Ariad draws interest from others besides Baxalta - sources
Ariad Pharmaceuticals (NASDAQ:ARIA) has fielded acquisition interest from other larger pharma companies -- aside from Baxalta (NYSE:BXLT) -- but has not gotten a valuation it considers attractive, according to a source familiar with the situation.
The Cambdrige, Massachusetts-based company, being advised by JPMorgan and Lazard, has evaluated proposals from prospective bidders interested in expanding their oncology franchises, the source said, adding that it has no formal auction process underway.
On Wednesday, Bloomberg News reported that Baxalta, the recently listed pharma company that is being pursued by Shire (NASDAQ:SHPG) in a USD 30bn all-stock hostile offer, offered close to USD 2bn for Ariad, which the target’s board rejected as undervaluing the company.
The company has been rumored in previous years to have received approaches from such companies as Eli Lilly (NYSE:LLY) and GlaxoSmithkline (NYSE:GSK).
However, the source said Baxalta has not shut the door on its pursuit of Ariad, which could bolster the former’s franchise in cancer medications and also potentially serve as a defensive move to ward off Shire.
Ariad, which sells cancer medicine Iclusig and is developing other cancer drugs, has a current market cap of about USD 1.43bn.
According to an industry banker who recently pitched Ariad proposals from large pharma companies, the Ariad board does not appear to be averse to selling, but would expect well above USD 2bn to agree on a deal, which the banker characterized as a challenge.
The valuation floated by prospective acquirers “will not go much higher,” the banker said. “It will not go for more than USD 2.5bn.” The valuation could depend on data expected in coming months on Ariad’s second developmental drug, brigatinib, which is in Phase II clinical trials and for which the company hopes for Food and Drug Administration (FDA) approval next year. In addition, its lead product Iclusig is not without flaws, the banker said, having been pulled from the market last year for sometime.
Another industry banker said Ariad is “not cheap” though it generates growing sales and is an apparently willing seller with activist involvement. It has been on “everybody’s radar screen, so if there was tremendous excitement in it, somebody would have already bought it,” the banker said.
These views were echoed by a third industry banker who suggested that if Baxalta reaches an agreement to acquire Ariad, Shire could be willing to acquire both Baxalta and Ariad and has the financial heft to do so. Shire, which has been acquisitive, has expressed interest in expanding its hemox franchise, or treatments for hematology and oncology, both of which Ariad has in various stages of development, the banker noted.
Previously Ariad was advised by Goldman Sachs, but the bank was conflicted this time around because it represented Baxalta in its defense against Shire, the source added.
An Ariad spokesperson declined to comment. Baxalta spokesperson Geoffrey Mogilner said the company’s strategy is to pursue disciplined M&A transactions but declined to comment on Ariad. A Shire spokesperson could not be reached for immediate comment.
Ariad earlier this year resolved a proxy contest with activist investor Sarissa Capital by agreeing to replace long-time CEO Harvey Berger by the end of 2015 or earlier.
Sarissa, the second largest shareholder in Ariad with a 6.8% stake, previously accused the company of overcompensating its CEO and mismanagement, particularly in the wake of last year’s pulling of Iclusig from the market for some months at the behest of the FDA.