Friday, November 30, 2007

Deals of the Week: For Sale By Owner

For some US home owners, this week brought bad news: the National Association of Realtors reports sales of previously owned homes hit their lowest level since 1999 and single family homes suffered the biggest price drop on record in October.

Thank heavens lower sales forecasts haven't spilled over into pharma land, where M&A is the sector's only bright spot. (It certainly isn't R&D.) Hoping to take advantage of pharmas' hunger to acquire, a number of companies--including MGI Pharma, GPC Biotech, and QLT--decided this week to put themselves up for sale. In honor of their entrepreneurial spirit--or as QLT's press release noted, a willingness to "review all strategic alternatives"--IN VIVO Blog gives you Deals of the Week: The For Sale By Owner edition.

  • MGI Pharma/GPC Biotech/QLT: All three companies hung out for sale signs this week. (Okay, we know this probably shouldn't count as a "deal". Try and think of it as the preamble to a deal.) It may be a sellers market in pharma land, but its tough to think either GPC or QLT will fetch a high price. As we've noted here, GPC has taken a beating for the failures associated with its lead drug satraplatin. QLT, too, has suffered in recent years as its lead therapy Visudyne competes with new anti-VEGF drugs such as Genentech's Lucentis. (Interestingly, QLT just spent $42 million on a drug-eluting punctual plug technology developed by Forsight Labs. For more, check out this recent START-UP article.) It's possible that an unlisted company seeking a route to the public markets might find attractive the significant cash reserves of either company--$90 million for GPC and $300 million for QLT. The picture may be rosier for MGI Pharma, however. As we wrote a couple of weeks ago, Celgene was willing to spend nearly $3 billion for Pharmion, a rival of MGI's. Reuters reports potential suitors could include Amgen, which might be interested in MGI's Aloxi, which treats chemotherapy-induced nausea, and BMS, which given its focus on specialty markets such as cancer, might be very interested in the biotech's Dacogen. Still all three companies should be wary of becoming the next BiogenIdec, which hung out its own for sale sign over a month ago, and still hasn't closed a deal.

  • TPG Capital/Axcan Pharma: Here's a lesson for BiogenIdec and the other companies that have put themselves on the block. If you can't find a pharma company to buy you, maybe you should consider private equity. On Thursday Nov. 29, TPG Capital ponied up $1.3 billion for the Canadian Axcan Pharma and its portfolio of treatments for gastrointestinal disorders. As the NYT's Dealbook blog notes that this is the latest in a string of smaller buy-outs brought on by the credit crunch and the halt in mega-merger deals.

  • GSK/Merck: Merck sold GSK exclusive US rights to an OTC version of its cholesterol lowering drug Mevacor for undisclosed milestones and royalties. It was the company's second big deal in less than a week, and came just as US workers were emerging from their tryptophan-induced hazes. (Only a British company would announce deals the day before Thanksgiving and the Monday after.) Despite the dearth of details disclosed, the announcement is intriguiing. Mevacor lost patent protection back in 2001 and Merck, in conjunction with Johnson & Johnson, tried twice to obtain OTC status for the drug--the last time back in 2005. What makes the GSK-Merck team think its more likely to succeed this time around? Perhaps it's the more open outlook FDA has embraced in approving OTC versions of Plan B and Roche's diet pill Xenical. (For more on the FDA and OTC, read here and here.) More likely, its the tremendous success Glaxo has had selling Xenical as Alli. In its earnings call last month, GSK estimated it would sell between 5 and 6 million weight-loss kits this year for about $1 billion in revenue. Merck certainly has nothing to lose. And who knows? If GSK can succeed with OTC Mevacor, it could pave the way for a US version of OTC Zocor, which has existed in the UK since 2004. An FDA advisory panel will discuss the switch at a meeting on Dec. 13.

  • Astellas/Agensys: On Tuesday, Astellas Pharma announced plans to buy cancer antibody play Agensys for $387 million, including a $30 million net cash balance. The deal comes a few months after another Japanese pharma, Eisai paid $325 million for a different cancer antibody player, Morphotek. The Japanese pharmas tend to adopt US and European companies' fads a little later, so it makes sense that Astellas is only now jumping on to the large molecule bandwagon (For more on this, read here.)

  • Sanofi Aventis/ Regeneron: One company that isn't, so to speak selling-out, is Regeneron. Instead, it's done a fantastic job of monetizing its therapeutic platform, called VelociSuite. In addition, to this deal with Sanofi, worth $85 million upfront plus $475 million in research funding over the next five years. the company has also inked partnerships with Bayer and AstraZeneca in the past year. (For more on the Bayer deal, click here.)

No comments: