ddn Online

The Blog of Drug Discovery News

Season’s mergings

So, I just finished writing one of my articles for the January issue, which is on the Johnson & Johnson and Crucell acquisition bid for Crucell. As I noted in the blog (here), one of the sticking points in the M&A journey for these two companies has been the opinion of the second-largest shareholder, Van Herk Groep, that J&J just isn’t offering a satisfactory per-share price in its bid.

Well, in the few months that have passed since the two companies told everyone they were courting, there have been some manufacturing problems at a Crucell plant in South Korea that were bad enough to affect third-quarter earning and year-end projections.

However, J&J went ahead with a formal acquisition bid earlier this month, and didn’t lower its offer a single penny.

Now, one can only speculate whether Van Herk has still been holding to its opinion that J&J is being a Scrooge. After all, I haven’t heard anything so far that’s made me think their collective minds have changed. And I don’t know how much they think is fair…

…but one wonders whether Van Herk will view this bid as a holiday gift (no change despite manufacturing problems), or still keep looking for a bigger box under the tree for itself.

At least I wonder.

Seasons greetings, everyone, belatedly to those who’ve already celebrated their respective holidays and proactively to everyone else. And let’s hope for a Happy New Year in pharma, whether J&J and Crucell tie the knot in February or not.

Advertisements

December 20, 2010 Posted by | Corporate, M&A activity | , , , , | Leave a comment

Who? What? How much?

So, as I was writing a news article (here) on the web site about Axcan Holdings getting prepped to buy out Eurand N.V., I was struck with an overwhelming question.

Who are these companies?

I don’t mean to be flip, mind you. They’re both legit pharma entities, with Axcan having a strong gastrointestinal focus and Eurand having six FDA-approved products under its belt. But I’ve never heard of either one of them.

This isn’t odd, of course. There are so many small and mid-size pharmas and biotechs that even the most hardened life sciences market analyst couldn’t know them all. No matter how much we are in the business or reporting about it, there will always be company names that make us say, “Never heard of ’em.”

But the reason this sticks out for me is that the buyout deal is for $583 million. That’s over a half-billion dollars.

Isn’t that a lot of money? Shouldn’t I have heard of these companies in passing before, with that kind of money about to change hands?

Or is it just that things have begun to move so quickly now, and so much money is being thrown around the world economy that a billion dollars is “the new black?” That is, being a millionaire now, even at the high ends, is perhaps passé, and now you don’t matter as a rich person unless you break the billion mark?

I realize that as I get older, I will look back at the “good old days” (or bad old ones, for that matter) and say, “What happened?” I already do, and I recognize it.

But still, half a billion dollars seems to me like the kind of money that gets thrown around by pharmas I’ve heard of before. It just doesn’t seem like in the mere five-and-a-half years that I’ve been on staff at ddn that we could have gone from half a billion being big news to simply being a blip on the radar.

So, I wonder: Is the fault in me that I’ve never heard of these companies before and should have? Or just that the world is moving so fast now that it’s hard to keep up with the dollars and the deals?

December 2, 2010 Posted by | Corporate, Dealmakers, M&A activity | , , , , , , | Leave a comment

Pink slips pile up in Big Pharma

We here at ddn are in the business of covering the business side of Big Pharma. But behind every headline touting million- or billion-dollar price tags for mergers, acquisitions and partnership deals, there are the untold stories of collateral damage.

Those stories are coming to the forefront lately as headlines are taking note of the number of pink slips piling up in the pharmaceutical and biotech industries.

According to the U.S. Bureau of Labor Statistics, unemployment in the United States was 9.6 percent in September. The unemployment rate has hovered around that figure for most of this year, but it’s about to gain a few percentage points, thanks to recently announced layoffs in Big Pharma.

According to PharmaManufacturing.com, the unemployment rate in pharmaceuticals and life sciences is estimated at 16 percent. Market research firm Reportlinker attributes pharma job losses to several factors. Besides the obvious ones—the economic downturn, the rising number of uninsured Americans and the impending 2011 patent cliff—the firm notes that action taken by the U.S. government as part of healthcare reform legislation will also impact Big Pharma.

“U.S. healthcare reform is set to improve coverage but this will be at the expense of containing healthcare costs,” Reportlinker says. “Although the pharma industry will benefit from the rise in insured individuals, measures such as the increased Medicaid drug rebate and Medicare donut hole discount will have an immediate negative impact on revenues out to 2014.”

Ed Silver, editor of Pharmalot, points out that these numbers may not tell the whole story, since not all job cuts are disclosed: “Some companies cut staff in dribs and drabs, and therefore are not required to file notices with their state governments. The implication is that job losses are greater than the survey implies.”

It can be argued that many of the layoffs are part of the life cycle of merger and acquisition activity. Consider the following:

  • Last year, Abbott Labs purchased Solvay’s drug business for $6.2 billion. Abbott is now cutting about 3,000 jobs in commercial, R&D, manufacturing and staff operations. The company will also close Solvay’s U.S. headquarters in Marietta, Ga.
  • Bristol-Myers Squibb Co., which recently acquired ZymoGenetics Inc. for about $885 million, plans to eliminate 3 percent of its headcount—or about 840 jobs—in the next few months.
  • After signing an agreement reportedly worth $1 million with the J. David Gladstone Institutes aimed at identifying treatments for multiple sclerosis, Alzheimer’s and other neurological diseases, Danish drugmaker H. Lundbeck A/S said it will cut 50 people from its R&D operations in the United States and Europe.
  • Just one month after agreeing to buy Penwest Pharmaceuticals for $144 million, Endo Pharmaceuticals is said to be in the process of laying off an unspecified number of sales managers and sales reps.
  • And most recently, sanofi-aventis—which in recent months has dominated our headlines with its many multimillion- and billion-dollar deals and plans to bring more companies into its fold—announced it will eliminate about 1,700 job in the United States, or about 25 percent of the company’s U.S. pharmaceutical operations division.

In announcing its recent agreement to acquire King Pharmaceuticals Inc., Pfizer Inc. focused on the “cost synergies” it expects to see from the $3.6 billion deal. According to Pfizer, it will take only three years for the dust to settle on the consolidation involved in the bolt-on acquisition. By then, it will have cleared a substantial patent expiration hurdle.

We’ll bring you the details of that acquisition in our November issue, but until then, what is your opinion of the mounting job losses we are seeing in Big Pharma?

October 15, 2010 Posted by | M&A activity | , , , , , | 1 Comment

What happens when a biotech takes its talents to South Beach?

What happens when a biotech takes its talents to South Beach?

No, that’s not yet another joke borrowed from the strange vernacular that has become former Cleveland Cavalier LeBron James’ recent decision to leave the Cleve for Miami.

“This is tough, but … this fall, I am taking my talents to South Beach,” James announced via an overblown, overhyped, hour-long special on ESPN in July called “The Decision.”

The revelation and associated public relations mess sent Cleveland—where ddn is based—as well as sympathetic fans in other cities, into a tailspin. In the months since and leading up to the start of the NBA season, this poorly planned PR tsunami has so dominated headlines and popular culture that even I, who can be quite accurately described as “not a sports fan,” dedicated my monthly column to it in June (see “We are all witnesses … to failure and success”). In the piece, I drew a correlation between Cleveland’s projections of hope and success onto a guy who wears sneakers to work, and the pharma industry’s inability to rebound from some of drug discovery’s most inherent failures, such as failed clinical trials.

The column proved popular among our readers, who very generously took the time to reach out and weigh in on what I described as “misguided frustration.” They were equally opinionated when I penned a “Jeers” to James and his astonishingly short-sighted PR reps in his camp for our August issue.

Most people marveled that I was somehow able to make a comparative leap between professional basketball and Big Pharma work. To tell you the truth, I still don’t know what made me decide to attempt it. But it seems like I am not the only one who thinks that Big Pharma can learn something from South Beachgate.

Weighing in on Bristol-Myers Squibb’s (BMS) recent acquisition of Seattle-based biotech ZymoGenetics—a deal valued at approximately $885 million—Stewart Lyman, owner and manager of Lyman BioPharma Consulting LLC in Seattle, took to an Xconomy blog to draw his own parallel:

“I guess I look at the ZymoGenetics acquisition in the same way that people in Cleveland look at the loss of LeBron James to the Miami Heat,” Lyman writes. “They spent years watching him develop his game to the highest level, only to see him depart just when they were hoping for greatness. Yes, it was his decision to leave, but would the fans be less upset if he had been traded to Miami for a second-round draft choice, just so the team could save payroll?”

Lyman is disappointed that the ZymoGenetics buyout will mean a loss of more than 300 biotech-related jobs from the Seattle area, a region that is ranked third or fourth among U.S. biotech centers, and is a popular destination for start-up companies.

“Publicly traded biotechs are supposed to be acting in the best interests of their shareholders, but this may not align with the best interests of their employees or the greater public at large,” Lyman adds.

According to BMS, the fate of ZymoGenetics’ facilities in Seattle and its 300-plus employees has yet to be decided. But until the deal closes and that announcement is made, Lyman has another sports analogy:

“The Green Bay Packers thrive in the smallest market of any team in professional sports. However, because the people in Green Bay actually own the team, they never have to worry about them leaving town for a bigger market. Could such a model work in biotech?” he wonders.

Speaking of jobs, BMS apparently just announced that it will  eliminate about 3 percent of its workforce, or 840 jobs, over the next six months as part of a “streamlining initiative.” Interesting!

What do you think? Is merger and acquisition activity in the pharma/biotech industries a sign of a healthy industry, or does it adversely impact specific geographic regions that are trying to become biotech hubs, creating jobs and producing novel therapeutics in the process?

We’ll discuss the BMS-ZymoGenetics deal in-depth in our upcoming October issue, but in the meantime, feel free to weigh in on this popular topic.

September 23, 2010 Posted by | M&A activity | , , , , | Leave a comment