M&A's in Pharma

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    IVth Year B. Pharm + M.B.A (Pharma. Tech.)

    Trimester XII (Section A & B)

    Unit no. 10, Pharma Industry TrendsApril, 2012

    Module 10 A

    Mergers & Acquisitionsin Pharmaceuticals

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    Involves the combination of all the assets, liability,loans and businesses (on a going concern basis) of two(or more) companies such that one of them survives

    Merger is primarily a strategy of inorganic growth Two firms agree to go forward

    as a single new company ratherthan remain separately ownedand operated : a "merger ofequals"

    The firms are often of aboutthe same size

    Both companies' stocks aresurrendered and new company

    stock is issued in its place

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    In practice, however, actual mergers of equals don'thappen very often.

    Usually, one company will buy another and, as part of

    the deal's terms, simply allow the acquired firm toproclaim that the action is a merger of equals, even ifit is technically an acquisition.

    Being bought out often carries negative connotations;therefore, by describing the deal euphemistically as amerger, deal makers and top managers try to makethe takeover more palatable.

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    1996 By December, Ciba-Geigy, Ltd. and Sandoz Ltd. merged to formNovartis AG. With this merger, Novartis AG became one of thelargest pharmaceutical companies in the world.

    2003 Novartis Generics group of businesses rebrands all globalcompanies under one name, Sandoz. Geneva Pharmaceuticalsbegins its rebranding efforts, operating under the Sandoz nameand creating a worldwide network of resources for genericpharmaceutical production and marketing. On December 1,Geneva officially became Sandoz. The company has more than1,300 employees.

    CIBA-Geigy

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    Both firms ceased toexist when they mergedMerged

    1989

    SmithKlineBeckman

    Merged

    acquired

    1995

    2000Both firms ceased toexist when they merged

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    December, 2010, multinational FMCG giantReckitt Benckiser acquired Paras Pharmaceuticals

    for Rs.3,260 crore. (US $ 724 mio.)

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    Improvevaluation

    The benefits of a greater focus to each of the businesses does get reflected inthe market and it is possible to realize the actual value of each business.Example:

    1. The combined market capitalization of Sun Pharma

    and its demerged R&D firm SPARC 10 to 15 per cent

    higherthan the market capitalization of Sun Pharmasince SPARC listed in July 2007

    2. Demerger of Dabur India comprised of

    - The FMCG business including personal care,

    healthcare and ayurvedic specialty products

    - The pharmaceuticals business which includeallopathic, oncology formulations and bulk drugs.

    Demerger to create a global presence forDaburs pharmaceuticals business andprovide focus to maximise penetration in global markets.

    For the FMCG business: Better and more efficient management of its resources andfacilitate more accurate benchmarking with industry which lead to improvement invaluations for both businesses

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    It is an agreement in which 2 or more

    companies (JV Partners) contribute to the equity capital ofa new Company in a pre-decided proportion.

    Normally joint ventures are formed to pool the resources of

    the partners and carry out a specific project beneficial to

    both the partners but which none of the partners wants to

    carry out under its own corporate entity for any one of thegiven reasons:

    1. The JV may be highly risky with unpredictable result eg. oil

    exploration

    2. JV partners may be competitors but want to collaborate for a

    specific project or business3. Neither of the partners may be interested in diluting control over

    their businesses by accepting funding

    4. To ensure that the management control of the common business

    or project is shared in the agreed proportion through a charter

    of the JV company

    5. Rewards of the common business are shared in the pre-

    determined ratio (rule out manipulation by either side)

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    To increase market share

    To gain control of a blockbusterdrug existing or potential

    To gain entry into a high growththerapeutic area

    To enhance R&D productivity

    Access to new technology platform

    Management efficiency

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    Company Targetcompany

    Year Deal $ Billion

    Novartis (CibaGeigy)

    Sandoz 1996 26

    Astra Zeneca 1999 35

    Pfizer WernerLambert

    2000 90 Lipitor

    GSK(Glaxo

    Wellcome)

    Smith KlineFrench

    2000 55

    Pfizer Pharmacia 2003 57 Celebrex

    Sanofi Aventis(Sanofi)

    Aventis 2004 62

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    *

    Company Target company $ billion Technology/product

    Pfizer Wyeth 68 Prevnar, Enbrel

    PharmaceuticalsMerckBayer

    Schering PloughSchering

    4119.7

    PharmaceuticalsPharmaceuticals

    Schering Plough Organon 14.5 Pharmaceuticals

    Takeda Nycomed 13.6 Pentaprazole, Daxas/Daliresp

    Gilead Pharmasset 11 Hepatitis C

    Sankyo Daiichi 7.7 Pharmaceuticals

    Abbott Solvay 7

    Tricor, Trilipix, vaccines

    Nycomed Atlanta 6 Protonix

    UCB Schwartz 5.8 Pharmaceuticals

    AbbottKos 3.7

    Humira, Niaspan

    Abbott Piramal 3.7 Generics

    GSK Steifel 3.6 Dermatology

    Pfizer King 3.6 Analgesics

    Shire New River Pharma 2.6 Pharmaceuticals

    Dainippon SumitomoSepracor 2.6

    Lunesta, Xopenex

    Lilly Icos 2.3 Cialis

    Dainippon Sumitomo 2.1 Pharmaceuticals

    Toyama Fujifilm, Taisho 1.4 Pharmaceuticals

    GSK Reliant Pharma 1.65 Pharmaceuticals

    Solvay Fournier 1.4 Pharmaceuticals

    Teva Taiyo 1.2 Pharmaceuticals

    Forest Clinical Data 1.2 PharmaceuticalsShionogi Sciele 1.1 Pharmaceuticals

    J&J Cougar 1.0 Cancer drugs

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    Company Target company $ billion Technology/product

    Novartis Alcon 39 in 200928 in 2010

    Eye care

    Boston Scientific Guidant 27.5 Medical Devices

    Johnson & Johnson Synthes 21.3 Orthopedic

    GE HealthcareLife Sci Technol

    Abbott diagnosticApplied Biosyst

    8.16.7

    DiagnosticDNA sequencing

    Merck KGA Millipore 6.0 Equipment

    Danaher Beckman Coulter 5.9 devices, equipment

    Fresenius Renal Care 4 Dialysis

    Fresenius APP Pharm 3.7 Abraxane (Nanotech)

    Roche Ventana 3.4 Diagnosis

    Blackstone Cardinal health 3.3 Healthcare

    Endo American Medical System 2.9 Urology. Pain

    Abbott Advanced Medical 2.8 Eye Care, Lasik

    Kinetics Concepts LifeCell 1.7

    Quagen Digene 1.6 Diagnostic

    Charles River WuXi Pharma 1.6 Drug testing

    Endo Qualitytest 1.2

    J&J Mentor 1.03

    GE HealthVital SignsWhatman

    0.860.71

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    Company Target company $ billion Technology/product

    J&J Pfizer OTC 16.6 Consumer health

    Teva Barr-Pliva 7.5 Generics

    Teva Ivax 7.4 Generics

    Novartis Eon 6.8 Generics

    Mylan Merck KGA generic 6.7 Generics

    Novartis Hexal 5.3 Generics

    Teva Ratiopharm 5.0 Generics

    Daiichi Sankyo Ranbaxy 4.0 Generics

    Teva Sicor 3.4 Biosimilars

    Sanofi Aventis Zantiva 2.6 Generics

    Barr Pliva 2.5 Generics

    Reckitt Benckiser Adams respiratory 2.3 Generics

    Sanofi Aventis Chattem 1.9 Consumer health

    Watson Andrx 1.9 Generics

    Watson Arrow 1.75 Generic Lipitor

    King Alpharma 1.6 Generics

    Richter Gedeon Polypharma 1.3 Generics

    Novartis Ebewe 1.3 Generics

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    Company Target company $ billion Technology/productRoche Genentech 47 Rituxan, Avastin,

    Herceptin, MoAbs,Oncology

    SanofiAventis

    Genzyme 20Orphan biologicsCerezyme, Fabrazyme,Renagel, Synvisc

    AstraZeneca MedImmune 15.6 Monoclonal AntibodiesMerck Serono 13.5 Biologics

    Takeda Millennium 8.8 Velcade, Oncology

    Lilly ImClone 6.0 Erbitux, Oncology

    Novartis Chiron 5.8 Vaccines

    Teva Cephalon6.2

    Nuvigil, Provigil,Treanda

    CNS, Oncology

    Abraxis American BioScience 4.2 Oncology

    Astellas OSI Pharma 4.0 Tarceva, oncology

    Eisai MGI Pharma 3.9 Aloxi, Salagen, Hexalen,Oncology

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    *India will break into top 10 pharma markets in the world by2015.

    *Increasing spending on Healthcare will drive the MNCs to lookfor Indian presence.

    *Indian companies do not have the capital & expertiserequired for new drug development.

    *At the same time form the point of view of MNCs, with thedrying up of the R & D productivity in the US and theDeveloped markets and their search for other sources ofinnovation, acquisitions are a cost-effective way to bring in aportfolio of branded generics.

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    Change in themindset of MNC as

    well as Indian

    Promoters

    1) New Patent Regime

    2) Challenges faced bygeneric cos. in

    regulated markets

    3) Robust valuationoffered by MNCs

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    Entered

    Pharma by