April 2014: Tsunami in the Global Pharmaceutical Industry & Consumer Health Care Sector – New Organizational Structure Emerging
Commentator: Aviva Lev- Ari, PhD, RN
UPDATED on 2/19/2015
2014 – The Year of Pharma Very Expensive M&A
http://pharmaceuticalintelligence.com/2015/02/19/2014-the-year-of-pharma-very-expensive-ma/
UPDATED on 7/21/2014
Allergan Reports Second Quarter 2014 Operating Results
http://agn.client.shareholder.com/releasedetail.cfm?ReleaseID=860851
FierceBiotech reported t
Allergan aims ax at R&D, eliminating 1,500 jobs in bitter takeover fight
By John Carroll
Struggling to escape Valeant’s ($VRX) unwanted $53 billion takeover attempt, Allergan came up with plans to chop back its budget–axing 1,500 workers and eliminating another 250 vacant positions. Allergan’s release Monday morning is light on details, but the company clearly plans to cut back on early discovery work in what had been a rapidly growing R&D division.
Altogether, Allergan ($AGN) says its cost-cutting regimen–which will eliminate 13% of its workforce–will reduce its 2015 budget by $475 million. Reductions in spending will hit across the board, affecting its commercial organization, general and administrative functions, manufacturing and research and development. The emphasis at the company now is preserving “customer-facing” staff as well as all the key development programs now in the pipeline.
But there was a clear hint of where the ax will fall. The company noted that while it will continue all programs in the clinic, “any reductions in discovery programs will not impact approvals within the strategic plan period.”
Allergan CEO David Pyott
Allergan execs had earlier promised some deep cuts as they continue to resist the increasingly bitter charges being leveled against the company and its executive staff by Valeant and its allies. But the company just lost a key ally. The Wall Street Journal reported this morning that one of its biggest investors, Capital Research & Management, sold its stake in the company after meeting with CEO David Pyott.
In a call with analysts Monday morning Pyott emphasized that the company is in the hunt for new acquisitions, both large and small. He steered clear of mentioning any possible buyout targets, but offered that the perfect profile would be a “specialist in nature” with a good growth profile, good margins and a new therapeutic “pillar” that they could use to develop new products and grow sales more.
Bill Ackman and Valeant have been working to scrape together a 25% stake in the company, which they say will trigger a shareholders’ meeting to vote on its slate of proposed directors.
Just a few weeks ago Allergan was forced to acknowledge that the FDA had rejected–for the third time–migraine drug Semprana. Two of those rejections came after Pyott bought the therapy. Allergan said today that the next FDA action on Semprana is expected by the end of the second quarter in 2015.
R&D cutbacks were definitely not on Pyott’s agenda when he began the year. In an interview with FierceBiotech at the J.P. Morgan conference in January, Pyott bullishly outlined plans to beef up its growing R&D wing, which at that time had a staff of about 2,500. Pyott outlined plans to add hundreds more investigators as it looked to boost its total research allocation from $1 billion to $1.5 billion over the next 5 years. And a confident Pyott added that he was ready and willing to spend billions more to cover the cost of new acquisitions and pacts aimed at expanding the company’s core research focuses–while pondering the addition of a new drug category to the list of 5 core focuses if the opportunity looks right.
Allergan beat out Street estimates for Q2 and raised its earnings estimates for the next two years, a move that analysts say could make Valeant pay more than $53 billion if it plans to complete the acquisition.
“The company raised its guidance to a range of $8.20-$8.40 in 2015 and ~$10 in 2016, versus our $6.70 and $8.23 and consensus of $6.90 and $8.18, respectively,” noted Sterne Agee analyst Shibani Malhotra this morning. “Applying an 18x – 20x multiple to 2016 guidance gives a standalone value of $180-$200 per share. Today’s announcement by Allergan makes it more difficult for Valeant (VRX, $121.97, NR) to demonstrate how a merger can add incremental value and AGN shareholders may now require Valeant to pay a greater premium for Allergan, we believe.”
Related Articles:
‘Unpromising’ Allergan drug projects headed for the chopping block–report
FDA hands out its third rejection for Allergan’s migraine drug Semprana
Hostile Allergan bid is part of Valeant’s war on ‘value-destroying’ R&D
SOURCE
From: FierceBiotech <editors@fiercebiotech.com>
Reply-To: <editors@fiercebiotech.com> Date: Mon, 21 Jul 2014 16:22:21 +0000 (GMT)
To: <avivalev-ari@alum.berkeley.edu>
Subject: | 07.21.14 | Allergan slashes R&D, cuts 1,500 jobs; J&J partner gets a ‘breakthrough’
- Much higher Concentration ratio in the Global Pharmaceutical Industry & Consumer Health Care Sector following the FIVE Tzunami Waves presented, below.
- The Consumer is expected to experience an increase in product prices involved
April 28, 2014 – Wave: Pfizer is willing to pay 58.7 billion pounds, or $98.7 billion for AstraZeneca
UPDATED on 4/28/2014
http://dealbook.nytimes.com/2014/04/27/pfizer-said-to-pursue-astrazeneca/?_php=true&_type=blogs&emc=edit_dlbkam_20140428&nl=business&nlid=40094405&_r=0
Updated, 9:06 a.m. | Pfizer publicly announced its interest in acquiring AstraZeneca of Britain on Monday, in what would be one of the biggest in an already swelling series of deal efforts among drug makers.
In a statement, Pfizer said it was willing to pay 58.7 billion pounds, or $98.7 billion. That would make it one of the largest-ever acquisition efforts in the pharmaceutical industry, surpassing Pfizer’s $90 billion takeover of Warner-Lambert 14 years ago.
Pfizer’s prospective bid was valued at £46.61 a share, roughly 30 percent above where AstraZeneca was trading at the beginning of the year.
The move is aimed at putting pressure on AstraZeneca, which has turned down a number of informal takeover approaches from Pfizer.
AstraZeneca shares surged 16.1 percent, to £47.37 in afternoon trading in London on Monday. Shares in Pfizer were up 2.6 percent in premarket trading, at $31.53.
On Monday, AstraZeneca said in a statement that it had agreed to meet in January with Pfizer, which made a preliminary offer of cash and stock representing a value of £46.61 a share – the same amount Pfizer revealed on Monday.
AstraZeneca said its board determined in January that the offer “very significantly undervalued AstraZeneca and its prospects.”
New York Times cites the following link on
Monday, April 28, 2014 – 2:08am EDT
STATEMENT FROM PFIZER INC. (“PFIZER”)
POSSIBLE OFFER FOR ASTRAZENECA PLC (“ASTRAZENECA”)
SOURCE
http://www.pfizer.com/news/press-release/press-release-detail/pfizer_confirms_prior_discussions_with_astrazeneca_regarding_a_possible_combination_and_its_continuing_interest_in_a_possible_merger_transaction
END OF UPDATE
Wave #1: Novartis & GlaxoSmithKline – Swiss and British
The Swiss pharmaceutical giant Novartis announced an overhaul of its operations on Tuesday that included an agreement to
- buy the cancer drug business of its British rival GlaxoSmithKline for up to $16 billion. The deals announced on Tuesday come on the heels of eye-popping transactions in the drug sector in recent months and speculation about even more to come.
As part of its restructuring, Novartis said it would
- sell its vaccine business to GlaxoSmithKline for $7.1 billion and combine its over-the-counter pharmaceutical business with Glaxo’s consumer drug business.
That new joint venture would be one of the world’s biggest companies in the consumer health care sector. Its products would
- include Novartis’s Excedrin pain reliever and Maalox antacid, and
- Glaxo’s Aquafresh toothpaste and Nicorette chewing gum.
Novartis, based in Basel, Switzerland, also said it had agreed to
- sell its animal health division to Eli Lilly & Company for $5.4 billion, and that
- it would put its flu vaccine business up for sale.
The deals grew out of a strategic review begun last year as Novartis faced pressure from investors to exit some of its less profitable businesses.
“This is about getting us into fighting shape for the next 10 years,” Joseph Jimenez, Novartis’s chief executive, said by telephone.
Over the next decade, Mr. Jimenez said, health care systems will be under strain, trying to hold down costs as the number of older people grows rapidly – even as fewer people are actually able to pay for their medications. “It’s a demographic fact,” he said.
Pharmaceutical companies across the globe “are looking at their portfolios,” he said, “and they’re asking, ‘How can I be a winner in this industry?’ The winners will be the ones who can innovate, who have global scale.”
According to data from Thomson Reuters, deals this year in the health care sector – driven primarily by acquisitions by pharmaceutical companies – have resulted in global transactions worth about $64.1 billion through April 10. That is the sector’s strongest start to a year since 2009.
The deals would allow Novartis to focus on higher-margin businesses in which the company already has scale, while staying active in the over-the-counter market.
By acquiring Glaxo’s oncology business, Novartis would expand its cancer drug offerings, including adding Tafinlar and Mekinist, two recently approved drugs used to treat skin cancer. The GlaxoSmithKline cancer drug business had revenue of about $1.6 billion in 2013. For Glaxo, the proposed deals are expected to provide greater scale in two of the company’s core businesses –
- vaccines and
- over-the-counter products.
The transactions are expected to increase its annual revenue by £1.3 billion, to about £26.9 billion.
The transactions with GlaxoSmithKline, expected to be completed by the first half of 2015, are subject to regulatory and shareholder approval.
Mr. Jimenez, an American who took over as Novartis C.E.O. in 2010, said he anticipated few regulatory hurdles, as the businesses being combined would be complementary ones, for the most part.
Glaxo’s combined consumer health care business, based on 2013 performance, would have revenue of £6.5 billion, making it the largest provider of over-the-counter drugs.
GlaxoSmithKline would hold a controlling interest of 63.5 percent of the combined company, with the rest held by Novartis.
“Opportunities to build greater scale and combine high quality assets in vaccines and consumer health care are scarce,” Andrew Witty, the GlaxoSmithKline chief executive, said in a statement. “With this transaction we will substantially strengthen two of our core businesses and create significant new options to increase value for shareholders.”
Emma Walmsley, the president of Glaxo’s consumer health care segment, will serve as chief executive of the combined consumer business.
The deal is also expected to expand Glaxo’s vaccine portfolio, including adding Bexsero, a treatment for meningitis.
Novartis, which had revenue of $57.9 billion in 2013, employs about 136,000 people in 150 countries.
GlaxoSmithKline was advised by Lazard, Citigroup, Zaoui & Company and Arkle Associates.
Wave # 2: Mallinckrodt Pharmaceuticals Irish and American partners
Mallinckrodt Pharmaceuticals, the Irish drug maker:
spun off from the medical device company Covidien last year, agreed this year to buy Questcor Pharmaceuticals for $5.6 billion in cash and shares, and acquired Cadence Pharmaceuticals of San Diego for about $1.3 billion in cash.
After a failed bid to gain control of the German pharmaceutical wholesaler Celesio, the health care company McKesson Corporation received enough shareholder support in January to complete the $8.3 billion deal.
Wave #3: Pharmaceutical Industries in India
And Sun Pharmaceutical Industries of India said this month that it would pay about $4 billion in stock for Ranbaxy Laboratories, a smaller Indian rival.
In addition to the Novartis deal, there are potentially tens of billions of dollars in transactions being discussed in the sector.
Wave #4: Allergen under hostile take over
Pershing Square Capital Management, which is led by the activist investor William A. Ackman, and the health care company Valeant are teaming up on a bid to buy Allergan, the maker of Botox, for about $46 billion. The bid by Valeant was announced on Tuesday.
Wave #5: AstraZeneca declines Pfizer
The British drug company AstraZeneca recently spurned several informal takeover approaches by Pfizer, according to a person briefed on the matter. One of those approaches valued AstraZeneca at about 60 billion pounds, or nearly $100 billion, according to The Sunday Times, a British newspaper.
The announcement on Tuesday was positive for Novartis shares, which rose 2.5 percent in midday trading in Zurich.
Pharmaceutical shares also rose elsewhere. In London trading, GlaxoSmithKline added 5.4 percent and AstraZeneca gained 6.6 percent. In Frankfurt, Eli Lilly rose 2.1 percent and Pfizer rose 2.4 percent. Sanofi rose 1.8 percent in Paris, and Roche gained 0.7 percent in Zurich.
Neil Gough, David Gelles, Michael J. de la Merced, Alexandra Stevenson and Andrew Pollack contributed reporting.
SOURCE
Novartis Builds a Major Overhaul on a Flurry of Deals
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Other related articles published on this Open Access Online Scientific Journal include the following:
Predictions on Biotech Sector’s Two-year Boom
http://pharmaceuticalintelligence.com/2014/03/27/predictions-on-biotech-sectors-two-year-boom/
Updated: Investing and Inventing: Is the Tango of Mars and Venus Still on
http://pharmaceuticalintelligence.com/2013/12/08/investing-and-inventing-is-the-tango-of-mars-and-venus-still-on/
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