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Pharma Mergers Boom Despite Global Credit Woes
The American Lawyer
October 14, 2008
As the global credit markets continue to reel, pharmaceutical company mergers have chugged right along, with multibillion-dollar deals thriving in a cash-strapped market.
The latest example: On Monday, King Pharmaceuticals Inc., renewed its proposed $1.6 billion offer for Alpharma Inc. The bid for Bridgewater, N.J.-based Alpharma had been on the table since Sept. 11 and was slated to expire on Friday.
Bristol, Tenn.-based King had first expressed interest in a deal Aug. 4, offering $1.4 billion, or $34 dollars a share. At $37 a share, King's pending offer has so far failed to excite Alpharma, which continues to play hard to get while its stock price keeps rising.
Dewey & LeBoeuf partners Morton Pierce, Chang-Do Gong, Robert Myers, and Ivan Presant are representing King on its offer. Alpharma is represented by Simpson Thacher & Bartlett partners Mario Ponce and William Doherty. Neither firm would comment on ongoing deal negotiations.
In rebuffing King's advances, Alpharma has made itself a more desirable target. While the August offer represented a sizable premium on top of the company's share price at the time ($22.15), by Monday the stock price had risen to $33.30. Over the same period, King's per-share price has dipped from $11.60 to $8.71.
"We fully expected King Pharmaceuticals to extend its offer," a spokesman for Alpharma told The Am Law Daily. "We continue to pursue the process, but we urge Alpharma shareholders not to tender their shares into the King offer."
King's offer for Alpharma comes amid a boom in mergers in the pharmaceutical industry. M&A activity in 2008 hit a record $167 billion, according to data compiled by Bloomberg. Among the factors driving the trend: Competition from generic drugs is putting a damper on pharmaceutical sales, prompting companies to try to drive down costs through consolidation while attempting to grab more market share.
On Friday, Mediceo Paltac Holdings Co. and Alfresa Holdings Corp., Japan's two largest drug wholesalers, agreed on a $2.1 billion merger to become Alfresa Medipal Holdings in the face of government-mandated price cuts.
A day earlier, Japan's Shionogi & Co. Ltd., completed a $1.4 billion acquisition of Atlanta's Sciele Pharma Inc., for $1.42 billion.
And last Monday, The Am Law Daily reported on Eli Lilly & Co. winning a bidding war with GlaxoSmithKline to buy Imclone Systems Inc. for $6.5 billion.
Another pending deal shows how pharmaceutical companies are collaborating on licensing deals to save production costs. Swiss drugmaker Roche Holding AG, which is trying to arrange enough credit to buy biotech firm Genentech Inc. for more than $40 billion, is working with the San Francisco company to develop a cancer therapy.
"The industry itself is facing severe pricing pressures in America and Europe and Japan, and there is the need to get new innovative pharmaceutical products into the market," says Thomas Reid, head of Davis Polk & Wardwell's corporate department. The firm has represented AstraZeneca PLC, Novo Nordisk A/S, Roche, and Shionogi in recent merger and licensing transactions. "Despite credit problems, these deals get financed. Even in bad times, there is still a need for drugs."
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
