Following a scandal at Valeant over an earnings announcement typo, which short changed the figure by €540m, the disintegration of Pfizer Inc. and Allergan Plc’s mega-merger and a downturn in biotech stocks, few advisers would’ve expected 2016 to be the year of the pharmaceutical industry. Yet the sector is currently cruising on a wave of takeovers and purchases of smaller rivals due to cheap debt.
One deal which closed this month saw Shire Plc, the Irish-based and UK-listed biotech company merge with the US-based biopharmaceutical company with a portfolio of haemophilia, immunology and oncology products, Baxalta Incorporated, for €32bn. Shire is expecting the acquisition to become earning accretive in 2017 and Baxalta benefit from a 6-7% lower tax bill following the deal. It had appeared the deal wasn’t going to close due to tougher rules imposed on US companies seeking to benefit from lower corporate taxation overseas. Given that the Obama administration managed to block the proposed €150bn merger of Pfizer and Allergan it is likely that tax inversion deals like these will be a hot issue in the upcoming US presidential race.
Earlier this year, US politicians warned large pharma companies that they would no longer be able to rely on price increases for growth. As a consequence, companies have begun to seek out innovative biotech firms to acquire. Aiding this is a 20% drop in the NASDAQ biotech index since the start of the year, which is putting cash pressure on biotech firms and being part of a larger entity may be the only lifeline for some.
During this month we have seen the following acquisitions of biotech rivals close:
- Pfizer Inc. acquired Anacor Pharmaceuticals, Inc., the US-based biopharmaceutical company focussed on developing novel small-molecule therapeutics derived from its boron chemistry platform, for €4.0bn; and
- AbbVie Inc. acquired US-based developer of oncology therapies, StemCentRx Inc., for €8.2bn.
While the global economy grows at a sluggish pace and pharma giants are exposed to ever increasing external pressures, at Clearwater we expect these companies to increasingly seek out acquisitions to facilitate shareholder satisfying levels of growth. For a more in-depth analysis of the sector look out for our Clearwater International Global Pharmaceutical and Biotechnology Report coming later this year.
A taste of deals in June
Medical equipment and supplies
Luminex Corporation, US-based developer of biological testing technologies acquired Nanosphere Inc., a US-based biomolecular medical testing technology manufacturer, for €46m.
Entellus Medical, Inc., listed US medical technology company acquired CogENT Therapeutics, LLC, a US-based medical device company which develops biomaterial and device solutions for ear, nose, and throat disorders, for €10m.
BTG plc, UK-listed pharmaceutical product developer acquired Galil Medical Ltd., Israel-based developer of cryotherapy ablation systems, for €96m.
Zimmer Biomet Holdings, Inc., listed US manufacturer of implants and surgical products acquired Compression Therapy Concepts, Inc., the US-based developer of medical devices and accessories for the prevention of deep vein thrombosis (DVT), for an undisclosed consideration.
Direct Healthcare Services Limited, UK-based provider of pressure area care products acquired Nightingale Care Beds Limited, the UK-based manufacturer and supplier of hospital beds and bariatric equipment, for an undisclosed consideration.
Vitrolife AB, the listed Swedish assisted reproduction products manufacturer acquired OCTAX Microscience GmbH, Germany-based IVF equipment developer and MTG-Medical Technology Vertriebs-GmbH, the Germany-based distributor of medical equipment, for €14m.
Prism Medical Ltd., listed Canadian mobility products manufacturer acquired certain assets of the lifts and elevating business in the provinces of Ontario, Saskatchewan and Alberta from Shoppers Home Health Care, Canada-based retailer of home health care products and services, for €1m.
Health and social care
Groupe Maisons de Famille, the France-based operator of retirement homes acquired Amma Gerogestión S.L., Spain-based company which owns and runs residential homes for the elderly, for €220m.
Target Healthcare REIT Limited, UK listed real estate investment trust (REIT) acquired a care home in Gloucester, UK, for €10m.
Carter Validus Mission Critical REIT, Inc., US-based REIT acquired a portfolio of five post-acute medical facilities based in the south of the US, for €63m.
Totally plc, listed UK provider of solutions to the healthcare sector acquired About Health Limited, provider of dermatology and referral services based in New Zealand, for €10m.
Schumacher Clinical Partners, Inc., the US-based provider of outsourced emergency and hospital services acquired ECI Healthcare Partners, Inc., the US-based emergency and hospital medicine management provider, for €125m.
National Health Investors Inc., listed US REIT acquired two entrance fee continuing care retirement communities based in the US, for €50m.
The Cooper Companies Inc., developer of medical instruments, devices and disposables acquired the remaining 90% of Reprogenetics UK, Ltd., the UK-based genetics laboratory that focuses on preimplantation screening and preimplantation diagnosis, for €11m.
Mylan N.V, US-listed, UK-based developer of generic, branded generic, and specialty pharmaceuticals acquired the non-sterile topicals-focused specialty and generic businesses of Renaissance Acquisition Holdings, LLC, the biopharmaceutical contract developer, for €886m.
Ergomed Plc, listed UK provider of clinical research, drug development and safety services acquired Dr. Oestreich und Partner GmbH, the Germany-based contract research organisation and Gesellschaft für Angewandte Statistik und Datenanalyse mbH, the Germany-based company providing data management, statistical analysis, biometric reporting, and statistical consulting services for the pharmaceutical industry, for an undisclosed consideration.
Vectura Group Plc, listed UK developer of therapeutic products for airways-related diseases acquired and subsequently delisted Skyepharma Plc, the UK-based developer of oral and inhalation pharmaceuticals, for €503m.
Apax Partners LLP, UK-based private equity firm acquired Invent Farma S.L., Spain-based developer of active pharmaceutical ingredients and pharmaceuticals specialties, for €221m.