Drug Buying Spree Still Bustling as Pfizer Leads Hunt: Real M&A
2015-01-07 05:00:17.0 GMT
By Caroline Chen and Tara Lachapelle
(Bloomberg) -- After a record-breaking year of mergers and
acquisitions in the health-care industry, bankers, venture
capitalists and analysts say more is to come from companies such
as Pfizer Inc. and Actavis Plc.
For big drugmakers, “the only real place they can find
growth is through acquisition,” Jeff Stute, head of health-care
investment banking at JPMorgan Chase & Co., said in a telephone
interview from New York.
Investors will be listening for hints of coming deals at
JPMorgan’s annual health-care conference in San Francisco next
week. There, executives from more than 300 companies, including
industry giants Merck & Co. and Roche Holding AG, will make
presentations to fund managers and other attendees about the
year ahead, while business development teams and bankers take
over nearby hotel suites to meet with potential targets.
Drugmakers will likely be busy again after announcing a
record $234 billion of acquisitions last year, almost triple the
volume in 2013, according to data compiled by Bloomberg. Health-
care mergers also led global takeover activity in 2014, a year
defined by megadeals across various industries.
“2014 was clearly the year of the big deal,” Rich
Jeanneret, Americas vice chair of transaction advisory services
at EY in New York, said in a phone interview. “I think that’s
going to persist in 2015 because there’s much more confidence in
the M&A ecosystem.”
In health care, there are many reasons: The need for new
products. Low interest rates have kept capital cheap.
Discoveries in cancer have generated a new generation of
treatments that big drugmakers are scrambling to acquire.
Activist funds like Bill Ackman’s Pershing Square Capital
Management have targeted companies for takeovers. None of those
trends have changed in 2015.
Pfizer Again?
Analysts say to keep an eye on Pfizer after its $117
billion hostile bid for AstraZeneca Plc failed last year.
Actavis, Bristol-Myers Squibb Co. and GlaxoSmithKline Plc are
possible alternative targets, as is AbbVie Inc. after it walked
away from a more than $50 billion takeover of Shire Plc in
October. Pfizer has also talked about a breakup into two or more
separate companies.
Shire, meanwhile, has $4.4 billion NPS Pharmaceuticals Inc.
high on its takeover list, people familiar with the matter said
last month. Other companies said to be ripe for acquisition
include Salix Pharmaceuticals Ltd. and Zoetis Inc. Ackman’s
fund, which helped prompt 2014’s biggest deal, a $66 billion
merger between Actavis and Allergan Inc., has a stake in Zoetis,
which makes animal health drugs. Zoetis is said to be a good fit
for Bayer AG.
Musical Chairs
Others companies are looking for new targets. Allergan’s
deal with Actavis left its initial suitor, serial acquirer
Valeant Pharmaceuticals International Inc., out in the cold.
Valeant may now turn its attention to dental takeover
candidates, according to a Cantor Fitzgerald report last week.
Big pharma will continue to search for prime assets to add
to their pipelines, especially in immunotherapy, which harnesses
the body’s immune system to fight the disease.
“There’s a new norm in the larger companies in the
industry of outsourcing innovation,” said Kevin Starr, co-
founder and partner at Boston-based Third Rock Ventures.
Pfizer agreed to pay $850 million for rights to Merck
KGaA’s immunotherapy cancer drug last year, while Merck and
Bristol-Myers received approvals for immunotherapy-based skin-
cancer treatments last year, and a crop of biotech startups has
joined the field.
“Oncology’s still the king of the hill and commands the
broadest and deepest interest among buyers,” said JPMorgan’s
Stute.
Tax Is Done
Tax inversions, which were behind some of the biggest deals
of the past couple of years, such as those that gave Actavis and
Valeant their tax-favorable jurisdictions, are now passe due to
new regulations announced by the U.S. Treasury, said Stute. That
means acquirers will need good strategic fits that complement
their existing portfolios to justify transactions, he said.
Activist investors will also help to keep M&A activity
ongoing. Pershing Square’s Ackman reaped about $2.5 billion from
his stake in Allergan, even though it sold to Actavis instead of
Valeant, the suitor he supported.
“Funds which have a lot of money are looking for more
opportunities, and they’re going to look at the biotech and
specialty pharma space,” said Myles Clouston, Nasdaq’s senior
director of advisory services. Biotech valuations remained high
even in the face of pricing pressure, and the Nasdaq
Biotechnology Index finished the year up 34 percent, compared to
the S&P 500 Index’s gain of 11 percent.
Absent other reasons, buyers may be prodded into action by
continued low interest rates, which makes acquisitions one of
the only ways to find growth, said Joe Rosenberg, a Nasdaq
biotech and health-care specialist.
“We are not hearing anything that would suggest a decrease
in acquirers’ M&A appetites heading into 2015,” he said.
For Related News and Information:
Real M&A’s 2015 Guide for Deal Watchers: Pfizer to MegaBrew
Actavis CEO Saunders Has $70 Billion in Deals to Choose From
Risk Is Back for Hedge Funds Chasing Glut of Mergers: Real M&A
Record Year in Pharma Deals Not Enough to Sell Mature Drugs
Top Health News: HTOP <GO>
Top Deal Stories: DTOP <GO>
M&A News About Health-Care Companies: TNI HEA MNA BN <GO>
Merger Calculator: MRGC <GO>
To contact the reporters on this story:
Caroline Chen in San Francisco at +1-415-617-7211 or
cchen509@bloomberg.net;
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Drew Armstrong, John Lear
2015-01-07 05:00:17.0 GMT
By Caroline Chen and Tara Lachapelle
(Bloomberg) -- After a record-breaking year of mergers and
acquisitions in the health-care industry, bankers, venture
capitalists and analysts say more is to come from companies such
as Pfizer Inc. and Actavis Plc.
For big drugmakers, “the only real place they can find
growth is through acquisition,” Jeff Stute, head of health-care
investment banking at JPMorgan Chase & Co., said in a telephone
interview from New York.
Investors will be listening for hints of coming deals at
JPMorgan’s annual health-care conference in San Francisco next
week. There, executives from more than 300 companies, including
industry giants Merck & Co. and Roche Holding AG, will make
presentations to fund managers and other attendees about the
year ahead, while business development teams and bankers take
over nearby hotel suites to meet with potential targets.
Drugmakers will likely be busy again after announcing a
record $234 billion of acquisitions last year, almost triple the
volume in 2013, according to data compiled by Bloomberg. Health-
care mergers also led global takeover activity in 2014, a year
defined by megadeals across various industries.
“2014 was clearly the year of the big deal,” Rich
Jeanneret, Americas vice chair of transaction advisory services
at EY in New York, said in a phone interview. “I think that’s
going to persist in 2015 because there’s much more confidence in
the M&A ecosystem.”
In health care, there are many reasons: The need for new
products. Low interest rates have kept capital cheap.
Discoveries in cancer have generated a new generation of
treatments that big drugmakers are scrambling to acquire.
Activist funds like Bill Ackman’s Pershing Square Capital
Management have targeted companies for takeovers. None of those
trends have changed in 2015.
Pfizer Again?
Analysts say to keep an eye on Pfizer after its $117
billion hostile bid for AstraZeneca Plc failed last year.
Actavis, Bristol-Myers Squibb Co. and GlaxoSmithKline Plc are
possible alternative targets, as is AbbVie Inc. after it walked
away from a more than $50 billion takeover of Shire Plc in
October. Pfizer has also talked about a breakup into two or more
separate companies.
Shire, meanwhile, has $4.4 billion NPS Pharmaceuticals Inc.
high on its takeover list, people familiar with the matter said
last month. Other companies said to be ripe for acquisition
include Salix Pharmaceuticals Ltd. and Zoetis Inc. Ackman’s
fund, which helped prompt 2014’s biggest deal, a $66 billion
merger between Actavis and Allergan Inc., has a stake in Zoetis,
which makes animal health drugs. Zoetis is said to be a good fit
for Bayer AG.
Musical Chairs
Others companies are looking for new targets. Allergan’s
deal with Actavis left its initial suitor, serial acquirer
Valeant Pharmaceuticals International Inc., out in the cold.
Valeant may now turn its attention to dental takeover
candidates, according to a Cantor Fitzgerald report last week.
Big pharma will continue to search for prime assets to add
to their pipelines, especially in immunotherapy, which harnesses
the body’s immune system to fight the disease.
“There’s a new norm in the larger companies in the
industry of outsourcing innovation,” said Kevin Starr, co-
founder and partner at Boston-based Third Rock Ventures.
Pfizer agreed to pay $850 million for rights to Merck
KGaA’s immunotherapy cancer drug last year, while Merck and
Bristol-Myers received approvals for immunotherapy-based skin-
cancer treatments last year, and a crop of biotech startups has
joined the field.
“Oncology’s still the king of the hill and commands the
broadest and deepest interest among buyers,” said JPMorgan’s
Stute.
Tax Is Done
Tax inversions, which were behind some of the biggest deals
of the past couple of years, such as those that gave Actavis and
Valeant their tax-favorable jurisdictions, are now passe due to
new regulations announced by the U.S. Treasury, said Stute. That
means acquirers will need good strategic fits that complement
their existing portfolios to justify transactions, he said.
Activist investors will also help to keep M&A activity
ongoing. Pershing Square’s Ackman reaped about $2.5 billion from
his stake in Allergan, even though it sold to Actavis instead of
Valeant, the suitor he supported.
“Funds which have a lot of money are looking for more
opportunities, and they’re going to look at the biotech and
specialty pharma space,” said Myles Clouston, Nasdaq’s senior
director of advisory services. Biotech valuations remained high
even in the face of pricing pressure, and the Nasdaq
Biotechnology Index finished the year up 34 percent, compared to
the S&P 500 Index’s gain of 11 percent.
Absent other reasons, buyers may be prodded into action by
continued low interest rates, which makes acquisitions one of
the only ways to find growth, said Joe Rosenberg, a Nasdaq
biotech and health-care specialist.
“We are not hearing anything that would suggest a decrease
in acquirers’ M&A appetites heading into 2015,” he said.
For Related News and Information:
Real M&A’s 2015 Guide for Deal Watchers: Pfizer to MegaBrew
Actavis CEO Saunders Has $70 Billion in Deals to Choose From
Risk Is Back for Hedge Funds Chasing Glut of Mergers: Real M&A
Record Year in Pharma Deals Not Enough to Sell Mature Drugs
Top Health News: HTOP <GO>
Top Deal Stories: DTOP <GO>
M&A News About Health-Care Companies: TNI HEA MNA BN <GO>
Merger Calculator: MRGC <GO>
To contact the reporters on this story:
Caroline Chen in San Francisco at +1-415-617-7211 or
cchen509@bloomberg.net;
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Drew Armstrong, John Lear