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- Over the past 10 years, major acquisitions have reshaped the healthcare industry.
- Analysts from SVB Leerink rounded up the five best and the five worst pharma deals of the last decade.
- One of the best deals was Merck acquiring Schering-Plough for $41 billion in 2009, with one of the worst deals being Johnson & Johnson’s $30 billion acquisition of Actelion in 2017, according to the Leerink analysts
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Over the past 10 years, dealmaking has reshaped the pharmaceutical industry.
Facing generic competition for once-blockbuster drugs and new pricing threats, many a deal got done to fill in key gaps in a company’s portfolio — some more successfully than others.
Analysts at SVB Leerink rounded up the five best and the five worst acquisitions of the last decade. The list of best and worst deals are based on an analysis of all the transactions over the last decade along with the input of the SVB Leerink therapeutics research team, and it shines some light on the often binary nature of biotech dealmaking.
The analysts found overall that deals with a transaction value of $1 billion to $5 billion have the highest success rate, compared to lower success rates for larger transactions. The analysts note that deals within the oncology space had two times the success rate as deals in other therapeutic areas.
The best deal was Merck acquiring Schering-Plough for $41 billion in 2009, and the worst was Johnson & Johnson’s $30 billion acquisition of Actelion in 2017. The gains made by the top deals towered far over the losses of the bottom five, according to Leerink’s estimates.
Read on to find out what contributed to the best and worst pharmaceutical acquisitions of the last decade.
THE BEST: 1. Merck’s $41 billion acquisition of Schering-Plough in 2009
At the time, the deal was seen as a good opportunity for Merck to freshen its drug portfolio. The merger gave it access to successful brand-name Schering products, like the prescription allergy spray Nasonex, the New York Times reported at the time of the acquisition.
Schering also provided Merck with consumer brands like Dr. Scholl’s. The German pharmaceutical company Bayer later acquired Merck’s consumer care business for $14 billion, taking over Dr. Scholl’s and other brands.
Merck’s drug Keytruda, which is an oncology treatment, is the company’s top selling drug with $7 billion in sales worldwide in 2018.
2. Bristol-Myers Squibb’s $2.1 billion acquisition of Medarex in 2009
In 2009, the pharma giant Bristol-Myers Squibb bought Medarex to add more drugs to its pipeline.
At the time, Medarex was developing human antibodies to be used in a broad range of therapeutic areas including immunology and oncology, which are now in marketed therapies.
“Medarex’s technology platform, people and pipeline provide a strong complement to our company’s biologics strategy, specifically in immuno-oncology,” then CEO and current chairman at Bristol-Myers Squibb, James M. Cornelius said at the time.
In particular, the acquisition brought in house a now-blockbuster cancer immunotherapy drug for BMS: Opdivo. The drug made BMS $6.7 billion in revenue in 2018.
3. Gilead’s $11 billion acquisition of Pharmasset in 2011
In 2011, the big pharmaceutical company Gilead bought Pharmasset, a clinical-stage drug company known for its antiviral drugs for HIV and Hepatitis B and C. The development of various drugs allowed for Gilead to have a more diverse and expanding pipeline, and some of those treatments are now key elements of its portfolio.
“The acquisition of Pharmasset represents an important and exciting opportunity to accelerate Gilead’s effort to change the treatment paradigm for HCV-infected patients by developing all-oral regimens for the treatment of the disease regardless of viral genotypes,” said then-CEO of Gilead, John C. Martin, at the time of the acquisition.
4. Sanofi’s $20 billion acquisition of Genzyme in 2011
The French drugmaker Sanofi bought the biotech Genzyme with a $20 billion cash offer.
At the time, it was the second biggest deal ever to happen in biotech.
Around the time of the Genzyme deal, Sanofi was losing sales of its oncology drugs to generic rivals. With the acquisition of Genzyme’s biotech drugs that treat rare disease, it was seen as a means to help fill Sanofi’s revenue gap, The Wall Street Journal reported.
5. AstraZeneca’s $4 billion acquisition of Acerta in 2015
In 2015, the UK drugmaker AstraZeneca acquired a majority stake in Acerta Pharma, a cancer drug developer, for $4 billion.
“The investment is consistent with our focus on long-term growth and reflects the role targeted business development plays in our business model,” AstraZeneca CEO Pascal Soriot said in a news release at the time.
Under the terms of the deal, AstraZeneca would acquire a 55 % stake in Acerta for an initial payment of $2.5 billion. It would then pay $1.5 billion when acalabrutinib, Acerta’s treatment for blood cancer had regulatory approval in the US.
The drug was FDA approved in 2017.
THE WORST: 5. Gilead’s $12 billion acquisition of cancer immunotherapy company Kite.
Gilead in August 2017 announced plans to spend $12 billion to buy Kite Pharma, a biotech that at that point has no approved therapies. Kite got approval for its drug Yescarta in October 2017.
The deal broke a long-running dealmaking hiatus for Gilead, which had amassed billions in cash from its Hepatitis C drug sales.
But since then, sales of the drug have disappointed. For the full year 2018, Yescarta generated $264 million in sales.
3. Alexion’s $8.4 billion acquisition of Synageva in 2015
Alexion bought Synageva for $8.4 billion, with the hope of diversifying Alexion’s revenue with the addition of rare disease drugs Kanuma and Strensiq. At the time, executives at Alexion thought Kanuma in particular had the potential to be a billion-dollar drug.
Two years later, the drug had made $29 million in sales, The Street reported at the time. In 2018, the drug generated $92 million in sales — still far from the billion-dollar threshold.
In the acquisition, Alexion touted the potential of one of Synageva’s experimental drugs, SBC-103. In 2017, Alexion decided not to keep developing the drug, putting an $85 million write-off on its fourth-quarter earnings release.
1. Johnson & Johnson’s $30 billion acquisition of Actelion in 2017
After weeks of deal talk, Johnson & Johnson scooped up Swiss drugmaker Actelion in early 2017 for $30 billion. It was the largest deal in J&J’s history.
As part of the deal, J&J picked up Actelion’s rare disease treatments on the market and in late-stage development, opting to spin out the company’s drug discovery operations.
In 2018, J&J halted development of an experimental antibiotic picked up in the deal.
Actelion in 2018 also paid out a $360 million settlement to the US government related to allegations that it used a copay assistance programs to pay Medicare patients for taking some of its drugs.