The Health Care M&A Monthly: Pharma Captures Big Bucks -
Ten Deals Announced Worth A Combined $7.5 Billion
The Pharmaceutical sector generated 10 deals in February, worth a combined total of $7.5 billion. Two of the 10 were billion-dollar deals. The largest involves the $4.3 billion combination of Tanabe Seiyaku Co. (T: 4508) and Mitsubishi Pharma Corp., a subsidiary of Mitsubishi Chemical Holding (T: 4188). The transaction was discussed in last month’s column, but is included in this month’s statistics.
Shire Pharmaceuticals Group plc (NASDAQ: SHPGY) is acquiring New River Pharmaceuticals (NASDAQ: NRPH) for $64.00 per share, for a total purchase price of $2.6 billion. New River is a specialty pharma company based in Virginia and focused on developing novel drugs. While on a trailing 12-month basis, NRPH generated revenue of just $32.0 million and a net loss of $17.2 million, it is codeveloping a promising drug with Shire to treat ADHD, Vyvanse, which should significantly boost revenue if approved.
This deal gives Shire full control of the ADHD drug that the two collaborators have been developing. So far, the drug has received two approvable letters from the FDA. It is fervently hoped that Vyvanse will prove to be a worthy successor to Shire’s Adderall XR ADHD treatment—which is due to lose patent protection in 2009—and generate $1.0 billion a year. The purchase price offers NRPH shareholders a 10 percent premium to the stock’s prior-day price. The founder of New River has pledged his 50.2 percent stake in the company to the deal. Bear, Stearns & Co. and Merrill Lynch are serving as financial advisors to NRPH in this transaction.
The Linde Group (DE: LIN), based in Wiesbaden, Germany, is selling INO Therapeutics, a Clinton, New Jersey-based specialty pharma company, to Ikaria, a Seattle-based biotech, for €380.0 million ($498.7 million), or 2.9x revenue. INO specializes in therapies that utilize gaseous drugs, such as inhaled nitric oxide for treating hypoxic respiratory failure in newborns. Including the amount to be paid to shareholders of Ikaria, the total transaction value rises to about $670.0 million. The combination of the two companies, under Ikaria Holdings, an investment company, will create a leading therapeutic gases and critical care company, to be headquartered in Clinton, New Jersey. The seller will retain a 17 percent equity position in the combined company. This merger is being financed by private equity and venture capital firms, including New Mountain Capital, ARCH Venture Partners and Venrock Associates.
Salix Pharmaceuticals (NASDAQ: SLXP) is paying up to $61.0 million to acquire the U.S. prescription product rights to the gastrointestinal drugs Pepcid and Diuril oral suspension from Merck & Co. (NYSE: MRK). Consideration consists of a $55.0 million upfront payment and $6.0 million in potential sales-based milestone payments. This acquisition, valued at 3.1x revenue, expands SLXP’s portfolio and diversifies its revenue sources. SLXP hopes to squeeze out the last bit of value from these relatively mature drugs by marketing them in a well-defined niche: the company intends to add them to an institutional product portfolio of drugs that concentrates on the pediatric and hospitalized patient populations.
France’s Ipsen (PA: IPN) is granting exclusive rights to develop and market Dysport as an anti-wrinkle treatment to Galderma, S.A. for $39.5 million. A joint venture between Nestlé (SWX: NESN) and L’Oréal (PA: OREP), Galderma is headquartered in Switzerland and is involved in therapeutic, corrective and esthetic solutions for dermatology patients. Dysport is a botulinum toxin type A drug, known as Reloxin in the U.S. esthetic market.
Under terms of the deal, Galderma is to pay €10.0 million in an upfront payment and €20.0 million in certain milestone payments. Royalties are also stipulated in the transaction. According to the agreement, Galderma is to develop and market a specific formulation for the esthetic use of Ipsen’s botulinum toxin type A drug, which was originally developed as a treatment for movement disorders or muscle spasticity. The new formulation is intended to rival Allergan’s (NYSE: AGN) Botox in the European Union, Russia, Eastern Europe and the Middle East. The royalties paid to Ipsen would be approximately 40 percent of Galderma’s net sales of the product. Dysport is currently approved for esthetic purposes in 20 countries.
Cambridge Laboratories is selling rights to Nabilone in the United Kingdom and Europe to Valeant Pharmaceuticals (NYSE: VRX) for $14.0 million. Nabilone is used to treat nausea and vomiting associated with cancer chemotherapy in certain patients. VRX currently sells it both in Canada, where it has an 87 percent share of the cannabinoid market, and in the United States. Nabilone is the only licensed cannabinoid in the United Kingdom.
Generic Pharma. Merck KgaA (DE: MRCG) is expected to auction off its generic pharma business in March in a deal that could fetch up to €4.0 billion. Several Indian companies have lined up to bid, including Ranbaxy Laboratories (BSE: RANB), Dr. Reddy’s Laboratories (NYSE: RDY) and Cipla Ltd. Iceland’s Actavis (ISE: ACT), Israel’s Teva (NASDAQ: TEVA) and Novartis’ (NYSE: NVS) Sandoz unit are also likely bidders. However, both Teva and Novartis are looking to invest into India, as well. The two are in a race to buy a strategic stake in Aurobindo Pharma Ltd. (BO: ARVN).
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