Johnson & Johnson, Roche Allegedly Circle GlaxoSmithKline as Takeover Speculation Intensifies

Published: Jun 26, 2015

Johnson & Johnson, Roche Allegedly Circle GlaxoSmithKline as Takeover Speculation Intensifies
June 16, 2015
By Alex Keown, BioSpace.com Breaking News Staff

LONDON – Another pharmaceutical company could be the next target for acquisition in what has been a year of deal-making in the biotech industry, but this time pharma giant GlaxoSmithKline is in the crosshairs, the Daily Mail of London is reporting.

Rumors are swirling that Swiss-based Roche and U.S.-based Johnson & Johnson are eying the U.K. company for approximately $143 billion.

Roche and J&J aren’t the only companies though who have been thought could go after the elephant that is Glaxo. Last month there was buzz that Pfizer Inc. was considering acquiring Glaxo, a year after it failed to acquire AstraZeneca PLC . Just this month over a third of respondents in a poll conducted by BioSpace believe that AstraZeneca PLC could be in the running to acquire struggling GlaxoSmithKline (GSK).

Pfizer was speculated to be considering the deal in order to “unlock access to its balance sheet and improve its tax situation,” according to an analyst following the situation. Gregg Gilbert, a biotech analyst at Deutsche Bank , wrote in a note to investors “Introducing PfizerKline” that he thinks a deal would be “materially accretive” for both companies. Gilbert estimated that a bid priced at $29.86 a share, via half stock and half cash, which would push up Pfizer’s earnings per share by 10 percent to 16 percent beginning in 2016.

GlaxoSmithKline shares were trading at $42.65 in afterhours trading on Monday.

Over the past year there has been a spate of large pharmaceutical companies snapping up smaller startups and entities, including Pfizer’s $17 billion merger agreements with Illinois-based Hospira, Inc., or Amgen ’s acquisition of Onyx Pharmaceuticals, Inc. for $10 billion in 2013 or the merger of Actavis plc and Allergan Inc. , which resulted in the formation of a new company, Allergan PLC.

There has been an estimated $100 billion spent on pharmaceutical mergers and acquisitions since 2014, and more than 245 deals this year alone. There have also been a number of failed attempts, including Pfizer’s failure to acquire U.K.-based AstraZeneca last year.

As Glaxo looks for a silver lining following a decline in sales and scandals, the company could be ripe for a takeover. Glaxo has been hampered by lagging sales in Europe and the United States.

Although the company reported a 5 percent growth in emerging markets, sales in Europe were flat and in the U.S. sales were down about 10 percent as the result of formulary and contract changes to asthma drug Advair. Glaxo is under pressure to develop new drugs that aren’t threatened by generics.

In addition to the lagging sales, GlaxoSmithKline has been plagued by scandal, particularly in Asia. The company is still recovering from a bribery and ethics scandal dating back two years.

GlaxoSmithKline was fined nearly $500 million by the Chinese government when it was revealed that some employees of the pharmaceutical company were bribing doctors with extravagant gifts to prescribe Glaxo medications to their patients. Additionally the company was also accused of violating China’s personal privacy laws through illegal videotaping.

Peter Humphrey, an investigator hired by GSK to investigate a sex tape of GSK China general manager Mark Reilly and his girlfriend, was arrested and imprisoned for illegally acquiring private records of Chinese citizens and selling it to GSK and other clients. Humphrey was released from prison earlier this month due to health issues.

Additionally, Glaxo was fined $3 billion by U.S. courts in 2012 for a bribery scandal where Glaxo as accused of bribing physicians with concert tickets, money and other perks to prescribe the depression drug Paxil to children under 18 years of age, an age group for which the drug was not approved. Tow other drug were also part of the scandal, anti-depression drug Wellbrutin and diabetes drug Avandia.

While Glaxo has had its share of troubles, the company has had some positive news, including backing the launch of several startup biotech firms, including three announced yesterday. Glaxo and investment firm Avalon Ventures provided $30 million to the three companies to advance their work in developing new treatments for heart disease, cancer and certain genetic disorders.

The launch of the three companies comes on the heels of several successes for GlaxoSmithKline, including federal regulatory backing for two new asthma drugs mepolizumab and Breo Ellipta.

Earlier this month the company announced plans to consolidate most of its research and development operations in North America, shifting much of it to Upper Providence, Penn., near Philadelphia. The changes are expected to be completed by the end of 2019 and will more than double its 1,500 employees in the Upper Providence site.


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