In the June 2007
issue:
Mylan Wins Merck’s Generics Unit
Pays $6.7 Billion For Global Expansion
After a months-long bidding process, Mylan
Laboratories is
paying $6.7 billion to acquire Merck’s generics business.
Completion of the deal will make Mylan the world’s fourth-largest generics
company.
The bidding process reveals as much about the losing bidders’ strategic
goals as it does about Mylan’s.
...
May’s M&A
Activity Strong
72 Deals Announced Worth $28.4 Billion
May saw a total of 72 mergers and acquisitions in the health care industry,
worth a total of $28.4 billion.
Year to date, the M&A market has produced 365 deals worth a combined total
of $125.0 billion in a scorching, record-setting pace.
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
-Transaction Updates
Technology
-Deal Summaries
-Additional Transactions
-Transaction Updates -Health Care Technology
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Articles Archive
Companies Mentioned in this issue:
June 2007
5AM Ventures p 11
A
ABS Ventures p 10
ABV Holding Co. p 11
Acura Pharmaceuticals p 14
Advanced BioHealing p 11
Advanced Cell Tech.
p 8
Advanced Magnetics
p 4
Advanced Technology Ventures p 10
Advanced Technology Ventures p 10, p 11
Advancis Pharmaceut. p 4
Aegerion Pharmaceut. p 4
Aeolus Pharmaceuticals p 14
Aescap Venture Management p 11
Aetna p 8
Aetna Ventures p 11
Albany Molecular Res. p 8
Alliance Hospital p 8
Alliance Imaging p 4
AllianceBernstein p 9
Alta Partners p 10,
p 11
Alternative Treatment International p 16
Altitude Life Science Ventures p 10
Ambrilia Biopharma
p 14
Amedica p 4, p 11
American Society of Plastic Surgeons p 16
Amicus Therapeutics p 4
AMN Healthcare Svs. p 8
AmSurg Corporation
p 8
Andover Medical p 14
Annual Scientific Assembly of the American Thoraci
p 15
Antares Pharma p 14
Aperio Technologies
p 11
APNEX Medical p 11
Arcturus Capital p 11
Array Biopharma p 4
Ascension Health Ventures p 11
Asmacure p 11
Asthmatx p 15
ATC Healthcare Svs.
p 8
Atlantis Components p 11
AtriCure p 14
Avalon Pharmaceuticals p 13
AVEO Pharmaceuticals p 15
Avestha Gengraine Technologies p 11
Avid Radiopharmaceuticals p 11
Axxora Life Sciences p 8
B
BaroFold p 11
Barr Pharmaceuticals p 7
Bauch & Lomb p 8
Bausch & Lomb p 9
BBT Fund p 10, p 15
Be-Tabs Pharmaceuticals p 8
Bear, Stearns p 4
Beecken Petty O’Keefe & Company
p 7
Berry Medical Employment p 8
Bessemer Venture Partners p 10, p 11
Bio-Imaging Research p 8
Bio-Rad Laboratories p 8
Bioabsorbable Therapeutics p 11
Bioenvision p 8
Biogen Idec p 15
Biolex Therapeutics
p 10
BioMedical Ventures
p 10
Biomerk p 8
BioProgress p 8
Biosante Pharmaceuticals p 14
Biosite p 8, p 9
BioStorage Technologies p 11
Biotechnology Value Fund p 13
Blackmont Capital
p 13
Boston Life Sciences p 14
Boulder Ventures
p 11
Bovie Medical p 8
Bristol-Myers Squibb p 8
Brooks Eckerd Pharmacy p 7
Brookside Capital p 9
Burrill & Company
p 11
C
Cambridge Heart p 4
Cantor Fitzgerald p 4
Canyon Creek Devel. p 8
Cardinal Health p 7,
p 8
CardioMEMS p 4
CardioVascular BioTherap. p 14
Cardiovascular Innovations p 8
Cardium Therapeutics p 4
Catella Healthcare
p 10
CCS Medical Holdings p 4
Ception Therapeutics p 11
Champions Biotechnol. p 8
Charles Street Securities p 11
Chattem p 8
CIBC p 4
CIDC p 10
Citi p 4
Clayton, Dublier & Rice p 9
Community Hlth. Sys. p 8
Connecticut Innovations p 11
Cowen p 4
Creation Capital p 11
Credit Suisse p 4
Crest p 16
Cumberland Pharma. p 4
Cypress Bioscience
p 4
Cytyc p 7, p 8
D
D.A. Davidson p 4
Delphi Ventures p 10
Deutsche Bank p 4
Devonshire PGA National p 8
DFJ Frontier p 11
DiaMed Holding p 8
Digirad p 8
Domain Associates
p 11
Dow Venture Capital
p 10
E
Earlybird Venture Capital p 11
Easton Capital p 10
Encorium Group p 14
Endocare p 14
EndoCeutics p 4
Ensign Group p 4
EnteroMedics p 4
Enzo Biochem p 8
Essex Woodlands
p 11
ETF Venture Funds
p 7
Eurand N.V. p 4
EvoGenix p 8
F
Federated Kaufmann Fund p 13
Finistere Ventures
p 11
FirmInvest AG p 14
First Albany Capital
p 4
Flagship Ventures
p 10
Fonds Bio-Innovation p 11
Forest Laboratories
p 16
Foundation Capital
p 11
Foundation Medical Partners p 10
Frazier Healthcare
p 10, p 11
Frazier Healthcare Partners p 15
Frazier Healthcare Technology p 10
Frazier Healthcare Ventures p 10
Frazier Healthcare Ventures p 14
Fusion Capital. p 4
G
Galen Partners p 11
Genomic Health p 4
Genzyme Corporation p 8
Goldman, Sachs p 9
GPC Biotech p 12
Green Light Capital
p 11
H
H&B Capital p 10
Halozyme Therapeutics p 12
HBM BioVentures (Cayman) p 11
HealthSport p 8
Helicos Biosciences
p 4
Hemispherx Biopharma p 4
Hercules Healthcare Technology Growth Capital p 10
Highland Capital p 10
Highland Capital Management p 14
Hologic p 7, p 8
Hunt BioVentures
p 13
I
Iasis Healthcare p 8
IBG p 10
IBTM p 10
ImaRx p 4
Immunomedics p 13
InfoLogix p 8
Innovatech Quebec
p 11
Innoven Partenaires p 14
InnoZen p 8
Inovio Biomedical
p 14
Insmed p 14
Insulet p 4
InteliStaf Holdings
p 8
Intersouth Partners
p 10
Interventional Spine p 11
InterWest Partners
p 10
InterWest Partners
p 10, p 11
Intrexon p 11
Inverness Medical
p 8, p 9
Investor Growth Capital p 10, p 11
IOMED p 8
ITX International Equity p 11
J
J-Plasma p 8
Javelin Pharmaceutic. p 4
Jazz Pharmaceuticals p 4
Jefferies & Co. p 4
JM Financial p 15
John Curtin School of Medical Research at The Aust p 12
Johnson & Johnson Development Corporation p 10
Johnson & Johnson Development Corporation p 15
Johnson Matthey PLC p 14
JPMorgan p 4
K
Kleiner Perkins Caufield & Byers p 11
L
Latterell Venture Partners p 11
Lazard Capital Markets p 12, p 13
Lehman p 4
LehmanBrown International Accountants p 9
LeMaitre Vascular p 8
Life Without Pain p 8
Lusora Healthcare Systems p 14
Lux Capital p 11
M
Madison Dearborn
p 8, p 9
Manhattan Pharmaceu. p 4
Marcadia Biotech p 11
Maxim Group p 4
Maxor Natl. Pharmacy p 8
McGraw-Hill Construction p 16
Medcath p 4
Medical Staffing Ntwk. p 8
MemberHealth p 8
Merck KGaA p 7, p 8
Merlin BioMed Group p 10
Merlin Nexus p 13
Merrill Lynch p 4
Mitsubishi UFJ Financial Group p 10
Mitsui & Co. Venture Partners p 10
Modigene p 14
MonoSol Rx p 4
Morgan Stanley p 4,
p 11
Morria Biopharmaceuticals
p 11
MPM BioVentures IV
p 11
MPM Capital p 11
Mylan Laboratories
p 7, p 8
Mytogen p 8
N
Nationwide Health p 4
Naviscan PET Systems p 11
NeuroVista p 10
New Enterprise Associates p 11
New River Management V p 11
New River Management V, LP
p 12
New York Life Investment Management India Fund p 11
NitroMed p 4
Novadaq Technologies p 13
Novartis p 7
Novartis Venture Fund p 11
NOXXON Pharmaceuticals p 10
O
Olympus Medical Systems p 15
Omnicell p 4
ONSET Ventures p 11
Oppenheimer & Co.
p 12
Oppenheimer & Company p 4
Orange Medical p 9
Osco Drug p 7
Oxford Bioscience Partners p 10
P
Pacific Growth Eq. p 4
PainCare Holdings
p 4
PAION AG p 16
Pantarhei Bioscience p 14
Passport Management p 13
Pegasus Biologies
p 11
Peptech Limited p 8
Perceptive Life Sciences Master Fund p 14
Pharmion p 4
Pharmion Corporation p 14
Pharmion GmbH p 14
Piper Jaffray p 4,
p 14
PLC Medical System
p 13
Polaris Venture Partners p 10, p 11
Porter Health p 8
Portola Pharmaceuticals p 9
Power Medical Interven. p 4
Premise p 11
ProCertus Biopharm
p 11
Progen Pharmaceuticals p 12, p 13
Prolacta Biosciences
p 11
ProMed Healthcare
p 8
Prospect Ventures
p 10
Prospect Medical p 8
Prospect Venture Partners p 10
ProtAffin Biotechnologie p 11
Q
Quaker BioVentures
p 10
Quantum Group p 14
Quantum Technology p 11
QuatRx p 10
QuatRx Pharmaceuticals p 15
Quest Group p 8
QuestMark Partners
p 11
R
Radiation therapy center p 8
Radiation Thrpy. Svs. p 8
Radius Ventures p 11
Ranbaxy Laboratories p 8
RBC Dominion Securities p 13
ReAble Therapeutics p 8
Reliance Life Sciences p 11
Research and Markets p 9
Rigel Pharmaceuticals p 4
Rite Aid Corporation
p 7
River Rock Lodge p 8
Rodman & Renshaw
p 12, p 14
Rothschild Investment Partners p 10
Royalty Pharma p 8
Rx Pro Health p 8
S
Safeguard Scientifics p 11
Sanderling Ventures
p 11
Sandoz p 7
Sav-on Drugs p 7
Savannah Commons p 8
Savvian Advisors p 14
Schaller Anderson p 8
Schering-Plough p 8, p 15
Secure Pharmacy Plus p 8
Selah SeniorCare p 8
Sidec Technologies
p 11
SightLine Partners
p 10
Signet Healthcare Partners p 11
Skilled Healthcare Group p 4
Sofinnova Partners
p 10
Solace Pharmaceuticals p 11
Special Situations Life Sciences Fund p 13
SpectraScience p 14
Spectrum Pharmaceuticals p 12
Spring Mills Venture Partners p 11
Sprout Group p 10
Standard Mgmt. Corp. p 8
STARLIMS Technol.
p 4
Stifel Nicolaus p 4
Stockwell Capital p 10
StrataGent Life Sciences p 11
Sun Pharmaceutical
p 8
Sunesis Pharmaceutic. p 4
Sutter Hill Ventures
p 10
T
T. Rowe Price p 9
Take Care Health Systems p 7
Talima Therapeutics p 11
Targanta Therapeutics p 4
Taro Pharmaceutical p 8
Teachers’ Private Capital p 10
Tempo Pharmaceuticals p 11, p 15
Teva Pharmaceuticals p 7
Therative p 11
ThinkEquity Partners p 12
Third Point p 11
Thomas Weisel p 4
Thomas Weisel Healthcare Partners
p 10
Thomas Weisel Partners p 4, p 12,
p 15
Three Arch Partners
p 10, p 11
TL Ventures p 10
TomoTherapy p 4
TorreyPines Therapeu. p 4
Turenne Capital p 14
Turner Construction Company p 16
TVM Capital p 10
U
UBS p 4
UCB, S.A. p 13
Ultrascan p 8
Universal American
p 8
University of Pittsburgh School of Medicine p 16
US Venture Partners
p 11
V
Valera Holdings p 10
Varian p 8
Vectura Group p 16
Venrock p 11, p 15
Venrock Partners p 10
Ventas p 4
Venture Investors
p 11
Versant Partners p 13
VIASYS Healthcare
p 8, p 9
Viragen p 4
VirtualScopics p 4
Vivo Ventures p 9
Vivo Ventures VI p 9
VWR International
p 8, p 9
W
Walgreen Co. p 7
Warburg Pincus p 8,
p 9
Wexford Capital p 11
X
Xillix Technologies
p 13
Y
Younger America p 8
Z
Z-Cube p 11 |
Mylan Wins Merck’s Generics Unit
Pays $6.7 Billion For Global Expansion
Email Editor
Several months of guessing ended this month when Mylan Laboratories
(NYSE: MYL) announced a deal to buy Merck KGaA’s (DE: MRCG) generic
pharmaceutical business for $6.7 billion (€4.9 billion) in cash. In so
doing, Mylan beat out a number of competitors to secure its position as
the world’s fourth-largest generic pharma company.
Headquartered in Canonsburg, Pennsylvania, Mylan develops, manufactures
and markets generic and brand pharmaceutical products. On a 12-month
trailing basis, MYL generated revenue of $1.5 billion, EBITDA of $551.0
million and net income of $346.0 million. Like other generic pharmas, MYL
has sought to increase its market share through acquisition. In 2004, the
company bid $4.0 billion for King Pharmaceuticals (NYSE: KG), but
that deal ultimately fell apart because the parties could not agree to
terms. Last year, the company paid $736.0 million to acquire a 71.5%
interest in India’s Matrix Laboratories (Mumbai:524794).
Based in Darmstadt, Germany, Merck KGaA is a chemical and
pharmaceutical company that is 73% family owned, with the remaining 27%
publicly traded. Its generic pharma unit is the world’s fourth-largest,
with over 400 products; in 2006, the generics unit generated revenue of
$2.45 billion and EBITDA of $450.0 million. But with its $13.3 billion
acquisition of Serono, S.A., which closed January 1, 2007, MRCG has
decisively shifted its core focus toward biotechnology and away from
generics.
The Mylan-Merck merger will create a company with combined revenue of
$4.2 billion and EBITDA of $1.0 billion. It will further extend MYL’s
global reach, enabling the company to compete with the top three generic
pharma companies: Teva Pharmaceutical Industries (NASDAQ: TEVA),
Novartis’ (NYSE: NVS) Sandoz unit and Barr Pharmaceuticals
(NYSE: BRL).
The price is 2.7x 2006 revenue and 14.9x EBITDA. Some shareholders have
complained that the price paid is too steep, resulting in a highly
leveraged Mylan; others feel it comes too soon after the $736.0 million
acquisition of Matrix Labs, making it hard to assess the true financial
impact (as opposed to pro forma projections) of another deal. But from a
price-to-revenue (P/R) perspective, it is unremarkable.
The chart on page 9 of the
issue gives the price and P/R multiple for 30 deals involving generic
pharma companies or products over the past four years. The average P/R
multiple during this period is 2.7x, while the median is 2.2x. Even so, on
the announcement of the deal, the market sent the price of MYL down over
worries of dilution of the stock.
For its part, MRCG will use the proceeds to pay down debt incurred from
its acquisition of Serono.
In The Aftermath Of The Deal
This deal clearly secures Mylan’s position among the leading generic
pharmaceutical companies; however, the bidding process also revealed how
some of the losing bidders approach dealmaking and what their goals are in
the M&A market. Teva ultimately bowed out, noting that while the MRCG
generics business would have been a strategic fit, it didn’t meet the
company’s investment criteria. As top dog in the generics world, Teva most
likely saw no strategic advantage in overextending its resources.
Another bidder, Iceland’s Actavis Group hf (ISE: ACT), has come
up short in several proposed acquisitions. It tried to buy Pliva—which
Barr acquired last year—then MRCG’s generic business, but failed both
times. The board issued a statement that ACT would not pursue the MRCG
generics business into the final round (only TEVA and MYL got that far),
because "the transaction would not produce value for Actavis’s
shareholders." Reading between the lines, they seem to have felt unduly
constrained by shareholders’ concerns over how much they could risk.
Perhaps as a result of this, Actavis recently received a proposal from
The Novator Group, which is controlled by ACT’s chairman,
Bjorgolfur Thor Bjorgolfsson, to take the company private in a transaction
worth $4.5 billion (at €0.98 per share). Such a deal, it is argued, would
allow Actavis to move more nimbly in the consolidation market without the
encumbrance of the disclosure constraints, short-term earnings dilution,
etc. that hobble public companies. The bid to privatize the company offers
ACT shareholders only a modest 9% premium, which some trusting
shareholders took as a signal that a counterbid might be forthcoming from
another source. However, entities related to Novator Group hold 38.5% of
ACT’s class A common shares. (All told, just 20 shareholders hold 79.3% of
the stock.) With Mr. Bjorgolfsson’s holding, which could effectively
stymie any counteroffer, the hope of another buyer seems unfounded to us.
But hope, as they say, springs eternal (P.T. Barnum would put it
differently); on the announcement, the stock rose nearly 12%, wiping out
the premium. Still, we are left wondering whether ACT’s failure to close
these large deals is really due to a concern for how minority shareholders
would react or to an M&A team that has been unceremoniously bested in some
high-profile deals.
Such a proposal comes at a time when management-led buyouts are feeling
the heat of greater scrutiny from various quarters. The Delaware Court of
Chancery, for example, may now start taking a closer took at private
equity buyouts where potential conflicts arise involving the managers of
the target companies. Vice Chancellor Leo Strine, Jr. has indicated that
Delaware’s courts will take a heightened interest where certain aspects of
corporate law, hitherto unexplored, are emerging. The offer to keep his
job under a new ownership, for instance, might compromise a CEO’s
motivation to shop the company to the highest bidder and do right by
shareholders. Readers will recall that such concerns arose in CVS
Corp.’s (NYSE: CVS) recent $26.5 billion acquisition of Caremark Rx.
CEOs with a promise of job security would, after all, have a vested
interest and could find themselves in a position to sink the value of a
stock before buying it to make the cost of acquiring the company as low as
possible. This is the stuff that litigators’ dreams are made of.
A comparable case is Bradley Pharmaceuticals (NYSE: BDY), whose
CEO has offered to privatize the company at $21.50 per share, or about
$228.1 million (which includes $65.4 million in debt). This buyout
proposal offers BDY shareholders a 17% premium over the stock’s prior-day
price, closer to the average premium of 20%; even so, the stock rose to 4%
above the proposed offer.
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