M&A activity continues to roil global pharma

While analysts on two continents watch the mammoth Pfizer--AZ bidding, other companies are taking action—or being spurned. Novartis' CEO Jimenez: "The new brutal world of healthcare"

Reporters in the financial press are using the term “frenzied” to describe the frenetic bidding and counter-bidding going on in pharma and biotech right now; don’t expect the activity to let up as long as world financial markets remain relatively stable and pharma CEOs continue to get green lights from their boards. The latest blockbuster action: Merck (US) accepting a $14.2-billion offer from Bayer Health Care for its OTC businesses, including brandnames like Claritin, Dr Scholl’s and Coppertone. The deal should make Bayer the No. 2 global OTC company, behind GSK, now in an OTC j.v. with Novartis as a result of the deal they struck a week ago.

Lost in the mega-pharma deals are a flurry of other, smaller ones. Denmark’s Lundbeck has made a $658-million friendly offer for Chelsea Therapeutics (Charlotte, NC); the latter has newly approved product, Northera (droxidopa) for neurogenic orthostatic hypotension, a type of dizziness associated with Parkinson’s disease. Endo International (Dublin, Ireland) will acquire Grupo Farmaceutico Somar, a $100-million, Mexico City manufacturer, for an undisclosed price. Shire (also in Dublin) has acquired Melbourne, Australia-based Fibrotech for $75 million. And Alliqua (Langhorne, PA) is spending $4 million to acquire Choice Therapeutics; both companies are involved in wound care.

Meanwhile, the Valeant $46-billion bid for Allergan has led the latter to pursuing white-knight acquisition by Sanofi or J&J, according to a Bloomberg News report. And generics giant Mylan has been rebuffed in a $6.7-billion bid to buy Sweden’s Meda. There is speculation that Mylan itself might be an acquisition, as it, generics leader Teva and Mallinckrodt jostle for dominant positioning.

At a conference on M&A in life sciences last week, Thomson-Reuters reported that deal volume in 2013 was at a five-year high in 2013, with 258 deals proposed across pharma, med devices, diagnostics and other sectors; the deal value of closed acquisitions was $110 billion (which is about equaled by the Pfizer bid for AstraZeneca alone, this year). Ironically, the “deal of the year,” as voted by attendees at Thomson-Reuters 2014 Allicence meeting, was the $500-million purchase of Amplimmune, Inc. by MedImmune (MedImmune is a subsidiary of AZ).

In a guest column in Forbes magazine published May 8, Novartis CEO Joseph Jimenez explains the CEO perspective on life sciences M&A: “Healthcare costs [will] double over the next decade. This spending will put additional pressures on the healthcare industry to cut costs. Healthcare companies need to look at what is going to be successful in our industry 10 years down the road and build businesses that will win in this new, brutal world.” That, in turn, pushes companies like his to focus on “true” breakthroughs, the only ones that payers will reward; the “ability to innovate is what will separate the winners from the losers.”