|From: richardred||10/22/2010 12:35:44 AM|
|Lilly’s Diabetes Setbacks May Spur Shopping Spree Beyond Amylin|
By Catherine Larkin - Oct 22, 2010 12:01 AM ET
Eli Lilly CEO John Lechleiter
John Lechleiter, chairman, president, and chief executive officer of Eli Lilly & Co. Photographer: Jeff Kowalsky/Bloomberg
Eli Lilly & Co., under pressure to gain new products after setbacks this week with two diabetes drugs, may try to acquire its partner Amylin Pharmaceuticals Inc. or covet companies with more approved products.
With Amylin, Lilly would gain full control of the diabetes drug Byetta and a longer-acting version called Bydureon delayed Oct. 19 by U.S. regulators, said Seamus Fernandez, a Leerink Swann & Co. analyst. Lilly might try to acquire Cephalon Inc. or Endo Pharmaceuticals Inc. to expand its painkiller business, said Bill Tanner, an analyst at Lazard Capital Markets.
By 2013, Lilly loses patents on medicines responsible for almost half its revenue. The Bydureon rejection, which stalled a new revenue source for at least two years, was compounded Oct. 20 when the company halted tests on a second experimental diabetes medicine because it wasn’t effective. Lilly Chief Executive Officer John Lechleiter yesterday ruled out “large- scale combinations” while expressing interest in smaller deals.
“An outright acquisition of Amylin certainly could make sense” if Lilly thinks Bydureon will be approved, Fernandez said in a telephone interview from Boston. Amylin, based in San Diego, lost half its market value on Oct. 20 after the Food and Drug Administration requested a study of Bydureon’s effect on heart rhythm.
Amylin shares increased 45 cents, or 4.1 percent, to close at $11.48 yesterday in Nasdaq Stock Market composite trading, after a 46 percent plunge on Oct. 20. Indianapolis-based Lilly fell 51 cents, or 1.4 percent to close at $35.50 on the New York Stock Exchange.
40 Percent Premium
The average premium paid in the last 12 months for acquisitions of U.S. medical and biotechnology companies was 40 percent, according to data compiled by Bloomberg. That suggests Amylin may have cost $2.3 billion yesterday, excluding debt, compared with $3.4 billion before shares plunged this week. Lilly had $5.16 billion in cash to make deals as of June.
Other diabetes-drug developers led by Pfizer Inc. and Sanofi-Aventis SA, may also pursue Amylin at its bargain price, Fernandez said. Ray Kerins, a spokesman for New York-based Pfizer, the world’s largest drugmaker, didn’t return calls for comment. Jean-Marc Podvin, a spokesman for Paris-based Sanofi, said he doesn’t comment on market rumors.
“We are very satisfied with our current relationship with Amylin and their management team,” Mark Taylor, a Lilly spokesman, said yesterday in an e-mail.
“Executing our current business strategy, including working with the FDA to bring Bydureon to patients as quickly as possible, is the best way to increase value for our shareholders,” said Alice Izzo, an Amylin spokeswoman, in an e- mail.
While there is risk Amylin may be the target of an opportunistic acquirer, it’s not likely the company would solicit offers, said Howard E. Greene Jr., a co-founder who resigned from the board last year, in an Oct. 20 telephone interview.
“Whenever the stock gets whacked, you have to assume that some people are going to sharpen their pencils,” Greene said. “Two things happen: shareholders are mad, and companies with bundles of cash are standing on the sidelines, waiting for an opportunity.”
Lilly paid an undisclosed amount in July to buy closely held Alnara Pharmaceuticals Inc., the maker of a drug for pancreatic insufficiency. Lilly also said in March that it would pay an undisclosed amount to buy European rights to certain animal drugs from Pfizer and a manufacturing plant in Ireland.
“Our fundamental strategy remains intact,” Lechleiter said during a conference call yesterday. “We’re not interested in large-scale combinations. I think there are many other opportunities that I think we could consider along the lines of several that we have done this year.”
Lechleiter’s plan to stick to small purchases or licensing deals won’t give investors much confidence, said Barbara Ryan, an analyst with Deutsche Bank in New York, in a telephone interview.
“A lot of those companies will just be adding to the pipeline and they’re not going to be something that the market will accrue much value to on Lilly,” Ryan said.
United Therapeutics Corp. may also be a good fit because Lilly has an 11 percent stake and the two companies are partnered on Adcirca, a lung treatment made from the ingredient in Lilly’s impotence pill Cialis, according to Fernandez. Forest Laboratories Inc. would be another option to complement Lilly’s research in antidepressants and arthritis medicines, he said.
“It is not our expectation that we’re an imminent takeover target for Eli Lilly,” said Andrew Fisher, a spokesman for Silver Spring, Maryland-based United Therapeutics, in a telephone interview. The 2008 Cialis marketing agreement prevents Lilly from attempting a takeover before 2014, he said.
Cephalon doesn’t comment on rumor or speculation, said Candace Steele, a spokeswoman for the Frazer, Pennsylvania-based company. Kevin Wiggins, of Chadds Ford, Pennsylvania-based Endo, also declined to comment as a matter of company policy. Frank Murdolo, a spokesman for New York-based Forest, didn’t return a telephone message for comment.
The patent expires next year for Lilly’s top-selling antipsychotic Zyprexa, which brought in $4.92 billion last year. Generic copies of the antidepressant Cymbalta and insulin product Humalog may be introduced in 2013.
Had Bydureon been approved this week, it could have generated sales of $420 million next year, said Phil Nadeau, an analyst with Cowen & Co. in New York.
Tanner, of Lazard, estimates a fair price for Amylin would be as much as $15 a share, or about $2.16 billion based on 143.7 million shares outstanding as of June. He said Bydureon sales will be limited because there are at least six competing diabetes drugs in development -- including one from Lilly -- as well as one approved product, Novo Nordisk S/A’s Victoza.
“The chances that this drug makes it to market are probably pretty high, but you’re looking at almost two years from now,” Tanner said. “If it didn’t make it, then somebody would have massively overpaid for Amylin.”
To contact the reporter on this story: Catherine Larkin in Washington at email@example.com
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|To: richardred who wrote (2462)||10/22/2010 9:58:19 AM|
|UPDATE 2-GE to buy cancer diagnostics company Clarient|
Fri Oct 22, 2010 8:54am EDT
* To pay $580 mln, or $5 per common share
* Sees growing molecular diagnostics market
* Clarient shares jump to $5.04, above offer price
* GE, other industrials step up dealmaking (Rewrites, adds stock action, other details, background)
NEW YORK, Oct 22 (Reuters) - General Electric Co (GE.N) extended this month's acquisition streak, agreeing to buy cancer diagnostics company Clarient Inc (CLRT.O) for about $580 million net of cash and investments in a deal that sent Clarient shares up 35 percent in premarket trading.
GE's Healthcare unit will pay $5 per common Clarient share or $20 per preferred share, the companies said. Clarient's molecular diagnostics technology allows pathologists and oncologists to identify cancers, a market expected to triple to $47 billion within five years.
Clarient, based in Aliso Viejo, California, recorded 2009 sales of $92 million, according to Reuters data.
Before the deal was announced, Clarient shares closed at $3.74 on the Nasdaq on Thursday at their best level in more than a year. In premarket trading on Friday, they hit $5.04.
Goldman, Sachs & Co. (GS.N) was the financial adviser to Clarient on this transaction, while JP Morgan (JPM.N) advised GE Healthcare. The deal is expected to close in late 2010 or early 2011. Stockholders holding about 47 percent of Clarient's outstanding Clarient stock have agreed to tender their shares.
Safeguard Scientifics Inc. (SFE.N), which owns 26 percent of Clarient shares, said separately it would get $145 million from the deal. [ID:nWNAB6273]
RETURN TO DEALMAKING
GE, the largest U.S. conglomerate, has said it could spend up to $30 billion on takeovers over the next few years, marking a return to the dealmaking track it had exited during the recession.
On Oct. 6, GE reached a $3 billion deal for Dresser Inc [DRESS.UL], which makes gas engines used in oil production and mining, and bought a $1.6 billion portfolio of retail credit cards from Citigroup Inc (C.N), in moves intended to boost its energy and GE Capital businesses. [ID:nN06287898]
GE is also among the suitors for BAE Systems' (BAES.L) aerospace unit that could fetch up to $2 billion. Other suitors include Honeywell International (HON.N) and United Technologies (UTX.N), people familiar with the matter said this week. [ID:nN19135803]
The Clarient acquisition was the latest deal among cash-rich multinational industrial companies.
Earlier on Friday, Caterpillar Inc (CAT.N) signed an agreement to acquire engine maker MWM Holding GmbH from British private equity firm 3i Group Plc (III.L) for about 580 million euros ($810 million) in cash. [ID:nSGE69L0EN]
Earlier this week, industrial conglomerate Danaher Corp. signaled it was ready to step up dealmaking, saying it has $4 billion in acquisitions capacity. [ID:nN18269431] (Reporting by Nick Zieminski, editing by Dave Zimmerman)
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