So far this year—not quite done yet—there has been $667.5 billion in healthcare mergers and acquisitions, according to Dealogic. Next year is likely to continue a trend that started, or at least accelerated, last year.
Writing for Bidnessetc., Hannah Ishmael takes aim at Johnson & Johnson (JNJ) , Novartis (NVS) and Sanofi (SNY) in the pharmaceutical area, and Gilead Sciences, Inc. (GILD), Amgen (AMGN) and Biogen, Inc. (BIIB) in the biotech sector.
Pfizer Inc. (PFE) led 2015 with its acquisitions of Hospira, Inc. and the whopping $160 billion deal with Allergan plc (AGN). Ishmael ponders whether J&J will add assets rather than pursue a bolt-on deal. The company has a debt capacity of $43.6 billion. In October, the company started a $10 billion share buyback programs.
“I wouldn’t interpret the $10 billion share buyback as impacting our appetite for scale of any size in M&A at all,” said Dominic Caruso, J&J’s chief financial officer said in an October conference call. “Our appetite for M&A of any scale has entirely to do with whether or not the acquisition is going to create value for shareholders.”
Novartis and Sanofi, on the other hand, are possibly looking to unload some of their business units. Novartis is expected to divest its Alcon eye care division, Ishmael says, despite having recently spent $53 million on a new global data center in Forth Worth, Texas on Alcon (ACL)’s campus headquarters. Sanofi has suggested several times that it may get rid of its animal healthcare unit, Merial, as well as its European generics business.
In the biotech sector, Gilead, Biogen and Amgen, writes Ishmael, “are more likely to be seriously considering M&A opportunities to beef up their pipelines in 2016.”
Gilead has been the target of a great deal of M&A speculation this year. Although it dominates the hepatitis C market with Sovaldi and Harvoni, analysts believe their sales are plateauing. Extremely expensive, at about $1,000 per pill, there has also been a lot of pricing pressure from the government and payers. There are also other companies, such as Merck & Co. (MRK) that will soon be launching its own HCV drug with lower price tags.
Potential Gilead acquisition targets bandied about include Arrowhead Research Corporation (ARWR) and Achillion Pharmaceuticals, Inc. (ACHN) in the hepatitis and infectious disease areas, and Kite Pharma, Inc. (KITE), Clovis Oncology (CLVS), and Incyte Corporation (INCY) in the oncology area.
Biogen, write Ishmael, “can be expected to be looking for acquisitions in CNS and hemophilia, a rare bleeding disorder.” Biogen presents a bit of a puzzle. It’s shifting its focus away from multiple sclerosis (MS), where it has been extremely successful, to the riskier area of Alzheimer’s. It is restructuring, cutting several pipeline programs, and slashing 11 percent of its workforce despite an 11 percent increase in revenue in the third quarter of 2015. Despite the layoffs, it appears to be expanding its facilities in Boston. But its stock has been hammered this year and analysts and investors would really like to see an acquisition in order to bump up its revenue. Potential targets include Boston-based Vertex Pharmaceuticals (VRTX) and New York-based Acorda Therapeutics (ACOR).
Amgen Inc. (AMGN) has been quite upfront about wanting to acquire companies up to the $10 billion range. There was speculation earlier this week that Amgen might consider acquiring Belgian-based Galapagos NV (GLPG), which recently announced positive clinical trial data for a Crohn’s disease drug.
And no discussion of life science merger-and-acquisition activity can go by without mentioning serial acquirer Valeant Pharmaceuticals International Inc. (VRX) It has acquired more than 100 companies since 2008, and in 2015 alone acquired at least eight, including Synergetics USA (SURG) in September. If Novartis actually was interested in selling off Alcon, Valeant would be a likely buyer given its dominance of the contact lens market, including owning Bausch & Lomb, Largo, Fla.-based Unilens Vision Inc., Paragon Vision Sciences and several specialty contact lens-related laboratories.
“Biotech is a deal-intensive space,” wrote Bloomberg Intelligence recently, “and due diligence is constantly being done proactively to evaluate potential opportunities. More deals being considered may come to fruition.”
December 11, 2015
By Mark Terry, BioSpace.com Breaking News Staff