Category Archives: Mergers

Takeda could sell Shire eye care business after merger

Wax Selection – Leaders in Pharma, Biotech & MedTech Recruitment

Takeda could be considering selling Shire’s eye care business after their $62 billion merger next year to cut debts, according to press reports.

Citing sources close to the matter Bloomberg said the Shire’s Xiidra eye drug is among the potential divestments being assessed by Takeda.

Another possible sell-off could be Shire’s Natpara medicine, used to control low blood calcium related to parathyroid hormone, according to Bloomberg’s anonymous sources.

Takeda could raise between $4 billion and $5 billion depending on the assets that get sold, according to the sources.

Discussions are at an early stage and Takeda has not made a firm decision about what to sell off, according to Bloomberg.

There has also been interest in Takeda’s OTC business, according to the report, but Takeda’s CEO Christophe Weber told Japan’s Nikkan Kogyo newspaper in July that the company does not intend to sell its OTC operations in the island nation.

The rationale behind the merger is to reshape Takeda so that it has a suite of rare disease drugs, which Shire has assembled through its own acquisition spree over the last few years.

Takeda already has a $31 billion loan facility in place to help pay for the acquisition, the largest borrowing ever by a Japanese company for an acquisition.

Bloomberg said that neither Shire or Takeda’s representatives were prepared to comment.

The deal is set to close in the first half of 2019 if approved by shareholders, if it obtains regulatory approvals in more than 20 markets and if approved at an extraordinary general meeting of shareholders.

Competition regulators in the US and Brazil have already backed the deal, and Takeda has asked for clearance in China, Canada and Mexico.

Markets where Takeda still needs clearance include Japan and the EU – and Bloomberg noted that the merger could face tougher scrutiny in the EU where reviews assess how pharma companies compete in each of its 28 nations.

Another possible spanner in the works could come from the influential family that originally founded Takeda, who are fighting the deal along with a group of other shareholders.

Last week, Kazu Takeda, from the family group, reportedly said the takeover could be “disastrous” and risked undoing the company’s corporate philosophy called “Takeda-ism” – this states that profit comes from making people happy.

SOURCE: www.pharmaphorum.com/news

Demographic shifts create biotechnology opportunities

Wax Selection – Leaders in Pharma, Biotech & MedTech Recruitment

Ageing populations which are increasingly wealthy means opportunities for biotech and healthcare investors.

Globally, populations are rapidly growing, ageing and becoming richer. It is estimated that within 25 years, the number of over 65s in Asia will exceed the total populations of the eurozone and US combined.

This progression, accompanied by declining birth rates in the developed world, is creating a growing demographic imbalance. Simultaneously, incomes are rising in developing economies, so emerging market consumers are increasingly entering the global middle class.

When populations become wealthier, healthcare spending infallibly increases and pockets of new healthcare needs (in response to lifestyle changes) often emerge. The consequences of these demographic shifts – both current and emerging – include far greater pressures on healthcare and a greater reliance on the private sector to provide care solutions.

Against this backdrop, biotechnology (or biotech) businesses can minimise the strain of (and theoretically profit from) global demographic adjustment. The biotech sector is broad-based, but primarily seeks to improve healthcare and treat disease through clinical research and drug development. Crucially for long-term investors, the sector also benefits from the relatively non-discretionary nature of demand for its products and services.

We have been taking advantage of these opportunities since 2016, when we began investing in an actively managed healthcare and biotech investment trust. We see high growth potential and strong structural tailwinds in the industry, and have since added to our exposure by investing in a passive exchange-traded fund (ETF) tracking the Nasdaq Biotechnology Index.

Having fallen sharply between late 2014 and 2016, the Nasdaq Biotechnology Index has been tracking steadily upward ever since. Despite its considerable growth potential and solid performance since 2017, the sector continues to trade at relatively attractive valuations; since the 2014-2016 sell-off, the sector’s price-to-earnings ratio has languished below that of the broader market for the first time in history.

As any excess capital is generally reinvested into further research and development, the majority of returns from the biotech sector are driven by mergers and acquisition activity and – crucially – the number of new drug approvals in a given year. The latter is positive news for investors, as approvals are on track for near-record levels in 2018, backing up strong years in 2015 and 2017.

For the sector’s world leaders in the US, biotech activities are tightly regulated by the Food and Drugs Agency (FDA). However, in a characteristically controversial manoeuvre, President Trump recently found himself on the biotech frontline when signing the ‘Right-to-try’ law – legislation permitting terminally ill patients to bypass the FDA to gain faster, unhindered access to experimental treatments. While not universally supported, and not without ethical constraints, the act should widen the pipeline of information on the effectiveness of potential new treatments. In turn, this could accelerate decision making over the fate of these new drugs. 

As with all sectors, biotech has its weaknesses. The most commonly highlighted risks are the binary nature of research results and the subsequent price movements in individual companies. More recently, political pressure to address fears around drug pricing is also mounting.

Mindful of these risks, but also seeking to harness biotech’s many compelling opportunities, our diversified positioning aims to limit the portfolios’ exposure to stock-specific risk, while allowing access to the benefits of powerful demographic shifts.

SOURCE: www.moneyobserver.com/demographic-shifts-create-biotechnology-opportunities

How can pharma navigate the complex marketing landscape?

Wax Selection – Leaders in Pharma, Biotech & MedTech Recruitment

The first chapter of pharma’s commercial evolution takes us from the insatiable sales-drive of the 1980s to the present, highly complex marketing landscape.

It is easy to forget that our competitive industry still has 80-90% gross margins and, as a consequence, its traditional commercial model is driven by sales growth, rather than worrying about costs.

Under most circumstances, incremental sales drive incremental profit. Within the affiliates this is obvious, and country managers have often resisted attempts by corporate counterparts to take a centralised approach to sales and marketing, claiming their country’s commercial ecosystem is unique and not amenable to meddling.

Of course, the modern pharma company will also have to conduct market access, medical education and phase IV studies within its affiliates, but the reality is that most affiliate activity is focused on sales. For large pharma companies the sales and marketing budget usually beats R&D budgets by 1.7 times, and this is becoming increasingly difficult to justify.

Rise of primary care dominance

Throughout the 1980s and 90s the focus on sales-driven growth led to the evolution of some very different ways of working within primary care, from co-promotion and co-marketing with embedded local players, to the ‘petal’ system of multiple salesforces detailing overlapping product ranges.

The purpose of these techniques, together with employment of contract sales teams, was a sort of ‘shock and awe’ strategy which swamped the physician with frequent visits about particular products. The competitive response was usually swift and commensurate, resulting in a commercial arms race between players within a hotly contested therapeutic area.

This was known as the ‘share of voice’ model, and when applied to large primary care categories, it drove top line growth so successfully that governments and institutional payers were forced to find a response to escalating drug bills around the world.

Backlash from health technology

This response varied from country to country, but has taken two main forms; the Health Technology Assessment response and the consolidated payer response. Throughout the 1990s and 2000s, in the UK (NICE), much of Europe, Australia and parts of Asia, there has been systematic developing of a process that assesses whether a product represents value for society.

Much of the health economics work is shared among countries, and pricing comparisons made between the same product in different countries are routine. The benchmarks for the monetary value of a healthy human being are the subject of debate, but are necessary to make budgetary choices in a system without unlimited resources.

The consolidated payer model, operating in the US through pharmacy benefit managers such as Express Scripts, relies on large payers exerting pressure on manufacturers for rebates, with some undifferentiated product portfolios having to rebate as much as 50% of their gross price.

The impact of health technology assessments can be seen today, manifesting itself in pricing pressure, therapeutic substitution, a diminution of decision-making by physicians and a conscious shift towards products with a confirmed medical need. A decline in R&D productivity, however, has not made this process easy.

Dead end: Primary care hits a wall

Many commentators blame the decline in R&D productivity for the steep fall in product approvals through the 2000s but, in reality, there have been several forces at work.

The rise in genomics, together with high-speed screening techniques, led to a belief that chemical libraries could be screened against unprecedented targets and that optimised drug candidates would flood through the discovery phase into phase I trials.

The sharp product rise in the early clinical phases then came to a shuddering halt during phase II ‘proof of concept’ studies, when large numbers of clinical failures unveiled the reality – there is no short cut to understanding disease biology.

As research cul de sacs were explored, a squeeze on primary care products began in the form of price pressure from above and greater safety demands from below. As a consequence, and aided by the rise in technology, a rapid increase in the proportion of newly-approved, biological in origin drugs commenced.

Monoclonal antibodies, vaccines, enzyme replacement therapy and other therapeutic peptides, aided by insatiable demand for insulin, developed strong sales and completely changed the nature of commercial interfacing with physicians.

Biologicals change the commercial dynamic

The pressure on primary care products, together with the impact of the patent cliff in 2012/13, have combined to drive sales of primary care products into stagnation. Much of industry downsizing, particularly within commercial operations, has been in response to this.

Perhaps most merger and acquisition activity within pharma also has its origins in this relentless pressure on primary care sales and the need to reload the pipeline quickly with biologicals and specialties.

The success of biologicals and other specialties, such as oral cancer drugs, in terms of both approval and sales, has required the industry to change its commercial emphasis. The huge traditional focus on primary care or family doctors has changed to specialists, and their support workers within a secondary care or hospital environment.

The increased complexity of the specialty sell, sometimes involving multiple decision-makers, formulary approval, health economic arguments, companion diagnostics and performance-related reimbursement, has required a much smaller, but more skilled group of people to interface with the healthcare network.

Many companies have yet to find the necessary mix of skills within their workforce and are still working under the old assumptions that spending on promotional activities can remain as high as it used to be under traditional models. They do so at their peril. Check out Part 2in the next issue, as promotional resources and modern data come under intense scrutiny.

SOURCE: www.pharmafield.co.uk/features