In the July 2005 issue:
UnitedHealth Group Offers $9.2 Billion to
Buy PacifiCare
Size does seem to matter, as UnitedHealth crafts a $9.2 billion deal to
buy PacifiCare and become the country’s largest MCO.
...
Consolidation Spikes in the
Generic Pharmaceuticals Market
Consolidation among generic pharma companies is increasing in response to
the opportunities created as brand-name drugs lose their exclusivity.
...
Second Quarter Results
A total of 211 mergers and acquisitions were announced in the second
quarter of 2005. $18.4 billion was committed to fund this M&A activity.
...
In The Departments
The Month in Deals
Service Sectors
Service Summaries
Additional Transactions
Transaction Updates
Technology Sectors
Technology Summaries
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Articles Archive
Companies mentioned in this issue:
A
aaiPharma p13
ABN AMRO p10
Adventist Health System—Sunbelt p4
Aerojet Fine Chemicals p13
Aetna p4
AIG Global Investment Group p13
Alkermes p13
Allied Capital Corporation p7
Amedisys p4
American Pacific Corp. p13
Anthem p3
Apax Partners p13
B
Balanced Care Corp. p9
Banc of America Securities p13
Bank Degroof p10
Bausch and Lomb p13
Bay Area Mobile Apheresis Program p8
BayNorth Capital p9
Bedford Community Medical Center p7
BiosPacific p11
Blue Chip Venture Company p13
Bradley Memorial Hospital p7
Bristol-Myers Squibb p10
Brookdale Living Communities p8
C
Callidus Capital Finance, LLC p11
Catholic Healthcare Partners p7
CB Richard Ellis p8
Celtic Pharma p11
Cephalon p13
CIVCO Medical Instruments Co. p12
Cleveland Community Hospital p7
Clinical Data p11
Coleman Swenson Hoffman Booth p13
Community Health Systems p7
D
D&K Healthcare Resources p10
Danaher Corp. p12
Deutsche Bank AG p8
Docupharma p10
Dr. Reddy’s Laboratories p10
Dun & Bradstreet p10
E
Eon Labs p10
EPI Corp. p8
Essex Woodlands p13
Evergreen Health Care p4
excellRx p9
F
Fischer Imaging Corp. p13
Fortress Investment Group p8
Fortron Bio Science p11
G
Geisinger Health System p7
Geisinger Wyoming Valley Medical Center p7
Genaissance Pharmaceuticals p11
GenCorp p13
GMAC Financial Services p8
H
HCA p7
Health Net p4
Healthcare Ventures p13
HealthSouth p8
Heumann Pharma GmbH & Co. Generica KG p10
Hexel AG p10
HMS Healthcare p9
Hologix p13
Housecall Medical Resources p4
I
IMS Health p10
InKine Pharmaceutical p13
IPC-AL REIT p9
J
Jubilant Organosys Ltd. p11
K
Kremer Laser Eye p10
L
Leiner Health Products p11
LifePoint Hospitals p7
M
Matrix Laboratories p10
McKesson Corp. p10
Medcon p11
Medical Properties Trust p9
Medimop Medical p12
Medtronic p12
Mercy Hospital p7
Merrill Lynch Capital p9
Morgan Stanley p4
MPM Capital p13
N
NeighborCare p9
Northern California Rehabilitation Hospital p9
Novartis p10
O
Omnicare p9
On-Call Plus p4
Oxford Health Plans p3
P
PacifiCare Health Systems p1
Pelton & Crane p12
Perseus-Soros BioPharmaceutical Fund p13
Pfizer p1
Pharmaceutical Formulations p11
Prudential Real Estate Investors p8
R
Reliant Pharmaceutical p11
Renal Care Group p8
ResCare p4
Roper Industries p12
Royal Philips Electronics p11
RxCrossroads, LLC p9
S
Salix Pharmaceuticals p13
Sandoz p10
Shandong Chia Tai Freda p13
Sicor p10
Silver Point Fund p13
Sino Biopharmaceutical p13
Spear Dermatology Products p11
Spear Pharmaceuticals p11
St. Rose Hospital p8
Stada Arzneimittel p10
Stentor p11
Strides Arcolab, Ltd. p10
T
TBMM Healthcare p9
Techne Corp. p11
Teva Pharmaceuticals p10
TLC Vision p10
Torrent Pharmaceuticals p10
Transneuronix p12
Triax Holdings, LLC p11
Trinity Laboratories p11
Tyco International Ltd. p12
U
UBS p10
UBS Securities LLC p13
United Rehab, LLC p8
UnitedHealth Group p1
V
Valleylab p12
Via Christi Health System p8
Vibra Healthcare p9
Vicuron Pharmaceuticals p1
Vivant Medical p12
VNU, NA p10
W
Wellchoice p4
WellPoint p1
West Pharmaceutical Services p12
X
Xanodyne Pharmaceuticals p13
Xenova Group plc p11 |
The
Health Care M&A Monthly
Consolidation Spikes in the Generic
Pharmaceuticals Market
Over the past few months,
news in
the Pharmaceutical M&A market has focused on big pharma buying late-stage biotechs and other drug
development companies to find the new blockbuster as their existing drugs
go off patent and lose exclusivity. To cite but one example, last month we
profiled Pfizer’s (NYSE: PFE) $1.9 billion acquisition of
Vicuron Pharmaceuticals.
While the loss of exclusivity may be a worry for one
company, it can also represent an opportunity for another. And this is
where the generic market comes into play. It is true that some drugs are
so tricky to manufacture that generic companies won’t pick them up after
they go off patent. But, in general, the generic companies are not faced
with the costs of paying for R&D, funding clinical trials or creating a
new market for the drugs.
In theory—and in practice—this translates into the
ability to manufacture and sell generic equivalents more cheaply than the
brand-name drugs on which they are based. Also, with the help of managed
care formularies, they can begin to capture market share from their
costlier brand-name counterparts.
Generic pharmaceutical companies figured prominently
among this month’s Pharmaceutical M&A market. This activity appears to be,
in part, a response to Novartis’ (NYSE: NVS) $8.4 billion
acquisition of Hexel AG and Eon Labs, announced in February.
When consummated and combined with NVS’ generic Sandoz unit, this
deal will create the world’s largest generic pharma business with annual
revenue of $5 billion, displacing Teva Pharmaceuticals (NASDAQ:
TEVA) from its number-one position.
Rumors swirled in the German and Israeli press during
late June that Teva was angling to buy Stada Arzneimittel (DE:
STAGn), Germany’s third-largest generic drug manufacturer, for
€36 a share for a total of €2 billion
($2.4 billion). Based on Stada’s 2004 results, the price would be 2.46x
revenue and 22.8x EBITDA. Such a deal would return Teva to the coveted top
spot among generic pharma companies. However, coming a year after Teva’s
$3.4 billion purchase of Sicor, the biggest acquisition in Israeli
history, this could stretch Teva’s resources a bit thin.
And while those rumors continue to waft through the
media, Novartis has taken positive steps to open up its lead by acquiring
the U.S. and Canadian consumer medicines business of Bristol-Myers
Squibb (NYSE: BMY) for $660 million in cash. Based on 2004 sales of
these drugs in North America, the P/R multiple is 2.7x.
Interestingly, three of the generic deals this month
originated in India. This
spate of activity is due, in part, to the Government of India’s enactment
of tougher patent protection laws in January. In addition to making India
more attractive to foreign investors, a further consequence of these laws
is that Indian drugmakers can no longer sell copycat drugs at home, so
they are turning to overseas markets for products. In doing so, they hope
to emulate the success of Dr. Reddy’s Laboratories (NYSE: RDY).
In the largest of the
these three deals, Matrix Laboratories (BO: MAXL) is paying $263
million to buy a majority interest in Docupharma (BR: DOCH), a
distributor of generic drugs in Belgium. Matrix is in the process of
merging with Strides Arcolab, Ltd. to form India’s seventh-largest
drug firm; this deal gives the company a base of operations in the heart
of the European Union.
Taking into account the cash acquired in this deal, the
net purchase price drops to $238 million, and the P/R multiple is 1.9x.
UBS advised MAXL while ABN AMRO and Bank Degroof advised
DOCH.
Torrent Pharmaceuticals (BO: TORP) is acquiring
Heumann Pharma GmbH & Co. Generica KG, a German generic business, from
Pfizer for an undisclosed price. The business being sold generates annual
sales of about €50 million.
International operations will account for 50% of the buyer’s revenue after
the deal closes, up from 24% before.
Finally, Jubilant
Organosys Ltd. (BO: 530019) is acquiring up to 75% of Trinity
Laboratories, which manufactures generics in North Carolina, for as
much as $24.7 million.
Within the United States,
Pharmaceutical Formulations (OTCBB: PHFR), one of the four largest
manufacturers of private-label products, is selling substantially all of
its OTC solid-dose pharmaceuticals business to privately held Leiner
Health Products for $23 million. Leiner is to purchase the assets
through an auction process under section 363 of the bankruptcy code.
Triax Holdings, LLC,
based in Mountain Lakes, New Jersey, is buying Spear Pharmaceuticals
and Spear Dermatology Products, which market and distribute a
generic equivalent of a leading topical acne medication, for approximately
$133 million. Triax is headed by Joseph Krivulka, a well-known industry
figure who was at the helm of Reliant Pharmaceutical until November
2004.
After cashing out its investment in
Housecall Medical (see page 7), Allied Capital Corporation has invested
$77 million in Triax to finance the Spear acquisitions. In connection with
the deal, Triax also secured $56 million of senior debt financing through
Callidus Capital Finance, LLC, which will syndicate a portion of
the facility post-closing. Details about revenue and cash flow were not
available. |
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