Pfizer Held Talks to Acquire AstraZeneca
“Pfizer Inc. (PFE), the world’s biggest drugmaker, held informal, now-discontinued talks with AstraZeneca Plc (AZN) about buying the London-based maker of asthma and heart drugs, said two people familiar with the matter…
…The companies aren’t currently negotiating, said the people, who asked not to be identified. One said the talks happened several months ago and there are no plans to resume. The discussions were first reported yesterday by London’s Sunday Times, whose unnamed bank and industry sources said New York-based Pfizer made a tentative approach about a takeover valuing AstraZeneca at more than 60 billion pounds ($101 billion).” (Source: Bloomberg)
Valeant and Activist Investor Bill Ackman Pursue Allergan
“Canada’s Valeant Pharmaceuticals International (VRX) said on Tuesday it has partnered with activist investor Bill Ackman in an unsolicited $47 billion bid to buy Botox maker Allergan (AGN) in a move to eventually 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. (Source: Reuters)
Eli Lilly Acquires Novartis Animal Health Business
“Eli Lilly and Company (LLY)…announced an agreement to acquire Novartis (NVS) Animal Health for approximately $5.4 billion in an all-cash transaction that will strengthen and diversify Lilly’s own animal health business, Elanco. Upon completion of the acquisition, Elanco will be the second-largest animal health company in terms of global revenue, will solidify its number two ranking in the U.S., and improve its position in Europe and the rest of the world.”
Novartis Acquires GlaxoSmithKline’s Oncology Products
“Novartis announced today that it has reached a definitive agreement with GlaxoSmithKline plc (GSK) to exchange certain assets, building global leadership in key segments and focusing the company’s portfolio. Under the agreement, Novartis would strengthen the company’s innovative pharmaceuticals business by acquiring GSK oncology products, and would divest Vaccines (excluding flu) to them. The two companies would also create a joint venture, combining their consumer divisions to create a world-leading consumer healthcare business…further focusing its portfolio on the leading businesses of innovative pharmaceuticals, eye care and generics.”
Valuentum’s Take
We continue to expect merger-and-acquisition activity in the pharmaceutical and biotech space as firms look to acquire non-US based entities (to absorb foreign cash) and pursue opportunities that may shore up any weaknesses in areas of their respective drug pipelines. Though a Pfizer-AstraZeneca tie-up won’t happen anytime soon, Valeant is looking to close in on Allergan in relatively short order. We fully expect the Valeant/Allergan deal to be completed. We also believe the Lilly/Novartis/GSK asset swaps make sense, though we’ll be monitoring operations closely to ascertain integration risk. Our fair value estimates for AstraZeneca and Allergan have been updated and now reflect the probability of a takeout premium. We continue to prefer the Healthcare Select SPDR (XLV) as the best risk-adjusted path to capture heightened M&A activity in the pharma space, especially as takeout multiples lift valuations across the entire industry.