Actavis and Valeant raise prospect of more pharma deals
Two of the most acquisitive pharmaceuticals groups have pledged to continue pursuing deals in 2015, raising the prospect of another big year for healthcare consolidation.
Brent Saunders, chief executive of Actavis, said his company would continue to do deals worth up to $10bn, although he said it would “take a pause” on transformational takeovers such as last year’s $66bn purchase of Allergan.
“We need to invest in our pipeline so that we can have growth well beyond the next decade,” he told the Financial Times. “We have not damped our appetite or capability to do deals.”
Meanwhile Valeant, the Canadian group that lost out in the race to buy Allergan, will also continue looking for “small and medium-sized” deals, its chief executive Mike Pearson told the Financial Times.
More than $250bn of pharma deals were struck during 2014, a record for the sector, as drugmakers used their strong cash positions to replenish their pipelines.
A rush of “tax inversion” deals contributed to the frenzy, as pharma companies sought to buy foreign rivals and redomicile overseas to escape higher US corporation tax. However, a White House crackdown in the autumn thwarted several pending transactions and has made it very difficult to pursue fresh inversions.
As two of the companies that have already inverted, Actavis and Valeant pay much lower effective rates of tax — 16 per cent and 5 per cent respectively — than some of their peers, putting them in prime position to bid for smaller rivals.
Actavis has in the past been linked to Salix, a gastrointestinal drug specialist with a market capitalisation of $7.6bn. Shares in Salix jumped almost 5 per cent on Tuesday following reports it had asked its banker, Centerview Partners, to explore a possible sale.
Pfizer, which tried to invert by buying UK-domiciled AstraZeneca but had to abandon that plan, has a tax rate of approximately 27 per cent. But its chief executive, Ian Read, has said that, despite the crackdown, there are still some advantages of doing an inversion. One source familiar with his thinking says he admires GlaxoSmithKline, also based in the UK.
Mark Schoenebaum, an analyst at Evercore at ISI, said: “Ian Read is a big thinker and I bet he will do something big in 2015, either a deal or buy his own stock back, but he is not going to sit around and wait for share price performance.”
Pfizer could also consider buying Actavis if the company stops expanding, healthcare bankers said.
Pfizer declined to comment.