Larry and I have been blogging a lot lately about the tsunami of mergers and acquisitions that has been rolling over the pharmaceutical industry recently. We’ve been amazed at how traditional Big Pharma has been collapsing its own excess capacity back on itself.
Let’s talk about two recently announced deals, Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP), (I won’t join the speculation about Johnson & Johnson (NYSE: JNJ) mixing it up with them) and Roche (SWX Europe: ROG) and Genentech (NYSE: DNA). (Regular readers can probably guess what I’m going to say next.) Which one of these deals makes the most sense from an investment perspective?
If you guessed Roche and Genentech then you’re correct! $46.8 billion is a nice piece of change for Genentech. The usual arguments of synergy, efficiency, etc. were given by management.
Roche gets the immediate benefits that come from such deals, improved revenues, earnings, and cashflow. But, what differs from a deal like Merck’s and Schering-Plough’s is that Roche is buying something new. (Alright, alright, I know that Roche already owned 56% of Genentech, but, at least they’re going in the right direction.) Bio-tech is the business differentiator here.
I haven’t had a chance yet to sit down and review the numbers between this deal and Merck’s but supposedly it’s more expensive. Given the future value of Genentech’s drugs, particularly the cancer treatments, that’s to be expected. The question is has Roche overpaid? I believe that’s it’s too soon to tell.
The hard part will now be making this deal work. Different cultures, national as well as corporate, and products are always hard to mesh together. Keeping key employees, particularly Genentech’s in this case, will be crucial. Given the amount of financing involved, Roche will be under significant pressure to produce results. Today’s markets are very unforgiving of missed expectations. Also, should this very expensive acquisition fail, what’s Roche’s chairman, Franz Humer going to do for his next trick? I’m assuming that Genentech’s chairman, Art Levinson, would be long gone by then.
Right now, the Roche and Genentech deal is the one to watch this year. This one’s the outlier. Something has to give in the pharmaceutical industry. The merging of companies with shrinking pipelines in an era of hostile government healthcare policies does not bode well as a good long term strategy for growth. Oh, for sure, there will a survivor. Just as in the auto industry, there will be a shakeout. I’m not ready to guess who that may be. But, I do feel confident that the bio-tech firms will be in a class by themselves. In the future, I’ll blog about why I believe bio-tech will be the engine driving innovation.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Showing posts with label Mergers and Acquisitions. Show all posts
Showing posts with label Mergers and Acquisitions. Show all posts
Thursday, March 19, 2009
Monday, March 16, 2009
Pharmaceutical Industry Consolidation-And the Winner is Pfizer, Merck or Roche????
And the Winner is Pfizer, Merck or Roche????
We promised our view on the potential results of the 3 "super-mega-global-mergers" that have taken place in the last 60 days and we don't wish to disappoint. As we don't want to keep you in suspense, we think that Roche is getting the most “bang for the buck”, BUT it is highly dependent on the non-integration of Genentech.
Let's start with the contenders-first Pfizer-Wyeth. No surprise here, we think PFE vastly overpaid to get a potpourri of businesses with a dog's breakfast of vaccines, biotechs, consumers and some underwhelming pipeline potential. It seems to us that the major drive here is “synergy”, that is reducing workforce size by nearly 20,000 while plugging some of the $11-13 billion hole that Lipitor going off patent in 2011 creates. The stock market has not exactly been “irrationally exuberant” about Pfizer's 10 year $258 billion spending spree for Warner Lambert, Pharmacia and now Wyeth and has inversely rewarded share holders with a nearly 70% reduction in market capitalization from the day of the Warner Lambert deal close (Pfizer's market cap about $300 billion) to this week's $95 billion. Need we say more?
Merck strikes as a version of more of the same. Paying a 30%+ premium (about $41 billion) to combine 2 feeble pipelines and some redundancy (maybe another 20,000 people reduced), "diverse" and/or non-intersecting cultures doesn't strike us as “happy days are here again”. In fact while Pfizer-Wyeth pretends to be a “diversification” play as opposed to a "consolidation", Merck-ScheringPlough doesn't even try to excuse itself with such rhetoric. There is Dick Clark's (Merck's CEO) trying to convince us that Schering Plough is somewhat of an international powerhouse (try telling that to executives of any of Europe's Big 3 pharmaceutical houses), and that Remicade will drive sales of several billion more-can you spell J&J? The reverse acquisition route seems spurious at best-we're no lawyers but can't imagine the transparency of this shenanigan and how it may play with the legal eagles of J&J in New Brunswick. Can we forget about potential in fighting between Fred Hassan (Schering's CEO) and the aforementioned Mr. Clark?
So, back to Roche-Genentech. Sure $95 a share is rich and many a scientist in South San Francisco is going to feel more like a Microsoft Millionaire from the 1980's and therein may lie Roche's opportunity and challenge. Genentech's pipeline is deep and rich with well over two dozen promising candidates and more to come. Much of this has been attributed and rightly so to a combination of brilliant scientists and a laissez faire culture with heralded beer blasts, parties and freedom to explore favorite projects, some of which have become major drugs. The trick is whether Roche's CEO, Franz Humer and his merry band from Basel can convince Art Levinson and Genentech's San Francisco based minions that it's business as usual and that things can only get better from here. We're going to guess that while this is a classic consolidation play, the boys of Basel will do it right.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Larry Rothman
We promised our view on the potential results of the 3 "super-mega-global-mergers" that have taken place in the last 60 days and we don't wish to disappoint. As we don't want to keep you in suspense, we think that Roche is getting the most “bang for the buck”, BUT it is highly dependent on the non-integration of Genentech.
Let's start with the contenders-first Pfizer-Wyeth. No surprise here, we think PFE vastly overpaid to get a potpourri of businesses with a dog's breakfast of vaccines, biotechs, consumers and some underwhelming pipeline potential. It seems to us that the major drive here is “synergy”, that is reducing workforce size by nearly 20,000 while plugging some of the $11-13 billion hole that Lipitor going off patent in 2011 creates. The stock market has not exactly been “irrationally exuberant” about Pfizer's 10 year $258 billion spending spree for Warner Lambert, Pharmacia and now Wyeth and has inversely rewarded share holders with a nearly 70% reduction in market capitalization from the day of the Warner Lambert deal close (Pfizer's market cap about $300 billion) to this week's $95 billion. Need we say more?
Merck strikes as a version of more of the same. Paying a 30%+ premium (about $41 billion) to combine 2 feeble pipelines and some redundancy (maybe another 20,000 people reduced), "diverse" and/or non-intersecting cultures doesn't strike us as “happy days are here again”. In fact while Pfizer-Wyeth pretends to be a “diversification” play as opposed to a "consolidation", Merck-ScheringPlough doesn't even try to excuse itself with such rhetoric. There is Dick Clark's (Merck's CEO) trying to convince us that Schering Plough is somewhat of an international powerhouse (try telling that to executives of any of Europe's Big 3 pharmaceutical houses), and that Remicade will drive sales of several billion more-can you spell J&J? The reverse acquisition route seems spurious at best-we're no lawyers but can't imagine the transparency of this shenanigan and how it may play with the legal eagles of J&J in New Brunswick. Can we forget about potential in fighting between Fred Hassan (Schering's CEO) and the aforementioned Mr. Clark?
So, back to Roche-Genentech. Sure $95 a share is rich and many a scientist in South San Francisco is going to feel more like a Microsoft Millionaire from the 1980's and therein may lie Roche's opportunity and challenge. Genentech's pipeline is deep and rich with well over two dozen promising candidates and more to come. Much of this has been attributed and rightly so to a combination of brilliant scientists and a laissez faire culture with heralded beer blasts, parties and freedom to explore favorite projects, some of which have become major drugs. The trick is whether Roche's CEO, Franz Humer and his merry band from Basel can convince Art Levinson and Genentech's San Francisco based minions that it's business as usual and that things can only get better from here. We're going to guess that while this is a classic consolidation play, the boys of Basel will do it right.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Larry Rothman
Friday, March 13, 2009
The Pharmaceutical Industry Merger Mania-”The Consolidation Camp” vs. “The Diversification Camp”
The Pharmaceutical Industry Merger Mania-
”The Consolidation Camp” vs. “The Diversification Camp”
Consolidation in the Pharmaceutical and Biotechnology Industry has been grabbing headlines lately and of course we have a strong point of view about how this may shape or mis-shape the industry going forward. While the biggest headlines involve the Pfizer-Wyeth, the Merck-Schering Plough and Roche-Genentech consolidations, we feel compelled to discuss these and alternatives that may have been considered and the landscape that may develop as a result of these moves.
Let's look at some of the alternative strategies that can be deployed given that most CEO's would acknowledge that the combination of low ROI from R&D investments, patent expirations, demise of the blockbuster model, ineffectiveness of the sales force armies, excess manufacturing capacity, increased regulatory oversight, significant pricing pressures, and the lack of success (failure?) of large consolidations wreak havoc with long term direction.
Chris Viehbacher, the new CEO of Sanofi characterized two strategic camps in a recent interview with Bloomberg News-they are the “Consolidation Camp” and the “Diversification Camp”.
To us, Pfizer is the prime example of the Consolidation Campers with expenditures of nearly $200 billion in the last several years to acquire Warner Lambert and Pharmacia along with several other smaller acquisitions, only to have its stock market cap for the consolidated company reach under $100 billion despite loads of restructuring, re-engineering and synergy targets. It appears that once synergy targets are met (1-4 years), company values as measured by stock market capitalization seem to wane quickly and the quest/thirst for more consolidation continues at a frantic pace.
For us the leaders of the Diversification Campers are Johnson & Johnson and Abbott. Both companies have major lines of business outside traditional large molecule pharmaceuticals with significant and growing businesses in consumer healthcare and medical devices and diagnostics. Their acquisition strategy seems to be small to mid size chunks, notably J&J's $16 billion+ acquisition of Pfizer's Consumer Healthcare Businesses as well as numerous biotechnology companies, while Abbott has acquired Advanced Medical Optics (AMO), Guidant's Vascular Intervention and Endovascular businesses and Kos pharmaceuticals.
Both J&J and Abbott seem to have incremental “bite sized” acquisitions, all meant to provide a portfolio of “health care” lines albeit balanced among multiple sub segments of the industry. Both companies seem to have accelerated the success of these acquisitions by leveraging existing franchises and/or management and infrastructures. Notably one wonders why they haven't or if they might look at generic pharmaceuticals and/or animal health to round out their portfolios.
We will next discuss our opinions of the recent merger wave and who were the smart ones (could it be Pfizer, Merck or Roche??). Stay tuned and we will look at other alternatives we think may be developing.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Larry Rothman
”The Consolidation Camp” vs. “The Diversification Camp”
Consolidation in the Pharmaceutical and Biotechnology Industry has been grabbing headlines lately and of course we have a strong point of view about how this may shape or mis-shape the industry going forward. While the biggest headlines involve the Pfizer-Wyeth, the Merck-Schering Plough and Roche-Genentech consolidations, we feel compelled to discuss these and alternatives that may have been considered and the landscape that may develop as a result of these moves.
Let's look at some of the alternative strategies that can be deployed given that most CEO's would acknowledge that the combination of low ROI from R&D investments, patent expirations, demise of the blockbuster model, ineffectiveness of the sales force armies, excess manufacturing capacity, increased regulatory oversight, significant pricing pressures, and the lack of success (failure?) of large consolidations wreak havoc with long term direction.
Chris Viehbacher, the new CEO of Sanofi characterized two strategic camps in a recent interview with Bloomberg News-they are the “Consolidation Camp” and the “Diversification Camp”.
To us, Pfizer is the prime example of the Consolidation Campers with expenditures of nearly $200 billion in the last several years to acquire Warner Lambert and Pharmacia along with several other smaller acquisitions, only to have its stock market cap for the consolidated company reach under $100 billion despite loads of restructuring, re-engineering and synergy targets. It appears that once synergy targets are met (1-4 years), company values as measured by stock market capitalization seem to wane quickly and the quest/thirst for more consolidation continues at a frantic pace.
For us the leaders of the Diversification Campers are Johnson & Johnson and Abbott. Both companies have major lines of business outside traditional large molecule pharmaceuticals with significant and growing businesses in consumer healthcare and medical devices and diagnostics. Their acquisition strategy seems to be small to mid size chunks, notably J&J's $16 billion+ acquisition of Pfizer's Consumer Healthcare Businesses as well as numerous biotechnology companies, while Abbott has acquired Advanced Medical Optics (AMO), Guidant's Vascular Intervention and Endovascular businesses and Kos pharmaceuticals.
Both J&J and Abbott seem to have incremental “bite sized” acquisitions, all meant to provide a portfolio of “health care” lines albeit balanced among multiple sub segments of the industry. Both companies seem to have accelerated the success of these acquisitions by leveraging existing franchises and/or management and infrastructures. Notably one wonders why they haven't or if they might look at generic pharmaceuticals and/or animal health to round out their portfolios.
We will next discuss our opinions of the recent merger wave and who were the smart ones (could it be Pfizer, Merck or Roche??). Stay tuned and we will look at other alternatives we think may be developing.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Larry Rothman
Thursday, February 19, 2009
Pfizer-Wyeth Redux--We Can't Help It!
I’m back on the Pfizer-Wyeth again. I can’t help myself. I feel as if l’m in that dream we’ve all had of being in a slow motion crash again and again. Here’s why.
Let’s start with the overall economy. Since last autumn, we have CEO’s either being excoriated in the press or by Congress. Obviously, there have been some serious shortfalls in abilities here. Now, let me ask a question, just because Big Pharma hasn’t been dragged up to the Hill yet by Congress doesn’t mean that they won’t be. (Doesn’t mean that they will be either, but old Guy’s sticking his neck out again.) Honestly, there’s some good potential here. Have we seen anything yet from Big Pharma’s CEO’s to distinguish them from their colleagues in banking or automobiles? This is where I’d really like to get some reader feedback.
Next, let’s talk about sticking the collective heads in the sand and hoping that problems will go away. Let’s face it. Barack Obama has won the election. He took the oath of office (twice) and he’s now the President of the United States (POTUS for you acronym freaks out there). Despite some Republican protests, President Obama’s stimulus package has been passed and signed. So, anyone who doesn’t think healthcare reform isn’t coming soon to a hospital near you had better wake up and smell the coffee. Especially, if they’re in the drug or medical device businesses.
Another one of my favorite gripes about the healthcare industry, and most other industries as well, is it’s fascination with mergers and acquisitions. Don’t get me wrong in the right circumstances, with the right reasons and for the right price, these types of deals can make a lot of sense. But, please notice the qualifiers that I listed. There generally aren’t too many deals that meet those criteria and then, if there happens to be a bidding war then any value goes right out of the window. How many M&A deals over the last thirty years, in any industry, have lived up to their oft overhyped potential?
Finally, let’s get down to basics. Business is all about making things and then selling them. Good products and services with good customer service attract customers who pay their bills and come back to buy more. While you’re at it, hire good employees, treat them right, and improve your productivity as a consequence. But, Big Pharma seems to be ignoring this model. Many of them are moving to a portfolio model of buying new drugs, outsourcing everything that they can, and making their profits on the resulting margins. Not bad business if you can get it, but how many companies can be in that kind of a business. Possibly a few, but, certainly not as many as are in the pharmaceutical industry today.
Oh, and let me add that with few exceptions they are optimizing the "blockbuster" model that no longer works. And, has anyone explained the law of large numbers to these people--combining two multi -10's of billion dollars business into one, taking on "synergy targets" has been at best short on results albeit high on promises.
So, let’s see what happens this year. If I’m wrong, I think I’ll find out soon enough.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Let’s start with the overall economy. Since last autumn, we have CEO’s either being excoriated in the press or by Congress. Obviously, there have been some serious shortfalls in abilities here. Now, let me ask a question, just because Big Pharma hasn’t been dragged up to the Hill yet by Congress doesn’t mean that they won’t be. (Doesn’t mean that they will be either, but old Guy’s sticking his neck out again.) Honestly, there’s some good potential here. Have we seen anything yet from Big Pharma’s CEO’s to distinguish them from their colleagues in banking or automobiles? This is where I’d really like to get some reader feedback.
Next, let’s talk about sticking the collective heads in the sand and hoping that problems will go away. Let’s face it. Barack Obama has won the election. He took the oath of office (twice) and he’s now the President of the United States (POTUS for you acronym freaks out there). Despite some Republican protests, President Obama’s stimulus package has been passed and signed. So, anyone who doesn’t think healthcare reform isn’t coming soon to a hospital near you had better wake up and smell the coffee. Especially, if they’re in the drug or medical device businesses.
Another one of my favorite gripes about the healthcare industry, and most other industries as well, is it’s fascination with mergers and acquisitions. Don’t get me wrong in the right circumstances, with the right reasons and for the right price, these types of deals can make a lot of sense. But, please notice the qualifiers that I listed. There generally aren’t too many deals that meet those criteria and then, if there happens to be a bidding war then any value goes right out of the window. How many M&A deals over the last thirty years, in any industry, have lived up to their oft overhyped potential?
Finally, let’s get down to basics. Business is all about making things and then selling them. Good products and services with good customer service attract customers who pay their bills and come back to buy more. While you’re at it, hire good employees, treat them right, and improve your productivity as a consequence. But, Big Pharma seems to be ignoring this model. Many of them are moving to a portfolio model of buying new drugs, outsourcing everything that they can, and making their profits on the resulting margins. Not bad business if you can get it, but how many companies can be in that kind of a business. Possibly a few, but, certainly not as many as are in the pharmaceutical industry today.
Oh, and let me add that with few exceptions they are optimizing the "blockbuster" model that no longer works. And, has anyone explained the law of large numbers to these people--combining two multi -10's of billion dollars business into one, taking on "synergy targets" has been at best short on results albeit high on promises.
So, let’s see what happens this year. If I’m wrong, I think I’ll find out soon enough.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Tuesday, February 17, 2009
What Does Barron's See in Abbott that We Don't?
We’re well into the second month of the year, the world hasn’t fallen apart as some had predicted. But, then things haven’t taken off as others had hoped. Things are kind of, please excuse the technical term, blah.
Yet, some people are still back in the good old days, or, wish that they were. I found an example in this week’s Barron’s. Neil A. Martin penned an article about Abbott Laboratories (NYSE: ABT) entitled “Abbott Labs: a Prescription for Success”. He paints a very optimistic picture for Abbott. Yet, somehow, I couldn’t help but think that I’ve heard this all before.
Much is made of Abbott’s drug pipeline and how, unlike its competitors, they aren’t about to have any patents expire soon on their key products such as Humira, Niaspin, and Similac. OK, but, don’t patents eventually expire? (OK, I know some of you are snickering out there in the Blogosphere and saying to yourselves, “Not if you’ve got good lawyers.” I don’t buy that and will deal with you in a future blog.) They do. In some parts of the world, like India, they don’t care about your patents and if you try to introduce your products there, you’re going to run into the buzzsaw called ‘generics’.
Much is made of Xience, Abbott’s drug eluting stent acquired from the late Guidant Corporation. Between stents, drug eluting or otherwise, becoming a commodity and the risks from government healthcare reform, I’m not so sure that I’d get too excited about this.
Now, I don’t want to appear to be too critical. Neil does mention Wall Street’s concerns about Abbott’s growth being unsustainable. Though, he does try to minimize their arguments.
CEO Miles D. White is quoted as saying that Abbott if done with acquisitions for a while thereby violating Guy’s Third Rule of Being a CEO, always talk about the possibility of acquisitions. I suspect that White realizes that he can’t do acquisitions anymore for a variety of reasons ranging from financial to organizational.
Here’s why I’m harping on this article and poor Martin. Things have changed in the life sciences sector significantly over the last few years and will continue to do so. Pipelines come to an end. Companies without strong intellectual capital and lengthy track records of scientific achievement, not necessarily resulting in new products, cannot achieve these overnight. Companies with these assets are led by PhD’s in the sciences, MD’s, and similar credentials not MBA’s from Stanford University accomplished in the legerdemain of corporate finance.
The recent lessons from Wall Street and the American banking industry should be sufficient proof that there’s more to running to running a successful business than just a mindless shell game of assets shuffling.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Yet, some people are still back in the good old days, or, wish that they were. I found an example in this week’s Barron’s. Neil A. Martin penned an article about Abbott Laboratories (NYSE: ABT) entitled “Abbott Labs: a Prescription for Success”. He paints a very optimistic picture for Abbott. Yet, somehow, I couldn’t help but think that I’ve heard this all before.
Much is made of Abbott’s drug pipeline and how, unlike its competitors, they aren’t about to have any patents expire soon on their key products such as Humira, Niaspin, and Similac. OK, but, don’t patents eventually expire? (OK, I know some of you are snickering out there in the Blogosphere and saying to yourselves, “Not if you’ve got good lawyers.” I don’t buy that and will deal with you in a future blog.) They do. In some parts of the world, like India, they don’t care about your patents and if you try to introduce your products there, you’re going to run into the buzzsaw called ‘generics’.
Much is made of Xience, Abbott’s drug eluting stent acquired from the late Guidant Corporation. Between stents, drug eluting or otherwise, becoming a commodity and the risks from government healthcare reform, I’m not so sure that I’d get too excited about this.
Now, I don’t want to appear to be too critical. Neil does mention Wall Street’s concerns about Abbott’s growth being unsustainable. Though, he does try to minimize their arguments.
CEO Miles D. White is quoted as saying that Abbott if done with acquisitions for a while thereby violating Guy’s Third Rule of Being a CEO, always talk about the possibility of acquisitions. I suspect that White realizes that he can’t do acquisitions anymore for a variety of reasons ranging from financial to organizational.
Here’s why I’m harping on this article and poor Martin. Things have changed in the life sciences sector significantly over the last few years and will continue to do so. Pipelines come to an end. Companies without strong intellectual capital and lengthy track records of scientific achievement, not necessarily resulting in new products, cannot achieve these overnight. Companies with these assets are led by PhD’s in the sciences, MD’s, and similar credentials not MBA’s from Stanford University accomplished in the legerdemain of corporate finance.
The recent lessons from Wall Street and the American banking industry should be sufficient proof that there’s more to running to running a successful business than just a mindless shell game of assets shuffling.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Sunday, February 8, 2009
Wow - What a Week for Pharma M&A and Our Opinions on What's What
Larry and I have been blogging a lot recently about the Pfizer/Wyeth merger and some other possibilities. I want to spend a little more time because I think that it’s fundamental to what’s happening in Big Pharma right now. Also, with Tom Daschle dropping out of consideration for a Cabinet post, President Obama won’t be able to start his agenda for U.S. healthcare policy for a while, so we have some time to focus on M&A activity in the BioPharmaceutical Sector.
While I’m still not a big believer in the sense or economics of mergers in the drug industry, they sure generate a lot of ink in the press. (Or, are they are electrons in the age of blogs? I’m having a difficult time adapting my metaphors to the Internet age.) I get the reasons, falling stock prices, lots of cash on drug company balance sheets, and CEO’s desperate to do anything to appear to be adding growth to the top line. Also, the lack of any real news seems to engender a lot of wishful thinking out there in the media.
Here’s one example. Jim Cramer over at CNBC recently blogged (http://www.cnbc.com/id/28813740 ) about the possibility of a merger between Abbott Laboratories (NYSE: ABT) and Celera (NYSE: CRA). Seems that Abbott’s CEO, Miles White, has been talking about the possibility of acquisitions (But then don’t CEO’s always talk about this? This is Guy’s Third Rule of Being a CEO.), and they are both already working together in the area of personalized medicine. Jim admits freely that he is only speculating here, but, given the article in Barron’s which came out today chiding him about his track record in making predictions, I don’t think I’ll put much into this one. I did find Jim’s summary of personalized medicine interesting and I’ll return to this in a future blog.
Meanwhile, Mike Huckman is keeping hopes alive over at his blog (http://www.cnbc.com/id/29014145 ) about the possibility of Roche (SWX Europe: ROG) acquiring Genentech (NYSE: DNA) in a hostile takeover. This was his second prediction for the pharmaceutical industry in 2009. Now, I’m not picking on Mike. I have a lot of respect for him. But, looking at his photo on his blog, I think I can safely say that I’m a few years older than him. OK, maybe more than a few years. Anyway, my point is that since 1976 when Robert Swanson and Dr. Herbert Boyer launched Genentech, I’ve been hearing people talk about a hostile takeover. It’s a perennial. Also, as I’ve blogged before, this kind of deal doesn’t make sense to me.
This week, Merck's (NYSE: MRK) CEO, Richard Clark stepped back from their long standing high and mighty point of view against mergers and "hinted" (http://blogs.wsj.com/health/2009/02/03/as-sales-slump-merck-ceo-clark-looks-to-acquisitions/ ) by saying “I don’t think any CEO in this environment can categorically rule out any transaction,” Clark said, according to Dow Jones Newswires. “There are opportunities across the whole spectrum we would look at.” We're not that clear on the position Andrew Witty, Glaxo's new CEO is taking first saying that there will be no acquisitions, and then suggesting "bolt-ons" and then suggesting that acquisitions will take a prominent role as Glaxo looks to back away from the traditional big pharma "Blockbuster" model and move further into consumer, vaccine and emerging markets (http://www.natap.org/2009/newsUpdates/010909_05.htm ). It may be of some interest that almost simultaneously and representing only about 1% of the value of the Pfizer-Wyeth deal, Glaxo acquired UCB's emerging market business for $687 million. In the meanwhile, Astellas launched a $1 billion hostile tender for CV Therapeutics (http://www.dealmakersforum.com/) and rumors continue to abound about a potential BristolMyers-Squibb-Sanofi hook up. Quite a week!
Other possibilities exist including Carl Icahn's continuing pursuit of "enhancing shareholder value" (e.g. sale to a Big Pharma company) at Biogen-Idec . That’s the fun thing about this kind of market, anyone can speculate about anything, even me. Let’s see what happens, I think that this is going to be a very interesting year.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
While I’m still not a big believer in the sense or economics of mergers in the drug industry, they sure generate a lot of ink in the press. (Or, are they are electrons in the age of blogs? I’m having a difficult time adapting my metaphors to the Internet age.) I get the reasons, falling stock prices, lots of cash on drug company balance sheets, and CEO’s desperate to do anything to appear to be adding growth to the top line. Also, the lack of any real news seems to engender a lot of wishful thinking out there in the media.
Here’s one example. Jim Cramer over at CNBC recently blogged (http://www.cnbc.com/id/28813740 ) about the possibility of a merger between Abbott Laboratories (NYSE: ABT) and Celera (NYSE: CRA). Seems that Abbott’s CEO, Miles White, has been talking about the possibility of acquisitions (But then don’t CEO’s always talk about this? This is Guy’s Third Rule of Being a CEO.), and they are both already working together in the area of personalized medicine. Jim admits freely that he is only speculating here, but, given the article in Barron’s which came out today chiding him about his track record in making predictions, I don’t think I’ll put much into this one. I did find Jim’s summary of personalized medicine interesting and I’ll return to this in a future blog.
Meanwhile, Mike Huckman is keeping hopes alive over at his blog (http://www.cnbc.com/id/29014145 ) about the possibility of Roche (SWX Europe: ROG) acquiring Genentech (NYSE: DNA) in a hostile takeover. This was his second prediction for the pharmaceutical industry in 2009. Now, I’m not picking on Mike. I have a lot of respect for him. But, looking at his photo on his blog, I think I can safely say that I’m a few years older than him. OK, maybe more than a few years. Anyway, my point is that since 1976 when Robert Swanson and Dr. Herbert Boyer launched Genentech, I’ve been hearing people talk about a hostile takeover. It’s a perennial. Also, as I’ve blogged before, this kind of deal doesn’t make sense to me.
This week, Merck's (NYSE: MRK) CEO, Richard Clark stepped back from their long standing high and mighty point of view against mergers and "hinted" (http://blogs.wsj.com/health/2009/02/03/as-sales-slump-merck-ceo-clark-looks-to-acquisitions/ ) by saying “I don’t think any CEO in this environment can categorically rule out any transaction,” Clark said, according to Dow Jones Newswires. “There are opportunities across the whole spectrum we would look at.” We're not that clear on the position Andrew Witty, Glaxo's new CEO is taking first saying that there will be no acquisitions, and then suggesting "bolt-ons" and then suggesting that acquisitions will take a prominent role as Glaxo looks to back away from the traditional big pharma "Blockbuster" model and move further into consumer, vaccine and emerging markets (http://www.natap.org/2009/newsUpdates/010909_05.htm ). It may be of some interest that almost simultaneously and representing only about 1% of the value of the Pfizer-Wyeth deal, Glaxo acquired UCB's emerging market business for $687 million. In the meanwhile, Astellas launched a $1 billion hostile tender for CV Therapeutics (http://www.dealmakersforum.com/) and rumors continue to abound about a potential BristolMyers-Squibb-Sanofi hook up. Quite a week!
Other possibilities exist including Carl Icahn's continuing pursuit of "enhancing shareholder value" (e.g. sale to a Big Pharma company) at Biogen-Idec . That’s the fun thing about this kind of market, anyone can speculate about anything, even me. Let’s see what happens, I think that this is going to be a very interesting year.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
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