About Anne Law

Consolidation is a practical solution when the competitive squeeze gets put on an industry, and large pharmaceutical companies are predictably falling into the acquisitive suitor role in an effort to solve their woes, despite their quarry’s occasional reluctance to fall into line.

Prescription drugmaker King Pharmaceuticals has made public its $1.4 billion offer to purchase rival pain medication maker Alpharma. Though Alpharma has apparently rejected King’s proposal several times this summer, King is relentlessly bringing its offer into the limelight in an attempt to rally shareholder support for the deal.

Two other hostile takeover attempts have surfaced this summer — Roche’s bid for Genentech and BMS’ bid for ImClone. All three target companies — Alpharma, Genentech, and ImClone — have taken the role of the coy maiden, rejecting their suitors’ initial proposals but hinting that they may be available if the wooing is increased.

Despite Genentech’s initial rejection of Roche’s bid, the company is obviously looking for a higher offer and has outlined a new retention plan for its employees to ease tensions over the merger speculation. ImClone has stated that BMS’ offer is undervalued and is hemming over its pursual of other options. In the most recent case, Alpharma has stated that King’s offer is not in its best interest but that it would look at a higher proposal.

The synergies in this case are clear — King Pharmaceuticals and Alpharma have similar abuse-resistant pain medications up for FDA approval, as well as other compatible substances on the market and under development. King is likely hoping to head off future competition, in addition to solidifying its current operations, by buying Alpharma outright.

Alpharma has taken the tone of refusal over the deal, but with the Genentech and ImClone deals still up in the air, one has to wonder if Alpharma is also playing hard-to-get. In all three cases, there is a real possibility that the suitors could become more agressive in their takeover attempts, despite the receiving companies’ wishes. There is also the possibility that new acquisitive gents will step onto the scene.

It seems that this company may never see an end to its cardiovascular stent troubles. Leading medical device maker Boston Scientific looks to be facing renewed strife in overcoming the controversies that surround its interventional cardiology products, which are used to prevent clogged arteries.

Two stories published yesterday — a Wall Street Journal article questioning the reliability of Boston Scientific’s study data on stent pipeline candidate Taxus Liberte and a New England Journal of Medicine study re-examining the advantage of stents over traditional cardiovascular treatment methods — have caused a bobble in the company’s stock and may prompt future challenges for the company’s interventional cardiology product sales.

Last year Boston Scientific and rival Johnson & Johnson faced significant sales losses due to widespread criticism of their respective drug-eluting stents, which are touted by the companies to be improved versions of uncoated stents but have also been said to increase the risk of blood clots. Boston Scientific’s overall stent sales have yet to recover from the ongoing medical debate surrounding the use of drug-coated stents and stents altogether.

The Liberte stent, which is awaiting FDA approval, is part of Boston Scientific’s vigorous efforts to rejuvenate earnings in that product segment and fight off competition from Medtronic and Abbott. The company received FDA approval for another drug-eluting product line, the PROMUS stent system, just last month. Boston Scientific has also sold off some noncore operating divisions to battle the effects of lagging sales (as well as to pay down debts incurred mainly through its huge 2006 acquisition of Guidant, which brought on additional product controversies that I’m not even going to touch right now).

Adding insult to injury, news also surfaced yesterday that Boston Scientific has recalled a batch of non-cardiovascular stent products. While it’s rather typical for new medical devices to raise questions in the medical community, I can’t help but wonder whether Boston Scientific should abandon the stent ship altogether and focus on its other less-controversial products.

Perhaps Martha Stewart should have held onto that ImClone stock a little longer. Not only would she have avoided jail time, but she might have earned a little more bang for her buck. Bristol-Myers Squibb’s $4.5 billion bid to acquire the 83% of ImClone it doesn’t already own values the company’s shares at $60 a pop (ironically, the same price that triggered Martha’s stock ditch in 2001).

But speculation over the deal has already raised the stock’s price tag above that bar and ImClone has hinted that it may seek a higher offer.

BMS’s unsolicited takeover attempt marks the second large biotech takeover attempt by a big-name pharmaceutical firm this summer (the first was Roche’s bid for Genentech) and is part of the larger and seemingly intensifying trend of the pharma industry’s shift towards biopharmaceuticals. (It’s a sign of the times, but also of dwindling revenues from traditional drugs.)

What is BMS hoping to gain through the purchase? While ImClone only has one commercial product (cancer treatment Erbitux, which is approved to treat colorectal, head, and neck cancers), that single product brings in over $1 billion in annual revenue. ImClone also has a pipeline of similar antibody-based cancer drugs, and it is pursuing additional indications for Erbitux. If the company’s development candidates make it to market ImClone will also hold a corner on treatments for lung, pancreatic, breast, prostate, and ovarian cancers.

So despite a history laden with patent disputes, management shake-ups, and stock-trading scandals, ImClone represents an opportunity for growth to the struggling BMS. Whether ImClone accepts the offer is another question. The biotech indicates that it may decide on another course to maximize shareholder value, such as the separation of its Erbitux and development operations into two companies.

The deal’s success will also largely depend on the opinion of ImClone chairman Carl Icahn, the formidable investor who has already voiced his doubts on the BMS offer.

There’s a lot of speculation circulating about whether leading biotechnology firm Genentech will accept pharmaceutical giant Roche’s $43.7 billion takeover bid, the largest pharma/biotech merger price tag in several years.

The offer came as a surprise for Genentech, which has maintained a unique culture despite Roche’s controlling ownership stake. If Roche’s offer is accepted, the pharmaceutical giant says that it wants to keep Genentech independent so as not to squelch its innovative atmosphere. I imagine that Genentech executives and employees are wondering whether this goal is realistic though, especially since Roche has also announced its intention to integrate some US functions to cut costs.

Also at issue is the popular opinion that the offer is undervalued, only giving a 9% premium over Genentech’s stock value. Some analysts and investors are betting that Roche will have to up its offer before Genentech will commit, while others feel that Roche will use its advantage as majority shareholder to keep the price down.

Roche has thus far been satisfied with its controlling interest in Genentech, which has allowed it to reap profits from the division while avoiding management duties. The shift in strategy is less of a surprise, however, when you consider current competitive and consolidation trends in the pharmaceutical/generic/biotech industries, as well as the rise of foreign investments in US assets.

Roche itself has made several acquisitions in its quest to remain in the top ranks of drug companies, especially in the areas of biotechnology and diagnostics. (It also recently bumped up its stake in another majority-owned subsidiary, Japan’s Chugai Pharmaceutical.) Like many other pharma companies, Roche is looking to biotechnology firms to bolster its product offerings in the face of generic competition. Generic firms are also joining forces to get ahead of the game.

Though Roche will probably have to raise the stakes, it’s highly likely that Genentech will eventually end up taking the bait in this situation, if for no other reason than to secure its position in the increasingly challenging marketplace. However, let’s not completely discount that the California company may yet fight for its (partial) freedom with San Francisco flair.

Recent statistics from the CDC show that the number of diabetes cases in the US continues to rise — one in 12 Americans now suffer from the disease. This tragic phenomenon is a large part of the reason we are seeing so many public health campaigns unsuccessfully attempting to reverse the trend. The study also highlights why so many pharmaceutical and medical device companies are entering the diabetes treatment field or ramping up their existing offerings to diabetics.

Companies catering to 24 million diabetic Americans (or around 8% of the US population) include traditional insulin makers Eli Lilly and Novo Nordisk, as well as device makers such as Abbott Diabetes Care and Bayer Healthcare Diabetes.

Established companies such as these are modernizing their product offerings by ramping up R&D efforts. Lilly is developing a once-a-week insulin-replacement therapy with biotech partner Amylin, and Abbot recently received approval for a new continuous glucose monitoring system.

Top pharmaceutical companies, such as Pfizer and Merck, are also expanding their diabetes operations by making diabetic treatments a top R&D priority, and big name biotechs like Amgen are looking to create alternative biologics-based treatments. Many small startup development companies, such as Phenomix and Spherix, are putting diabetes therapies at the forefront of their efforts.

One shining point in the survey shows that the percentage of diabetics who are aware of their condition has improved by 5%, which leads me to the assumption that a larger number of diabetics are seeking treatment — another plus for drug and device makers.