Deal Fever Hits Global Pharmaceutical Sector

Jakarta Globe – AFP, Apr 27, 2014

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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"THE BRIDGE OF SWORDS" – Sep 29, 2012 (Kryon channeled by Lee Carroll) - (Text Version)

“…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. …”