Biotechnology

Bad finance: the dangerous drug of EPS accretion

8 Feb 2016

AstraZeneca’s chief executive says he’s done with deals, unless they are accretive to earnings right away. That could rule out some good acquisitions, and rule in some terrible ones. Judging transactions by their effect on earnings per share is common, and a most unhealthy habit.

AstraZeneca pay contortions get ever more tangled

4 Feb 2016

The UK pharma group may miss the earnings targets Chief Executive Pascal Soriot must meet to get his bonus. But it may adjust Soriot’s goal to reduce the effect of “dilutive” acquisitions. There’s logic to that, but Astra’s accounting gymnastics undermine its rigour on pay.

Glaxo self-help looks better than surgeon’s knife

3 Feb 2016

The UK pharma group has come under pressure to split itself up after weak performance. Latest results show Glaxo is coming to terms with its challenges. A breakup wouldn’t create much value, absent a premium bid. That gives Chief Executive Andrew Witty breathing space.

Express Scripts left vulnerable by contract spat

1 Feb 2016

Shares of the $48 bln drugs middleman were dealt a blow when heavyweight insurer Anthem went public with ambitions to get a better deal. Express will want a quick resolution before serial dealmaker Stefano Pessina at Walgreens Boots opportunistically lobs in a lowball bid.

Alere board’s diligence brings 51 pct premium

1 Feb 2016

A $5.8 bln sale to $56 bln healthcare group Abbott caps a series of good decisions. Appointing a separate chairman, jettisoning Alere’s deal-hungry founder, rejecting his low-ball bid and focusing the business all helped. It shows what engaged investors and directors can achieve.

Novartis blurry outlook merits investor pink-eye

27 Jan 2016

The Swiss pharma group disappointed with earnings and forecasts. It’s a combination of drug patent pressure and challenges in its eyecare unit Alcon. Neither can be quickly fixed and more radical action seems off the table. A return to Novartis’ premium rating isn’t imminent. 

Falling healthcare prices can lift some boats

12 Jan 2016

U.S. political backlash against the cost of pills and therapies has set the tone at JPMorgan’s big biotech gathering. A clampdown would hurt makers of new drugs, and firms selling older ones even more. Not all medical inflation is bad, though. Consider the likes of Illumina.

Shire’s merger with Baxalta looks a little peaky

11 Jan 2016

The drugmaker’s Chief Executive Flemming Ornskov has clinched his deal to buy haematology specialist Baxalta for $35 billion. The deal brings Shire scale in rare diseases, but offers few cost synergies, plenty of risk and relies on revenue growth that may be optimistic.

Biotech begins its annual bash with a hangover

11 Jan 2016

After a year of astonishing drug approvals, IPOs and M&A, the healthcare industry’s mood is noticeably less revelatory heading into this week’s JPMorgan San Francisco gathering. Inflated valuations could make it harder to persuade investors in attendance to hand over their cash.

Valeant’s temporary boss has his work cut out

6 Jan 2016

The drugmaker’s ex-CFO replaces a muddled three-headed approach implemented after CEO Mike Pearson fell ill with pneumonia. Former Goldman banker Howard Schiller helped build the acquisitive Valeant. Buying is one thing. Running an embattled company requires different skills.

Gene-editing IPO tests DNA of investors

5 Jan 2016

New disease-fighting techniques have captured the imagination of the medical community. A planned stock sale by Editas, backed by Google and Bill Gates, will see if financing follows. Though the market could be huge, patents are being challenged and therapies seem a decade away.

Healthcare M&A will wear down in 2016

4 Jan 2016

Obamacare and tax avoidance spurred over $550 bln of U.S. deals in 2015. That’s three times more than the previous record. With the obvious combinations already struck, acquisitive companies hurting and trustbusters sharpening their pencils, a repeat will be challenging.

Valeant’s latest fix reinforces its challenges

28 Dec 2015

The $38 bln drug company is handing the reins to three execs while CEO Mike Pearson is on medical leave. And three directors will “oversee and support” them. The double triumvirate shows how reliant on one man Valeant now is as debt, R&D and strategy issues take center stage.

Theranos’ wounded credibility hobbles all unicorns

21 Dec 2015

The blood-analysis company faces new charges of finagling with its herpes test, a product essential to its success. Unless the firm wins vindication from independent experts, the damage may be too serious to fix. That harms similar startups, whose survival depends on trust.

Pharma CEO’s arrest a sign of health sector ills

17 Dec 2015

Turing’s Martin Shkreli may face fraud charges. That’s not unheard of in an industry prone to financial foibles, but its recent boom offers more chances for misconduct. With good times fading, the excesses stand out like a sore thumb. Pharma’s bad boy is an obvious first target.

AstraZeneca’s M&A flurry clears value hurdle

17 Dec 2015

The UK pharma group has spent $4 bln on a stake in cancer specialist Acerta. Its acquisitions this quarter now total more than $7 bln. The dealmaking reflects new-drug pipeline challenges and sector-wide price pressure. Astra is ratcheting up the risk, but the approach looks sound.

Valeant has a pricing problem

16 Dec 2015

The $40 bln drug maker has a new distributor: U.S. pharmacy chain Walgreens. But a reduced revenue forecast for the fourth quarter suggests Valeant is cutting prices. The $30 bln of debt from its recent acquisitive past helps give insurers and other buyers an advantage.

Sanofi and Boehringer scratch each others’ backs

15 Dec 2015

The French pharma group is swapping its animal health business for the consumer arm of the German company. The 23 billion euro deal helps both while avoiding the risk of expensive M&A. Boehringer may have a marginally better deal, but Sanofi’s need is probably greater. 

Valeant poised to cause much collateral damage

7 Dec 2015

The acquisitive drugmaker’s travails have vaporized fortunes, damaged reputations and dusted the sector with political radioactivity. Indirect effects could be even larger. Valeant will take its toll on so-called platform companies, “adjusted” accounting and hedge funds broadly.

Cox: Two signs of M&A bacchanal’s last hurrah

1 Dec 2015

The boom just topped $4 trln, helped along by one telltale massive deal and another much smaller one. Pfizer’s takeover of Allergan is clearly predicated on exploiting tax loopholes while a U.S. retailer is getting into the pizza racket. Both indicate a cycle well past its peak.