A series of agreed or proposed drug company deals may herald a new era of acquisitions not seen since last decade as pharmaceutical companies improve their best businesses and exit weaker ones.
Novartis and GlaxoSmithKline agreed to trade more than $20 billion (11 billion pounds) worth of assets, boosting Novartis' cancer-drug business and Glaxo's vaccines business. Valeant Pharmaceuticals made a $47 billion unsolicited offer for Allergan Inc , the maker of Botox, to boost its skin care business. Reports that Pfizer Inc was rebuffed earlier this year in discussions to buy AstraZeneca Inc for more than $100 billion only fed anticipation that more mergers are ahead.
Linking this activity together is a combination of economic conditions and industry- specific developments including low interest rates, a desire by U.S. firms to make overseas acquisitions to shield foreign profits from U.S. taxes, and the realization that deals can be made to focus on a drugmaker's specific strengths, investors, analysts and investment bankers said on Tuesday.
Large drug companies are focusing 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.
There is also the stock prices of big pharma compared with biotechnology companies to consider. The Nasdaq Biotechnology Index .NBI of more than 100 companies -- many with market values of less than $500 million -- has risen almost 126 percent since the beginning of 2012, even with this year's declines. By contrast, the Standard & Poor's 500 index of pharmaceutical stocks .SPLRCCARG, which contains just 12 members, is up 55 percent in that time.
Valeant's $47 billion bid for Allergan, in which it's being aided by Pershing Square Capital investor Bill Ackman, represents another strategy. Ackman had already acquired almost 10 percent of Allergan, and the Allergan board will consider the offer.
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.
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 aquaculture, or fish farming, market.
Last year Elanco had sales of $2.15 billion, compared with $1.1 billion for Novartis Animal Health.
Source: Reuters
