IMS deal shows life, if not strength, in leveraged buyouts

(Recasts lead)

If a deal can’t get done with the backing of Canada’s pension fund and capitalism’s mightiest bank, then the leveraged buyout market would truly be dead.

So it is with limited fanfare that DealZone welcomes the buyout of IMS Health by Canada’s public pension plan and Goldman Sachs as a sign of the market’s return to health. Green shoots in the LBO patch are hardly growing all jack-and-the-beanstalk, but putting together $4 billion for the prescription drug sales data provider is not just ice on the moon either.

Excluding debt, the $22-a-share cash deal is the biggest leveraged buyout since Bristol-Myers Squibb sold its ConvaTec unit to Avista Capital and Nordic Capital just over a year ago for $4.1 billion, according to data from Thomson Reuters.

Financing markets and general optimism have improved from the nadir of the crisis, and debt, if you can find it, is hardly expensive, with core rates at zero. But $4 billion pales in comparison with strategic deals in the health space this year, such as Wyeth’s $68 billion union with Pfizer.

It is safe to say, though, that had the IMS deal foundered, it would have been a far worse signal for LBOs than its success means for the relative health of the business.

Bristol’s Medarex bid a tonic for biotechs

Shares of Medarex soared after Bristol-Myers said it would pay $2.4 billion to acquire the company. Medarex is a biotech that since 2005 has been helping Bristol-Myers develop a promising treatment for melanoma. The deal packs a beefy 90 percent premium that we’re told makes sense, given the scarcity value of the company’s “transgenic” mouse technology. The mice are souped-up with human immune systems that are able to generate fully human antibodies that can be used as drugs.

The deal could help Bristol-Myers regain its stature as one of the world’s leading players in the oncology market, and help it develop treatments for immunologic conditions such as arthritis, lupus and psoriasis, Ransdell Pierson reports.

Smaller-cap biotech payoffs have been capturing a lot of attention of late. Human Genome Sciences showed just how exciting the sector can be. Positive data on its experimental lupus drug caught Wall Street by surprise and led its shares to nearly quadruple on Monday.

Icahn on their minds

A deal that just a couple of days ago was thought to have at least a 50-50 chance of being pulled off between Irish drugmaker Elan and Bristol-Myers Squibb turned out to be dead on the table after our drugs reporter Rans Pierson reported that talks between the two last month never got as far as price.

Elan markets multiple sclerosis drug Tysabri with Biogen Idec, which is holding a shareholder meeting today. While the soured prospects for that deal may be on investors’ minds, the issue will only come up briefly if at all, as the company has a much bigger ownership issue to deal with in the form of activist investor of Carl Icahn.

In his second proxy fight for board representation at Biogen, Icahn wants Biogen’s board to consider splitting the biotechnology company into one firm focused on neurology and another focused on cancer. Icahn also wants Biogen to examine its cost structure and improve its relationships with its partners.

IPO drought persists in Q1, no rain in sight

desertWith just a few days left, the first quarter of 2009 has been as miserable for the U.S. IPO market as the last few quarters were.

The first three months of the year saw one solitary IPO- a grand slam to be sure, an $828 million (including over-allotments) deal by kids food maker Mead Johnson Nutrition. In contrast, the first quarter of 2008, when IPO flow was already starting to fall off a cliff, had 10 deals yield a total of $20.6 billion.

It was the second quarter in a row to see only one deal, the first time such a six-month drought has happened this decade.

The next best drug deal

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.

An IPO’s success has little to do with timing

An IPO’s successful pricing hinges to some extent on the overall market’s performance that particular day, or so goes the thinking in the world of new issues.

The logic holds that on a bad day, the markets remind potential investors of the risks of a new offering and leads to a lower pricing, if the IPO prices at all.

But that might be overstating the case. During a road show, an IPO’s underwriters spend several days selling the deal to potential institutional investors who have time to take a close look at its particulars and prospects.

One smash IPO does not a recovery make

If mjn2one didn’t know better, one could think all was all right in the world of IPOs right now.

Mead Johnson, the kids’ nutrition unit of pharma giant Bristol Myers Squibb, scored a home run with its IPO this week, raising $720 million and selling 5 million more shares than expected. The stock has enjoyed a strong debut, rising 10 percent in its debut Wednesday and putting on track to be the first double digit “pop” since fluid-handling systems specialist Colfax jumped 25 percent after its IPO in May 2008.

It’s the largest IPO in the United States since April and brings some measure of relief to fee-starved investment banks.

Man of Mystery

(Thanks to reader Bob, who caught the timeline errors in our first entry)

icahnb.jpgEli Lilly shareholders must have an itchy rash on their heads. Their management is set to pay a hefty $70 per share for cancer drug maker ImClone to rival a sweetened $62 per share bid from Bristol Myers that mercurial investor Carl Icahn has apparently whipped out. The mystery bidder has already completed due diligence and has the cash on hand to manage the deal. Analysts, generally unconvinced that this is a great strategic deal for Lilly. Shareholders could be less likely Lilly has a stomach for a bidding war if Bristol comes back. 

Austin PowersIcahn had called Bristol-Myers’ offer, which was increased by $2 per share, “absurd”, and ImClone says the unnamed suitor, who wants to remain shadowy until negotiations are over, does not need financing to put together the $6.1 billion-topping offer.

It seems fitting that the takeover of ImClone should be shrouded in intrigue. Founder Sam Waksal and his friend style icon Martha Stewart went to jail for lying to investigators over suspicious trading in its stock, and Carl Icahn brings his own mercurial blend of color and drama to the scene. One might find it poetic that the identity of this bidder is another stodgy old drug company rather than a media mogul, a style celeb or a flamboyant financier.

Thin line between love and hate

drugs.jpgFollowing the standard corporate merger playbook, ImClone Systems and its chairman Carl Icahn have called Bristol-Myers Squibb’s $60 per-share takeover offer “inadequate.” Doesn’t it seem like just yesterday Bud brewer Anheuser-Busch was saying the same thing about InBev’s bid?

The two companies have strong links– Bristol already owns about 16.6 percent of ImClone and is seeking to buy the rest. Their relationship has been centered on Erbitux, a drug approved for colorectal and head and neck cancer in the United States and Canada. Now the relationship, like so many other M&A talks, looks like it could turn nasty. No mention of business dealings with Cuba yet, but stay tuned.

Carl Icahn has said he was disturbed that one of ImClone’s directors was also a Bristol designee, leading ImClone to look into whether Bristol got confidential information about the company. And now Bristol is claiming it has rights to Erbitux’s successor.