Week of January 30, 2017 | Vol. 6, Issue 3
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Johnson & Johnson to Acquire Actelion in $30 Billion Deal
Johnson & Johnson has agreed to acquire Actelion Ltd. for $30 billion, in an unusual deal that will also spin out the Swiss biotech company's drug-discovery operations.
The deal, the largest in J&J's history and announced by both companies Thursday, ends
weeks of seesaw negotiations. J&J initially abandoned talks, only to resume them about a week later after the companies entered into exclusive negotiations.
Its peculiar structure, in carving out early-stage research, addresses Chief Executive Jean-Paul Clozel's longstanding resistance to selling the business over concerns that an acquisition would destroy the company's drug-discovery engine.
At the same time, it gives J&J a clutch of promising new drugs that will bolster its portfolio of rare-disease treatments as its top-selling drug faces new competition.
The new drugs would immediately and significantly add to J&J sales, while giving the company access to promising candidates for multiple sclerosis and hypertension, Chief Executive Alex Gorsky said in an interview.
More generally, the deal underscores the hefty price big pharmaceutical companies can face to replenish their drug pipelines as their top sellers lose patent protection and face competition from less-expensive copy drugs.
Shares in Actelion surged as high as 277 Swiss francs ($277) following the announcement, or nearly 22%, while J&J shares slipped 0.8% in morning trade in New York. J&J is paying $280 a share in cash for Actelion, retaining the company's commercially available treatments for rare diseases such as an artery disorder known as pulmonary arterial hypertension, plus a handful of drugs in late-stage development.
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Bristol-Myers Squibb Cuts Guidance on Cancer Drug Problems
Bristol-Myers Squibb
Co.
cut its earnings guidance for the year as the drugmaker contends with dimmed prospects for its top cancer drug after major setbacks last year.
For 2017, the company now expects adjusted earnings of $2.70 to $2.90 a share, down from its previous guidance of $2.85 to $3.05.
Bristol pioneered cancer immunotherapy, a type of treatment that aims to fight cancer by harnessing the body's immune system, but it has been struggling in recent months to cope with competition from
Merck
& Co.'s Keytruda and most recently Tecentriq from
Roche Holding
AG
.
After Bristol announced in August that its immunotherapy Opdivo failed to meet the main goal of a critical study exploring the drug's use in advanced lung cancer patients who hadn't previously been treated, the company sought to persuade investors it still had bright prospects treating such patients, known as "first-line" lung cancer patients, by combining Opdivo with Bristol's other immunotherapy, Yervoy. The combination is under study.
But last week, Bristol said it won't pursue speedy U.S. regulatory approval to market that combination as a first-line treatment for lung cancer. That announcement fed investor fears the company is losing ground in the race for this all-important patient group.
In a conference call Thursday, Bristol said it was adjusting its sales strategy for lung-cancer patients. Executives said they expect Opdivo sales to grow overseas but to be flat in the U.S., where Bristol will concentrate on serving lung-cancer patients who have already received treatment until its trials studying combinations of therapies for untreated patients finish.
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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
9 transactions totaling $29,880
million
Supplies, Equipment & Services
19 transactions totaling $156 million
Healthcare IT & Managed Care
4 transactions totaling $1,400 million
Healthcare Facilities & Distributors
8 transactions totaling $20 million
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Pharma & Biotech
15 private placements totaling $541 million
Supplies, Equipment & Services
8 private placements totaling $384 million
Healthcare IT & Managed Care
2 private placements totaling $800 million
Healthcare Facilities & Distributors
1 private placement totaling $- million
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Pharma & Biotech
5 public offerings totaling $170 million
Supplies, Equipment & Services
2 public offerings totaling $14 million
Healthcare IT & Managed Care
0 public offerings
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 presented in chronological order. For additional information or the article's complete text, click the headline link to view the original publication.
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January 25, 2017 -
Wall Street Journal
Novartis
AG is considering spinning off its ailing eye-care business Alcon, one year into a slower-than-expected turnaround for that business.
The Swiss pharmaceutical giant said it would explore all options for the Alcon business, which sells eye-care technology such as contact lenses, lens implants and associated surgical tools.
The potential spinoff comes seven years after Novartis
gained full ownership
of Alcon, a move that it had hoped would allow it to capitalize on the fast-growing eye-care market. In total, it paid $51.6 billion for the business.
Chief Executive Joe Jimenez said he wouldn't rule anything out, but suggested that a spinoff could "create a big opportunity for our shareholders" due to the scarcity of listed eye-care device companies of its size. He said the company would announce its decision near the end of the year.
The decision comes as the company struggles to revive growth at Alcon. A year ago, Mr. Jimenez had hoped that fresh leadership and a new focus on devices like lenses, lens implants and surgical tools-he moved Alcon's ophthalmology drugs into Novartis's broader pharmaceuticals division-would return Alcon to growth in the second half of 2016.
Massachusetts Governor Pitches Health-Insurance Penalty for Employers
January 25, 2017 -
Wall Street Journal
The first state in the nation to require residents to carry health insurance is grappling with escalating Medicaid rolls, but a fix floated by Massachusetts' Republican governor is drawing pushback from employers.
In the state's budget released Wednesday, Gov. Charlie Baker proposed a $2,000 penalty per worker on businesses that don't shoulder enough of the health-insurance cost, as well as limits on certain hospital prices.
With an employer penalty, the governor is aiming to solve what he sees as a flaw in the national health law: Medicaid ends up being more appealing to low-income workers than insurance offered by employers, raising the costs for the state. The proposal to regulate hospital price increases would make Massachusetts one a few states to do so, along with Maryland and West Virginia.
As employers shift toward lower-cost, high-deductible plans that require bigger out-of-pocket outlays for employees, some lower-income workers in Massachusetts have opted instead for Medicaid, which offers more traditional health coverage and lower upfront costs.
January 26, 2017 - Fierce Pharma
With Tecfidera sales under pressure, Biogen reported mixed Q4 results that saw it beat forecasts on earnings but miss on revenue. The drugmaker is guiding for a slower-than-expected 2017, with the costly new spinal muscular atrophy drug Spinraza set to play an important role going forward.
In the fourth quarter, Biogen's total revenue missed consensus estimates by $66 million. While Tecfidera sales were up 1% to $1 billion, they missed Street guidance by $6 million, as did interferons by $15 million and Tysabri by $34 million. Alprolix and Eloctate each beat consensus sales estimates.
Even though revenues fell short of expectations, the company's Q4 non-GAAP EPS of $5.04 beat estimates due to lower R&D spending and reduced SG&A expenses.
Next year, Biogen is
guiding
for revenue of $11.1 billion to $11.4 billion and non-GAAP EPS of $20.45 to $21.25. It's important to note the guidance only includes one month of sales from the company's hemophilia franchise, which Biogen will
spin off
as Bioverativ on Feb. 1.
The revenue and EPS guidance both come below consensus estimates, with Barclays describing the numbers as "initially conservative but not as bad as feared when excluding hemophilia."
January 27, 2017 -
Fierce Pharma
President Donald Trump's move to instate a federal hiring freeze quickly set off concerns in the pharmaceutical industry as experts said a handcuffed FDA might not be able to keep up with an influx of drug applications.
Following Trump's
order
to halt hiring on Monday, former FDA official Bob Pollock noted in a blog post that the FDA is already struggling to "keep pace" and meet its deadlines.
"While hiring freezes and restrictions of new regulations are not uncommon during a change of administration, with the new President's pledge to reduce government and cut regulations by 75%, we could be in for a long, unpleasant haul," he
wrote.
A White House spokesperson
told
Regulatory Focus the freeze "has exemptions for public safety, which certainly could include public health." Pollock's opinion is that the exemption won't include FDA staff.
The FDA is set to receive 1,600 abbreviated new drug applications this fiscal year, Pollock said. Already, the generics industry, which counts on strong FDA staffing to green light cheap alternatives to branded drugs, has voiced its concerns.
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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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