Mylan’s Second Bid for Swedish Drugmaker Meda Is Rejected

Mylan Inc., the biggest U.S. generic-drug maker, was rejected in a second bid to buy Meda AB (MEDAA), the Swedish producer of the Dymista allergy medicine. Meda stock fell the most in almost three years.

All contact between Meda and Mylan has been terminated, the Solna, Sweden-based company said in a statement today, without specifying financial details. The Canonsburg, Pennsylvania-based suitor raised its offer to about 43.8 billion kronor ($6.7 billion) from an earlier, undisclosed figure, people with knowledge of the matter said last week.

“The board’s decision is based on a strong belief in the continued potential of Meda as a stand-alone company and the assumption that a transaction cannot be completed as it lacks sufficient support from Meda’s largest shareholder,” the drugmaker said.

Mylan’s attempt to buy Meda comes as the generic drug industry is undergoing a wave of consolidation, with the U.S. pharmaceutical maker and competitors buying up smaller companies as well as expanding into brand-name and injectable medicines. The deals have helped the companies expand their geographic reach as well as add more profitable products.

Meda fell 7.8 percent, the steepest drop since Aug. 2, to close at 118.50 kronor in Stockholm. That pared the shares’ gain this year to 45 percent, valuing the company at about 35.8 billion kronor.

Olsson Family

Mylan spokeswoman Nina Devlin wasn’t immediately available to comment on Meda’s statement.

Sweden’s billionaire Olsson family, which owns shipping, offshore-drilling, finance and property companies, holds a 23 percent stake in Meda through Stena Sessan Rederi AB, whose chief executive officer, Bert-Ake Eriksson, is the drug producer’s chairman. Meda had sales of $2.13 billion in 2013, two-thirds of which were in western Europe. Mylan generated $6.91 billion in revenue last year, with $1.97 billion coming from Europe.

Actavis Plc (ACT), a Dublin-based drugmaker with operations in New Jersey, agreed in February to buy Forest Laboratories Inc. for $25 billion. Valeant Pharmaceuticals International Inc. has been gobbling up drug and health-products companies as it seeks to grow into one of the world’s five biggest drugmakers.

Valeant teamed up on April 22 with Bill Ackman, the billionaire hedge fund manager, in a $45.7 billion bid to buy Allergan Inc., the maker of the Botox cosmetic treatment.

A quarter of Meda’s sales come from dermatology products, such as acne and skin cancer treatments, while another 17 percent come from respiratory products including an allergy inhaler, according to the company’s annual report.

RPT-Reckitt Benckiser confirms talks to buy Merck unit

Britain's Reckitt Benckiser Group confirmed on Monday it was in talks to buy Merck & Co Inc's consumer healthbusiness, the latest asset up for grabs in a wave of pharmaceutical deals.

The consumer products group emerged as a front runner in the auction for the unit, best known for Coppertone sunscreen and Claritin allergy medicine, at the weekend, according to Reuters. Germany's Bayer AG is also vying to buy the unit, which could fetch about $13.5 billion.

 

"RB confirms that it is in discussions with Merck regarding an offer for its consumer healthbusiness," the company said on Monday. 

Exclusive: Allergan eyes new takeover bid for Shire - sources

 Allergan Inc (AGN.N), facing an unsolicited bid fromValeant Pharmaceuticals International Inc (VRTX.O), is preparing to approach Shire Plc (SHP.L) about a potential takeover, even though the Irish drugmaker rebuffed a previous overture, people familiar with the matter said on Monday.

A bid by Allergan for Shire, which has a market value of $32 billion, would underscore how keen the U.S. dermatology drugmaker is to stay independent.

Valeant teamed up with activist investor Bill Ackman earlier this month to make an unsolicited $47 billion offer for Allergan. Valeant has expanded through a series of acquisitions over the past few years. But Allergan has been reluctant to sell to it in part because of Valeant's reputation for cutting costs and spending little on research and development.

Allergan had held talks in recent months with Shire about a potential takeover, but those did not pan out, Reuters reported last week. The sources said Allergan is still interested in a deal with Shire and is planning a fresh approach, with the Valeant bid now also in the background.

Allergan could come back for a bid as soon as the next few days, one person added. The plan has yet to be finalized and could change, cautioned the sources, who asked not to be named because the matter is not public. It is not clear if Shire would be open to entering into merger discussions.

A representative of Allergan declined to comment, while Shire could not be immediately reached for comment. Valeant and Ackman's hedge fund Pershing Square declined to comment.

Allergan's shares closed down 1.3 percent on Monday on the New York Stock Exchange. Shire's shares closed up 2.4 percent in London before the news of Allergan's renewed interest.

A combination of Allergan and Shire would create a pharmaceutical giant with a combined market value of nearly $72 billion and annual sales of more than $11 billion.

Analysts have suggested one way for the Botox maker to defend against the unsolicited bid would be to acquire foreign drugmakers such as Shire, Jazz Pharmaceuticals Plc (JAZZ.O) or Alkermes Plc (ALKS.O).

A combination with Shire would help Allergan gain its top selling ADHD drug Vyvanse. It would also gain drugs for rare diseases like Elaprase for Hunter syndrome and Replagal for Fabry disease.

Pharmaceutical companies are interested in developing or buying orphan drugs which affect a small patient population because there are fewer hurdles to regulatory approval, have lower marketing costs and can command high prices.

Still, the Valeant bid could also complicate attempts by Allergan to find a white knight or buy someone else. As part of their strategy, Ackman bought a 9.7 percent stake in Allergan, becoming its largest shareholder.

A transaction would add to a frenzy of deal-making currently going on in the healthcare sector, as the industry restructures amid healthcare spending cuts and competition from cheap generics.

Deals totaling more than $153 billion have been struck so far this year, the highest year-to-date level since Thomson Reuters began tracking data. Pharmaceutical deals have accounted for 71 percent of overall healthcare deals.

Buying Shire, which is based in Dublin, would also play to an increasingly popular trend that is driving M&A in healthcare and some other sectors these days: It could help lower Allergan's tax rate.

In a process known as inversion, U.S. drugmakers seek to relocate their headquarters to other countries with lower tax rates. These companies are eying potential targets that are based in Ireland in particular because of a low 12.5 percent corporate tax rate, compared to 35 percent in the United States.

Bankers say the tax benefits of inversion are driving several other deals in healthcare and beyond. On Monday, for example, Pfizer Inc (PFE.N) said it had approached Britain's AstraZeneca Plc (AZN.L) (AZN.N) to reignite a potential $100 billion takeover, in what would be the biggest foreign acquisition of a British company and one of the largest pharmaceutical deals. <ID: nL6N0NK194>

That deal, if it were to happen, would also come with tax advantages. Pfizer could redomicile to Britain and enjoy lower tax rates, thanks to attractive incentives to companies that manufacture and hold patents in the country.

Generic drugmaker Mylan Inc (MYL.O) is also looking at acquisition targets that are based outside of the United States because of competitive pressures from rivals with a less burdensome tax structure, and it has made an unsuccessful bid for Swedish drugmaker Meda (MEDAa.ST).

Pfizer Still Wants AstraZeneca After Bid Rejected

Pfizer offered 46.61 pounds a share in cash and stock for AstraZeneca in January, and AstraZeneca declined to pursue negotiations, Pfizer said in a statement today. The proposal is about 14 percent above the April 25 close for AstraZeneca. The stock today climbed above that price, gaining the most in more than two decades.

For now, Pfizer is still trying to draw AstraZeneca into talks.

“We tried to get a mutual announcement to say we were in preliminary discussions,” Pfizer Chief Executive Officer Ian Read said on a conference call today. “AstraZeneca rebuffed that, which is why we were forced to make the announcement.”

Photographer: Chris Ratcliffe/Bloomberg

An employee fills a tray with cell compound solution at Neusentis Ltd.'s research... Read More

If Pfizer is able to consummate the deal, it would be among the biggest ever U.S. company to leave the country’s border. Read said that while he hadn’t discussed that with the U.S. government, he was confident it could get done.

‘Significantly Undervalued’

Pfizer wants to reach an agreement that AstraZeneca’s board can endorse and is considering its options.

“Clearly the reason Pfizer has gone public is to try to force a deal,” said Mark Clark, an analyst at Deutsche Bank in London. “The price that AstraZeneca is willing to talk about is nowhere near 46 or they wouldn’t have been summarily dismissed.”

Pfizer’s January proposal “very significantly undervalued” AstraZeneca, the U.K. company said in astatement. AstraZeneca also was concerned that Pfizer wanted to pay 70 percent of the price in shares, AstraZeneca said. The company concluded that, absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer.’’

“They’re sellers, we’re buyers,” Read said. “Of course they’re going to say it’s undervalued.”

Overseas Cash

Another key component of the deal is moving Pfizer outside the U.S. for tax purposes. A deal would allow Pfizer to use some $70 billion of cash it has built up overseas that would be subject to taxes if brought back to the U.S. and, because the combined company would be incorporated in the U.K., would lead to a lower tax rate.

“I don’t see why there’s any conflict in what we’re doing with U.S. policy,” he said on the conference call. The company would keep its operational headquarters in the U.S., and maintain a U.S. stock listing.

The Pfizer CEO has complained before about the U.S. corporate tax rate -- the highest in the world. “We saw how difficult it was to do business development with an uncompetitive tax rate,” he said on the conference call.

Read contacted AstraZeneca Chairman Leif Johansson on April 26 for the first time since January, with no specific proposal, AstraZeneca said today.

The last few months after the initial approach convinced Read it was time to try again. “We saw strength in our pipeline as results came through, that made us feel we’re coming from a position of greater strength and confidence, and we saw news come through their pipeline,” he said.

U.K. Rules

Pfizer has until May 26 to make an offer for AstraZeneca, or say that it won’t bid, under U.K. takeover rules.

Pfizer may be trying to accelerate talks with AstraZeneca in part because the U.K. drugmaker is scheduled to present promising data at the annual meeting of the American Society of Clinical Oncology, which begins May 30 in Chicago, according to one person familiar with the situation who asked not be named as the matter is confidential.

AstraZeneca rose 14 percent to 46.67 pounds in London, the biggest one-day advance since at least 1993. Pfizer climbed 4.2 percent to $32.04 in New York. The average premium for pharmaceutical takeovers of at least $1 billion was 30 percent over the past five years, data compiled by Bloomberg show.

‘Considerably Higher’

“The price that Pfizer will have to pay is considerably higher than the current one,” said Julian Chillingworth, chief investment officer for Rathbone Brothers Plc, a London-based investment firm that owns AstraZeneca shares and has 22 billion pounds under management. “That price would have to begin with a 50 and not a 40.”

An acquisition of AstraZeneca would add to the $127 billion of mergers among pharmaceutical companies this year, according to data compiled by Bloomberg. An industrywide recalibration that has been building since 2011 reached a peak last week with a flurry of activity byGlaxoSmithKline Plc (GSK), Novartis AG and Valeant Pharmaceuticals International Inc. (VRX)

Under Pfizer’s proposal, the two companies would be combined into a U.K.-based holding company, with headquarters in New York, Pfizer said. The deal would give the company flexibility to proceed with a potential split-up, as Pfizer has been considering, Pfizer said.

“We’ve had really extensive experience in this and we don’t see this as a distraction,” Read told reporters on a conference call. “We’re satisfied that these large deals can be done and create value. This is something society is requesting of the pharmaceutical industry. They want products faster and they want better value.”

Pfizer would seek to domicile the new company in the U.K. for tax purposes in order to shield AstraZeneca from the higher U.S. corporate tax rate, Read said. AstraZeneca’s business, which is structured for a 21 percent to 22 percent tax rate, couldn’t survive if it was taxed at 38 percent, he said.

Amgen, AbbVie Seen as Possible AstraZeneca White Knights

The largest proposed acquisition in drug-industry history may spark further deals asAstraZeneca Plc (AZN) tries to sort out alternatives to Pfizer Inc.’s (PFE) unsolicited 58.8-billion-pound ($98.7 billion) takeover approach.

AstraZeneca may seek a merger of equals with Amgen Inc. (AMGN) or AbbVie Inc. (ABBV), both of which have cancer programs, as a defense strategy, said Andrew Baum, a London-based analyst at Citigroup. Or the U.K. drugmaker may find itself the subject of further unwanted approaches from the likes of Sanofi, which would be attracted also to AstraZeneca’s diabetes assets.

Those scenarios are among the many swirling as investment bankers, analysts and investors puzzle out the ramifications of Pfizer’s announcement that London-based AstraZeneca spurned an acquisition proposal. AstraZeneca shares rose above the 46.61 pounds that Pfizer offered in January, indicating investors expect the company to be sold at a higher price.

Pfizer could raise its offer to try to entice AstraZeneca into negotiations, begin a hostile bid or walk away if AstraZeneca refuses to talk. Under U.K. takeover law, New York-based Pfizer has a month to decide whether to bid for AstraZeneca or to pull out.

“The game is open,” Odile Rundquist, an analyst with Helvea SA in Geneva, said today in an interview. “AstraZeneca will be under pressure to listen to Pfizer now. Astra could also seek a merger of equals with the likes of an Amgen. Or it could get another approach.”

Amgen Uninterested

Amgen hasn’t had any discussions with AstraZeneca and it wouldn’t fit the company’s strategy, said a person familiar with Thousand Oaks, California-based Amgen’s plans. The person asked not to be named because they weren’t authorized to speak about the matter on the record.

Amgen, the world’s biggest biotechnology company by revenue, declined to comment on the speculation, as did AbbVie.

Pfizer is considering its options, said Andrew Widger, a spokesman for the company, when asked if Pfizer would consider going directly to AstraZeneca shareholders with a hostile takeover offer.

“If and when there is a specific proposal or consummated transaction we will then be able to speak to specific aspects and details as appropriate,” he said in an e-mail.

Shares Rise

AstraZeneca rose 14 percent to 46.67 pounds at the close in London, the highest value since at least 1993. Sanofi advanced 1.3 percent to 77.15 euros. Pfizer rose 4.2 percent to $32.04 at the close in New York. AbbVie climbed 3.5 percent to $50.87 and Amgen gained less than 1 percent to $111.48.

Bank of America Corp., JPMorgan Chase & Co. and Guggenheim Securities are providing financial advice to Pfizer while Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser. AstraZeneca listed Evercore Partners Inc., Goldman Sachs Group Inc. and Morgan Stanley as advisers in a statement today.

Pfizer approached AstraZeneca in January with the 46.61-pound-a-share acquisition proposal, and walked away when AstraZeneca declined to pursue talks, Pfizer said in a statement today. The proposal “very significantly undervalued” AstraZeneca and the U.K. company also was concerned that Pfizer wanted to pay 70 percent of the price in shares, AstraZeneca said in a statement today.

Novartis and GSK trade assets as pharma industry reshapes

 Novartis and GlaxoSmithKline agreed to trade more than $20 billion worth of assets on Tuesday to bolster their best businesses and exit weaker ones as the drug industry contends with healthcare spending cuts and generic competition.

The deals, which include Novartis' purchase of GSK's cancer drugs and GSK's acquisition of Novartis' vaccines business, came just after a newspaper report that AstraZeneca Plc had turned down a $101 billion bid approach from Pfizer Inc, a story that sent shares up across the sector.

In addition, Novartis is selling its animal health arm to Indianapolis-based Eli Lilly for about $5.4 billion in cash. That would make Lilly's Elanco unit the world's second-largest animal health business when that deal closes early next year.

 

A flurry of dealmaking has overtaken the global pharmaceutical industry recently as most large companies try to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale.

Deal values have almost doubled since the start of 2014 to $77.9 billion from a year earlier, according to Thomson Reuters data.

The overhaul at Novartis marks the end of a yearlong review of its sprawling portfolio after the departure of longtime Chairman and Chief Executive Officer Daniel Vasella, the architect of the merger of Ciba-Geigy and Sandoz that led to the company's formation in 1996.

The Swiss drugmaker said it would buy London-based GSK's oncology products for $14.5 billion plus another $1.5 billion that depends on the results of a trial in melanoma.

The deal will strengthen Novartis's world No. 2 position in cancer behind crosstown rival Roche Holding AG.

Novartis said GSK was buying its vaccines, excluding flu, for $5.25 billion plus potential milestone payments of up to $1.8 billion and ongoing royalties. The companies also will form a joint venture in consumer healthcare.

The transactions, and their hint of more deals ahead for the drug sector, lifted the ARCA Pharmaceutials Index 1.8 percent.

Lilly's Elanco animal health unit will acquire about 600 animal health brands from Novartis, including vaccines and anti-parasite medicines that will allow it to enter the acquaculture, or fish farming, market.

This would be the eighth and largest acquisition since 2007 for Elanco, which by global sales would trail only Zoetis Inc, which also specializes in products for farm animals and pets.

"With this transaction, we'll go from being No. 5 to No. 3 on the pet side globally and become a top 2 or 3 player in every segment" of products for farm animals, Jeff Simmons, Lilly's head of animal health, said in an interview.

Last year Elanco had sales of $2.15 billion, compared with $1.1 billion for Novartis Animal Health.

"Novartis has agreed (to) an elegant set of transactions that either removes or strengthens its underperforming assets, while boosting its oncology portfolio," Jefferies analysts said.

In afternoon New York Stock Exchange trading, Novartis shares were up 1.4 percent at $86.63, while GSK rose 4.2 percent to $55.34. Lilly dipped 0.9 percent to $60.32.

FIGHTING FIT

Novartis CEO Joe Jimenez said the revamp would help make the company "fighting fit" to meet the challenges of the global healthcare industry over the next 10 years.

He told reporters the deals would lower overall sales by about $4 billion but result in higher profits as the company swaps lower-margin vaccines for higher-margin oncology drugs.

Cancer is a particular focus for some drugmakers as novel medicines show promise by boosting the body's immune system.

"We reckon the real value of the (cancer) deal should be searched for in the pipeline and the newly launched products, strengthening Novartis' position in melanoma and hematology," Vontobel analyst Andrew Weiss said.

Analysts at Swiss broker Notenstein were also upbeat, saying the new cancer drugs would help Novartis to navigate patent expiries on top-selling medicines more easily.

However, analysts at Barclays described the price tag of as much as $16 billion for the oncology assets as "rather hefty."

Drugmakers are stocking up their oncology pipelines as they bet that combinations of drugs will become the future of cancer care. A desire to boost its oncology business is seen as a key factor behind Pfizer's reported interest in AstraZeneca.

Cancer is an extremely competitive marketplace, however, and some analysts said it was right for GSK to exit a field where it was only No. 14 in the world.

GSK boss Andrew Witty said the company did not have the scale to compete in cancer drugs, so it made sense to put them into "the hands of somebody who is a world leader in oncology."

Conversely, he said the deals with Novartis strengthened two of GSK's core businesses: vaccines, given in more than 2 million shots every day, and consumer health, where the company will take the lead in running a business worth about $10 billion in annual revenue with the Swiss group.

The deals were another step in his strategy of focusing on areas of strength, he said, moving further away from the monolithic model of drugs companies that tried to do everything.

After the deal, GSK will get 70 percent of sales from its franchises in respiratory, HIV, vaccines and consumer health.

Novartis said it would start a separate sale process for its flu business immediately, which was not part of the GSK deal.

Lilly said it would fund its animal health transaction with $3.4 billion of cash and $2 billion of loans, and it expected cost savings of about $200 million per year within three years of closing the deal.

Bank of America Merrill Lynch advised Lilly, while Goldman Sachs Group Inc advised Novartis on the animal health deal. GSK said Lazard and Zaoui & Co were its joint financial advisers.

Valeant, Ackman offer to buy Botox maker Allergan for $47 billion

Canada's Valeant Pharmaceuticals International Inc said on Tuesday it and activist investor Bill Ackman made an unsolicited $47 billion bid to buy Botox maker Allergan Inc as it seeks to become one of the world's five biggest drug companies.

The offer, if successful, would bring together two mid-sized pharmaceutical companies with expertise in skin care and eye care products, and is highly unusual as activist investors typically buy stakes and then agitate for strategic change.

Ackman's Pershing Square Capital Management, Allergan's largest shareholder with a 9.7 percent stake, disclosed in a filing on Monday it is supporting the bid.

 

Allergan said in a statement that it has received the offer, and will carefully consider the proposal and "pursue the course of action that it believes is in the best interests of the company's stockholders."

Late on Tuesday, Allergan said it adopted a shareholder rights plan effective April 22 that will trigger if a person or group acquires 10 percent or more of its shares.

Valeant offered to pay $48.30 a share in cash and 0.83 of its common share for each Allergan share, valuing Allergan at $152.88 a share, a premium of over 7 percent to the company's closing price on Monday.

The offer is 31 percent higher than Allergan's stock price on April 10, the day before Pershing Square's ownership reached 5 percent.

Shares of Allergan jumped 15.2 percent to $163.65 in New York, signaling investors expect a sweetened bid to emerge.

Valeant stock rose 7.5 percent to $135.41.

Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings. Chief Executive Michael Pearson said in January the drugmaker wants to become one of the world's top five pharmaceutical companies by market capitalization by the end of 2016, largely through acquisitions.

"The big valuation driver is Botox," Pearson said, speaking about the Allergan bid to about 200 shareholders and analysts in New York.

Pearson said Allergan Chief Executive David Pyott and the company's board had been unwilling to discuss a merger with Valeant. In a letter to Allergan, Valeant said it would have preferred to negotiate a deal in private.

Pearson said Valeant would definitely not turn its bid into an all-cash offer, and suggested the company could still walk away if Allergan's price gets too high.

"We don't view this as we're going to pay whatever it takes to get Allergan, because we won't," he said. "If someone wants to come in and pay some ridiculous cash price, that's their choice."

Ackman, who also addressed shareholders, called the deal the most synergistic he has seen, and said he is already talking with Valeant about their next deal.

The Laval, Quebec-based company, whose products include antidepressant drug Wellbutrin and over-the-counter remedy Cold-FX, favors targets where it can aggressively cut costs. Valeant said it expects to realize at least $2.7 billion in annual cost synergies from a combination with Allergan.

A large-scale cost-cutting approach may not work at Allergan without damaging thebusiness, BMO Capital Markets analyst David Maris said in a note.

But J.P.Morgan analyst Chris Schott said the potential for savings from operating expenses and Valeant's low tax rate is compelling.

Allergan, which also has a lucrative portfolio of ophthalmic drugs to treat conditions such as glaucoma and dry eye, is larger by revenue, reporting $6.3 billion in sales last year. Valeant reported $5.8 billion in revenue last year.

Pearson said he doesn't expect the offer to raise antitrust concerns.

The Federal Trade Commission, which shares the work of antitrust enforcement with the U.S. Justice Department, will likely review this proposed transaction, according to an antitrust attorney, who declined to be named for business reasons.

"It's like any of these big drug deals, if there's overlap in certain products then, like prior deals in this space, they can divest one of the products to get the deal through," the antitrust expert said.

Valeant is already in talks with potential buyers of products the new company would divest, Pearson said, naming Valeant's Botox competitor, Dysport, as well as its Restylane and Perlane product lines. Combined sales of those lines could reach about $250 million, Schott said.http://www.reuters.com/article/2014/04/23/us-allergan-offer-idUSBREA3L0P520140423