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Mylan Inc. (MYL) Makes Second Round Of Bidding For GlaxoSmithKline (GSK) Drug Portfolio

8/21/2014 6:08:05 AM

Mylan Inc. Makes Second Round Of Bidding For GlaxoSmithKline Drug Portfolio Mylan Inc. Makes Second Round Of Bidding For GlaxoSmithKline Drug Portfolio

August 21, 2014

By Mark Terry, Breaking News Staff

Several companies, including Mylan Inc. (MYL) , have submitted a second round of bidding for a portfolio of older GlaxoSmithKline (GSK) drugs. The portfolio includes antidepressant Paxil, antimalarial Malarone, and fish-oil based Lovaza. Participating groups in addition to Mylan include TPG Capital, Advent International, KKR and Warburg Pincus. Several Indian pharmaceutical companies are also reportedly interested.

GSK’s asking price is around $1.66 billion. Whoever wins the bid would be able to sell the drugs together or in smaller batches.

The drugs in the portfolio are older drugs whose sales have been declining, with a drop of about 18% in the first six months of 2014. Although some of them are no longer actively marketed, they are still profitable, with operating margins at 59% in the first half of the year.

Companies have been particularly interested lately in sales of older drug portfolios because of their potential use in inversion deals. If a U.S. company acquires an overseas company or its assets, it can, in some cases, create a European holding company in a country with lower tax rates than in the U.S. Inversion deals are controversial with the current White House administration, but have the potential to save U.S. companies billions of dollars in tax savings. Usually the news focuses on inversion deals where the U.S. company acquires another company, not its portfolio.
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At least one analyst, Odile Rundquist of Helvea SA in Geneva, has suggested that AstraZeneca may be confident in its pipeline of experimental drugs to request an even higher asking price.

A recent example of inversion deals involving a portfolio acquisition includes Salix Pharmaceuticals Ltd buying a drug portfolio from Cosmo Pharmaceuticals SpA for $2.7 billion, which allowed it to move its domicile to Ireland. Another is still in the wind, AbbVie Inc’s potential $54 billion acquisition of Shire PLC. If completed, it would allow AbbVie to cut its corporate tax rate from 22% to 13%.

The U.S. Treasury Department is working to come up with administrative options for dealing with tax inversions. Although both Democrats and Republics seem opposed to tax inversion deals, not much is being done about it at the congressional level, which has triggered the White House to suggest actions. Treasury Secretary Jacob J. Lew recently commented “If Congress doesn’t act, we can’t wait for months or years to go by and just watch companies make decisions as if nothing will change.”

The first round of bids for the GSK portfolio were completed at the end of July. Bidders were notified of the results and the bidding process is expected to pick up again in early September.

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