DealZone

Big banking fees in pharma

The bankers on Merck’s pending $41 billion merger with Schering-Plough will get a nice pay day — one for the record books, in fact.

An amended proxy filing shows that the investment banks on the deal will receive more than $100 million in total advisory fees.

Goldman Sachs is set to receive $33.33 million, while Morgan Stanley will get $20 million for advising Schering-Plough, according to the filing with the U.S. Securities and Exchange Commission.

J.P. Morgan Chase is in line for a fee of $45 million for advising Merck, the filing said.

A portion of these fees are only payable upon completion of the transaction, so the deal must complete for the banks to receive the total payout.

Another deal in healthcare: what’s the magic pill?

pillsAs dealmakers everywhere struggle to get deals done, the healthcare industry seals yet another one.

Express Scripts has agreed to buy health insurer WellPoint’s prescription business for $4.68 billion in a significant expansion for the U.S. pharmacy beenfit manager. The deal will be a concoction of cash and up to $1.4 billion in common stock, and will generate more than $1 billion of incremental EBITDA.

This comes on the heels of Pfizer’s $68 billion acquisition of Wyeth, Merck’s $41.1 billion takeover of Schering Plough and Roche Holding’s $46.8 billion buyout of Genentech. Granted, this isn’t a pharma deal, but it still falls under the umbrella of the healthcare sector.

Drugs cure Morgan Stanley’s league table woes

ZetiaMorgan Stanley is bouncing back up in the global league tables for mergers advisory work after taking a hit to its rankings last year.

The investment bank has taken the No. 1 spot based on deal volume globally so far this year, according to latest Thomson Reuters data.

Morgan Stanley was one of the advisors, besides JP Morgan and Goldman Sachs, in the latest blockbuster pharma deal – the $41 billion offer for Schering-Plough by Merck. That came on top of its role as the advisor — along with Evercore — to Wyeth in the drug company’s $68 billion takeover by rival Pfizer.

Pushing Drugs

USAThe drums of consolidation in Big Pharma were beating loudly after Pfizer bid for Wyeth in January. And as Merck and Schering-Plough were already teamed up on key drugs, the deal they announced this morning was hardly a shock. Though analysts said the pact has lots of logic to sell it — the companies are practically neighbors in New Jersey — the market is playing defense, so any excitement about Monday merger mania was quickly quashed as the economic Thorazine kicked in.

Long the preferred defensive play in a downturn, Big Pharma has been suffering along with the rest of the market as investors unwind the bull-market era and dump stocks for treasuries in the face of the biggest surge of new government debt issuance in living memory. Plus, consider that just last week the Obama administration was marshaling the president’s executive might to make good on a campaign pledge to tackle soaring health-care costs. Considering the environment, the strength of logic might not be enough to cast the Merck/Schering-Plough deal as anything other than a defensive necessity.

Shareholders are acting defensively as well. Merck shares were retreating in premarket trade, indicating a lack of confidence that the synergies of the merger will overcome what ails Wall Street.
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