The next best drug deal

March 12, 2009

USA/After eight months of playing hard to get, cancer drug maker Genentech has agreed to be bought by Roche for $95 per share — a price Roche didn’t think it would have to pay. The strength of the dollar makes the deal even more expensive for Switzerland-based Roche, but it may feel it got off easy, given talk that Genentech management might hold out for as much as $120 per share.

Following Pfizer‘s bid for Wyeth and Merck‘s offer for Schering-Plough, that makes nearly $160 billion in Big Pharma deals so far this year. The last two big U.S. pure pharma companies still unattached are Bristol-Myers Squibb and Eli Lilly. Both are probably feeling a bit lonely, particularly Bristol, which installed a dealmaker CEO a couple of years ago.

Bristol and Lilly, the grande dames of the industry, face increasing competition from generics and are struggling to keep their pipelines pumped up. They’ve been hunting for exciting biotechs and makers of hot new biologic drugs, preferably in cancer or another big disease market, as a matter of survival. Lilly already has some exposure here, having bought Erbitux maker ImClone last year for a far less exciting $6.5 billion.

Genentech’s demise leaves Amgen as the big biotech in the living room. At about $50 billion, it’s half the size of Genentech, but $10 billion bigger than Bristol Myers and worth $15 billion more than Lilly. There are plenty of smaller, potentially riskier biotechs out there, but maybe Not-So-Big Pharma will have to compete with bigger biotechs in the Darwinian drive for the next best drug.

Other Deals of the Day:

* Gilead Sciences agreed to acquire CV Therapeutics for $20.00 per share, in a transaction it said was valued at about $1.4 billion.

* Japanese non-life insurers Sompo Japan Insurance and NipponKoa Insurance plan to merge, an industry source said, in the second deal in less than two months in a sector struggling with slumping demand and a dwindling, ageing population.

* Asahi Breweries, Japan’s largest beer maker, said it has agreed to buy the Australian beverage business of British confectionery maker Cadbury for A$1.185 billion ($769.5 million).

* BMW reiterated that it has neither plans nor intention to take stake in General Motors Corp’s Opel business denying newspaper reports.

* British oil and gas company Valiant Petroleum said it agreed to buy Nor Energy (UK) Ltd, a unit of privately held Norwegian firm Nor Energy AS, raising its stake in the Causeway Field in UK North Sea to 24.5 percent.

* Japan’s Seiko Epson said it would start talks with Sony Corp on an alliance in the small- to mid-size LCD display business, including a possible transfer of some of Seiko Epson’s LCD assets to Sony. The companies said they aim to agree on a deal by June.

* Logistics firm Gati said it plans to acquire the remaining 26.28 percent stake in trucking company Kausar India Ltd.

* India’s fraud-hit Satyam Computer Services closes registrations for potential bidders on Thursday, kicking off a process to sell a majority stake in the company caught in the country’s biggest corporate scandal.

* The French government is mulling opening the share capital of Areva to Middle Eastern investment funds with a view to reinforcing its political influence and the nuclear group’s prospects in the region.

* Axsys Technologies, which manufactures defense surveillance and imaging systems, on Wednesday said it is evaluating a possible sale, confirming a Reuters story that sent the company’s stock up 37 percent.

(PHOTO: A customer shops for over-the-counter medicine at a Wal-Mart Supercenter in Rogers, Arkansas June 5, 2008. REUTERS/Jessica Rinaldi)

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