all rights to Sutro-owned programmes. Sutro also has deals in place with Merck Serono and Pfizer.   

Originally signed up with Aduro Biotech in May 2014, J&J secured a global exclusive licence [headline value $365 m] for product candidates specifically engineered for the treatment of prostate cancer based on Aduro's novel LADD [live-attenuated double-deleted Listeria monocytogenes strains that have been engineered to induce an innate immune response] immunotherapy platform. Now with a headline of $847 m, Aduro receives an upfront of $30 m with $817 m in milestones for ADU 214 in the treatment of lung cancer.

Fuente: PMLiVE

Haciendo click en cada uno de los links siguientes, 

accederán a los Contenidos de nuestros 

TALLERES DE CAPACITACIÓN IN COMPANY A MEDIDA:

(translator on page)

¿Cómo INCORPORAR y APLICAR Modelos de
PENSAMIENTO ESTRATÉGICO?
(aplicado al Sector Salud y Farma, con resolución de casos reales en tiempo real)

http://msg-latam-meic.blogspot.com.ar/2014/06/capacitacion-in-company-programa_6246.html

¿Cómo GERENCIAR EFICAZMENTE a partir del

MANAGEMENT ESTRATÉGICO?

(aplicado al Sector Salud y Farma, con resolución de casos reales en tiempo real)

http://msg-latam-meic.blogspot.com.ar/2014/06/capacitacion-in-company-programa_3.html

¿Cómo GERENCIAR PROCESOS DE CAMBIO

y no sufrir en el intento?

(aplicado al Sector Salud y Farma, con resolución de casos reales en tiempo real)

http://msg-latam-meic.blogspot.com.ar/2014/06/capacitacion-in-company-programa.html

¿Cómo IMPLEMENTAR ESTRATEGIAS EFECTIVAS?

Recetas para Escenarios Turbulentos

(aplicado al Sector Salud y Farma, con resolución de casos reales en tiempo real)

http://msg-latam-meic.blogspot.com.ar/2014/06/capacitacion-in-company-taller-de.html

Consultas al mail: msg.latam@gmail.com

ó al TE: +5411-3532-0510