Jakarta Globe – AFP, Apr 27, 2014
New York. Global pharmaceutical companies facing major patent expirations have announced billions of dollars of transactions in a wave of deal-making that could ultimately include mega-mergers and hostile takeovers.
Customers buying goods in an independent pharmacy in Hong Kong on Nov. 18, 2013. (AFP Photo/Anthony Wallace) |
New York. Global pharmaceutical companies facing major patent expirations have announced billions of dollars of transactions in a wave of deal-making that could ultimately include mega-mergers and hostile takeovers.
On Tuesday,
Switzerland’s Novartis, GlaxoSmithKline of Britain and US group Eli Lilly
announced nearly $25 billion worth of deals to shift key assets in oncology,
vaccines and animal health among the three giants.
The same
day, Canadian company Valeant, working with activist investor Bill Ackman,
unveiled a bid to acquire Botox-maker Allergan for $45.6 billion. The proposal
suggested Valeant would launch a hostile campaign if management does not accede
to “productive discussions.”
Both deals
were shadowed by the possibility of an even more dramatic outcome: the purchase
by US giant Pfizer of Britain’s AstraZeneca for more than $100 billion. Pfizer
reportedly approached AstraZeneca about such a deal, although talks are not
active.
The stream
of activity comes as pharmaceutical giants seek to make up for lost sales as patents
expire and as medium–sized firms and generics specialists take steps to grow by
acquisition.
“We expect
the next few years to be particularly active from a mergers and acquisitions
perspective and hence pivotal in the reshaping of the industry,” said Barclays
analyst Shubhomoy Mukherjee.
If this
week’s transactions are completed, including Valeant-Allergan, that would lift
the total on healthcare deals in 2014 to $162.1 billion, making it the second
biggest sector in terms of deals after telecommunications, according to
Dealogic.
Driving the
realignment is pressure on pharma giants to build up specialty businesses and
exit lower-priority investments that in some cases have suffered from their
second-fiddle status within their companies.
Pharma
companies typically enjoy huge profit margins on blockbuster drugs, but the
expiration of patents leaves them vulnerable to steep declines in sales.
AstraZeneca
chief executive Pascal Soriot said the bulk of the British giant’s research
investment focused on three core areas — oncology, cardiovascular and metabolic
disease, and respiratory, inflammation and autoimmune problems.
The
company, aiming to spend less outside these fields, is exploring “partnering
options” for its remaining research in infectious diseases and other areas,
Soriot said.
“We’re
looking at a variety of options that we hope to conclude very quickly,” he
said.
Soriot
would not be drawn into a discussion of a Pfizer deal, but the Astra chief
argued the company can make it on its own.
“Of course
we are always considering options that accelerate shareholder value where it
makes sense,” he said. “But at this point in time we are very convinced that
our strategy is working. “We are creating value through progressing our
pipeline. And we’ll continue doing this on an independent basis.”
Recovering
from the ‘patent cliff’
The
Novartis-Glaxo-Lilly transactions further Novartis’ efforts to boost its
specialties in oncology, Glaxo’s efforts to build vaccines and Lilly’s efforts
to become a bigger player in animal health.
Novartis
and Glaxo also announced plans to create “a world–leading consumer healthcare
business” focused on wellness, oral health, nutrition and skin health. The
venture would sell popular remedies to quit smoking and address back pain, and
is geared at growing market share in developed and emerging markets.
Valeant too
is looking to become a dominant force in choice fields, which include
dermatology, aesthetics and ophthalmology. Valeant has said its goal is to
become one of the five biggest pharma companies by 2016.
Merck,
which has slashed headcount as it contends with the loss of patent exclusivity
of its allergy and asthma drug Singular and other best-sellers, is reportedly
looking to divest its consumer–brands business for $10 billion or more. The
unit includes products like Coppertone and Claritin.
Merck has
also streamlined its research efforts to focus on Alzheimer’s, oncology and
other choice areas.
Analysts
said AstraZeneca could provide Pfizer with some strong products in oncology,
cardio-metabolism and other fields, complementing the US giant’s offerings and
adding to its product pipeline.
Pfizer,
which has faced the challenge of falling off the so-called “patent cliff” for
Lipitor and other blockbusters, also has a history large mergers.
“The
thought process is that it may be faster and more prudent to buy products
through mergers and acquisitions,” said analysts at Credit Suisse. “It takes
out uncertainties. It may be more simple and much cheaper than attempting to
develop new products.”
But
Pfizer’s recent moves have not telegraphed a mega-merger as the most likely
course, analysts said.
Pfizer last
year spun off its animal-health business into Zoetis and has begun
restructuring its operations into three units.
Given these
actions, Credit Suisse assessed an Astra deal as “surprising” and less likely
than “bolt-on acquisitions.”
Agence France-Presse
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“…I'm in
Canada and I know it, but I will tell those listening and reading in the
American audience the following: Get ready! Because there are some institutions
that are yet to fall, ones that don't have integrity and that could never be
helped with a bail out. Again, we tell you the biggest one is big pharma, and
we told you that before. It's inevitable. If not now, then in a decade. It's
inevitable and they will fight to stay alive and they will not be crossing the
bridge. For on the other side of the bridge is a new way, not just for medicine
but for care. Paradigms that have not yet been thought of, which don't
represent any system that currently exists, will be created and developed by
young minds who have concepts that the seniors don't know about. Things that
don't have integrity today will fall over tomorrow. Just get ready. It's all
part of what's on the other side of the bridge. And the old energy won't like
it, and they will object. …”
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