Week of May 1, 2017 | Vol. 6, Issue 16
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Fresenius picks up M&A pace with Akorn, Merck KGaA deals
German healthcare group Fresenius SE & Co KGaA has stepped up its dealmaking, agreeing to buy U.S. generic drugmaker Akorn Inc for $4.75 billion (4.37 billion euros) and the biosimilars arm of Germany's Merck KGaA.
Takeovers were part of Fresenius's growth strategy under previous boss Ulf Mark Schneider, now leading Nestle. But his successor, former finance chief Stephan Sturm, is lifting the pace, having already bought a Spanish hospital chain for 5.8 billion euros since taking over in June.
The latest deals are in keeping with Fresenius's focus on drugs that have lost patent protection, but also mark a foray into new dosage forms, therapeutic areas and biotech drugs for its Kabi unit, a maker of generic infusion drugs as well as tube feeding and blood transfusion equipment. Akorn will add products such as medical creams, ophthalmic drugs, oral liquids, ear drops, nasal sprays and respiratory drugs, where competition is relatively benign compared with standard pills and tablets. "We are putting Fresenius Kabi on track for an even more broadly based and strong sustainable growth beyond the current decade," said Sturm.
The separate deal with Merck KGaA MRKG.DE marks an entry into "biosimilar" copies of complex biologic drugs made from living cells, which Fresenius has previously shunned.
"We've always said the regulatory environment would have to clear up before we invest in biosimilars. A lot has been done in that area in the recent past," Sturm added.
Reuters earlier on Monday reported Fresenius was close to acquiring Akorn.
In a deal that has the backing of Akorn's management and its largest shareholder, Fresenius will pay $34 per share and take on Akorn's net debt of about $450 million for a total price tag of $4.75 billion, Fresenius said late on Monday.
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2017's first-quarter reports, with the newest from BMS, AstraZeneca, AbbVie, Amgen and more
Biopharma earnings have been mixed so far, with some companies reporting "quiet" quarters and others surprising with beats or shortfalls
Bristol-Myers Squibb
walked back its 2017 guidance last quarter, in a move some industry watchers attributed to immuno-oncology star Opdivo and its recent setbacks. The first quarter turned that trend right around. Street-beating Opdivo sales of $1.13 billion-which blew past $988 million estimates-helped the New Jersey drugmaker come in ahead overall on the revenue front. It posted a top-line haul of $4.93 billion, well ahead of the $4.75 billion analysts expected.
AstraZeneca's castoff strategy has raised eyebrows, but it helped drive another earnings beat for the lacking-in-sales drugmaker to kick off the year. And this time, it was a big one. Sell-off revenue of $562 million-which made up 10% of AstraZeneca's $5.41 billion top-line haul-pushed core earnings to 99 cents per share, good for an outperformance of 18 cents. Of course, the company won't necessarily be able to keep up that clip, and with sales falling short-even among AZ's so-called growth products-the questions about its offloading moves are likely to continue.
Amgen needs a deal: Its blockbuster Enbrel took a $200 million-plus hit in the first quarter, helping drag the big biotech's overall sales down by 8%, to $5.46 billion. Repatha, its new PCSK9 med, came in below expectations, and its multiple myeloma med Kyprolis and Vectibix also fell short. But a 13% cut to R&D spending boosted margins. "[W]e see the company more than ever in need of, and possibly preparing for, a significant acquisition," Leerink analyst Geoffrey Porges wrote.
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Below are summaries and charts with the past week's transactions from the different healthcare sectors. For a detailed table showing data for each industry transaction click on any of the charts or use the download link above. Total transaction values are provided in USD millions.
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Pharma & Biotech
13 transactions totaling $6,084
million
Supplies, Equipment & Services
15 transactions totaling $26,538 million
Healthcare IT & Managed Care
5 transactions totaling $- million
Healthcare Facilities & Distributors
12 transactions totaling $210 million
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Pharma & Biotech
21 private placements totaling $463 million
Supplies, Equipment & Services
14 private placements totaling $196 million
Healthcare IT & Managed Care
8 private placements totaling $94 million
Healthcare Facilities & Distributors
3 private placements totaling $22 million
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Pharma & Biotech
13 public offerings totaling $626 million
Supplies, Equipment & Services
4 public offerings totaling $64 million
Healthcare IT & Managed Care
1 public offering totaling $1 million
Healthcare Facilities & Distributors
0 public offerings
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 Each week, w
e provide updated trading
comps for leading comp
anies from numerous healthcare subsectors.
To the right you will see a high-level breakdown of median revenue and EBITDA multiples for each of the specific subsectors
For a complete trading comp analysis (including the individual equities that comprise the subsectors), click on the table to the right or use the download link from the top of this newsletter.
Note: data reflects prior week close.
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RECENT INDUSTRY HEADLINES
A Sampling of Relevant Industry Headlines from the Last Week
Below are snippets from relevant industry news articles from the past week. For additional information or the article's complete text, click the headline link to view the original publication.
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Appeals Court Affirms Decision Blocking Anthem-Cigna Merger
April 28, 2017 -
Wall Street Journal
A federal appeals court on Friday declined to allow health insurer
Anthem
Inc. to acquire
Cigna
Corp., affirming a
trial judge's recent ruling that blocked the deal on antitrust grounds.
The decision is another major legal blow to Anthem's effort to salvage a $48 billion transaction that already was on its last legs.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, in a divided ruling, rejected Anthem's argument that the trial court had failed to sufficiently weigh the company's claim that billions of dollars in cost savings would flow from the merger. "The district court reasonably determined Anthem failed to show the kind of extraordinary efficiencies that would be needed to constrain likely price increases in this highly concentrated market, and to mitigate the threatened loss of innovation," Judge Judith Rogers wrote for the majority.
April 26, 2017 -
Fierce Pharma
The Israeli pharma is "exploring various options for the future structure of its oncology business, including possible divestiture," a Teva spokeswoman confirmed Wednesday. Teva's cancer meds generated $1.14 billion in 2016 revenue.
For Teva, jettisoning the cancer lineup-which includes meds Treanda and Bendeka, both of which saw sales suffer last year on competition, the generics giant
said
in a February regulatory filing-would help it pay down the massive debt pile it built through M&A. Much of that debt came from a $40-billion-plus buy of Allergan's generics business that investors weren't that keen on.
And recently, Teva's directors haven't much cared for the way CFO Eyal Desheh has managed the debt burden, Israeli newspaper Calcalist
noted
Tuesday. On Wednesday, Teva
announced
that the longtime leader would exit "during the coming months," a move that follows former CEO Erez Vigodman's February
departure
.
Singapore, UAE government funds' new investments put PPD at $9B
April 28, 2017 -
Fierce Biotech
A subsidiary of the Abu Dhabi Investment Authority (ADIA) and an affiliate of Singapore's GIC have bought a minority stake in PPD, valuing the CRO giant at more than $9 billion.
PPD's current owners, private equity firms Hellman & Friedman and the Carlyle Group, reached definitive agreements to recapitalize PPD through transactions with the two new investors, while maintaining a majority control of the CRO.
Reuters
previously reported that Carlyle owns 60% of PPD and Hellman & Friedman owns the remaining 40%. After this stake transaction, Hellman & Friedman will become the majority holder, while Carlyle will own a substantial minority share.
The company's board will also change slightly, a media aide with PPD told FierceCRO. Hellman & Friedman's and Carlyle's seats will rebalance to reflect their new ownership, and new investors ADIA and GIC will each get one seat.
"PPD expects to raise about $550 million through the issuance of new senior unsecured holdco notes," a
release
put forward by the company stated. But it kept mum about the exact amount each participant will invest, revealing only that all four of them, including the two current owners, are contributing.
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As an international, healthcare-focused merchant bank and financial advisory firm, we provide world-class services and capital to middle-market healthcare companies around the globe. We aim to keep our clients well-informed of healthcare news and events. With this additional insight in mind, together, we can recognize trends and opportunities that benefit our clients. We hope that you will reach out to Bourne Partners to help execute your healthcare operational and transactional needs. To learn more about our firm, visit our website or utilize the links below to engage with us on social media.
Sincerely,
The Bourne Partners Team
Bourne Partners
550 South Caldwell Street
Suite 900
Charlotte, NC 28202
704-552-8407
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