About Anne Law

Perhaps Martha Stewart should have held onto that ImClone stock a little longer. Not only would she have avoided jail time, but she might have earned a little more bang for her buck. Bristol-Myers Squibb’s $4.5 billion bid to acquire the 83% of ImClone it doesn’t already own values the company’s shares at $60 a pop (ironically, the same price that triggered Martha’s stock ditch in 2001). But speculation over the deal has already raised the stock’s price tag above that bar and ImClone has hinted that it may seek a higher offer.

BMS’s unsolicited takeover attempt marks the second large biotech takeover attempt by a big-name pharmaceutical firm this summer (the first was Roche’s bid for Genentech) and is part of the larger and seemingly intensifying trend of the pharma industry’s shift towards biopharmaceuticals. (It’s a sign of the times, but also of dwindling revenues from traditional drugs.)

What is BMS hoping to gain through the purchase? While ImClone only has one commercial product (cancer treatment Erbitux, which is approved to treat colorectal, head, and neck cancers), that single product brings in over $1 billion in annual revenue. ImClone also has a pipeline of similar antibody-based cancer drugs, and it is pursuing additional indications for Erbitux. If the company’s development candidates make it to market ImClone will also hold a corner on treatments for lung, pancreatic, breast, prostate, and ovarian cancers.

So despite a history laden with patent disputes, management shake-ups, and stock-trading scandals, ImClone represents an opportunity for growth to the struggling BMS. Whether ImClone accepts the offer is another question. The biotech indicates that it may decide on another course to maximize shareholder value, such as the separation of its Erbitux and development operations into two companies. The deal’s success will also largely depend on the opinion of ImClone chairman Carl Icahn, the formidable investor who has already voiced his doubts on the BMS offer.

There’s a lot of speculation circulating about whether leading biotechnology firm Genentech will accept pharmaceutical giant Roche’s $43.7 billion takeover bid, the largest pharma/biotech merger price tag in several years.

The offer came as a surprise for Genentech, which has maintained a unique culture despite Roche’s controlling ownership stake. If Roche’s offer is accepted, the pharmaceutical giant says that it wants to keep Genentech independent so as not to squelch its innovative atmosphere. I imagine that Genentech executives and employees are wondering whether this goal is realistic though, especially since Roche has also announced its intention to integrate some US functions to cut costs.

Also at issue is the popular opinion that the offer is undervalued, only giving a 9% premium over Genentech’s stock value. Some analysts and investors are betting that Roche will have to up its offer before Genentech will commit, while others feel that Roche will use its advantage as majority shareholder to keep the price down.

Roche has thus far been satisfied with its controlling interest in Genentech, which has allowed it to reap profits from the division while avoiding management duties. The shift in strategy is less of a surprise, however, when you consider current competitive and consolidation trends in the pharmaceutical/generic/biotech industries, as well as the rise of foreign investments in US assets.

Roche itself has made several acquisitions in its quest to remain in the top ranks of drug companies, especially in the areas of biotechnology and diagnostics. (It also recently bumped up its stake in another majority-owned subsidiary, Japan’s Chugai Pharmaceutical.) Like many other pharma companies, Roche is looking to biotechnology firms to bolster its product offerings in the face of generic competition. Generic firms are also joining forces to get ahead of the game.

Though Roche will probably have to raise the stakes, it’s highly likely that Genentech will eventually end up taking the bait in this situation, if for no other reason than to secure its position in the increasingly challenging marketplace. However, let’s not completely discount that the California company may yet fight for its (partial) freedom with San Francisco flair.

Recent statistics from the CDC show that the number of diabetes cases in the US continues to rise — one in 12 Americans now suffer from the disease. This tragic phenomenon is a large part of the reason we are seeing so many public health campaigns unsuccessfully attempting to reverse the trend. The study also highlights why so many pharmaceutical and medical device companies are entering the diabetes treatment field or ramping up their existing offerings to diabetics.

Companies catering to 24 million diabetic Americans (or around 8% of the US population) include traditional insulin makers Eli Lilly and Novo Nordisk, as well as device makers such as Abbott Diabetes Care and Bayer Healthcare Diabetes.

Established companies such as these are modernizing their product offerings by ramping up R&D efforts. Lilly is developing a once-a-week insulin-replacement therapy with biotech partner Amylin, and Abbot recently received approval for a new continuous glucose monitoring system.

Top pharmaceutical companies, such as Pfizer and Merck, are also expanding their diabetes operations by making diabetic treatments a top R&D priority, and big name biotechs like Amgen are looking to create alternative biologics-based treatments. Many small startup development companies, such as Phenomix and Spherix, are putting diabetes therapies at the forefront of their efforts.

One shining point in the survey shows that the percentage of diabetics who are aware of their condition has improved by 5%, which leads me to the assumption that a larger number of diabetics are seeking treatment — another plus for drug and device makers.

The numbers are in and it’s official — pharmaceutical firms outspent everyone, including themselves, on lobbying US senators and representatives in 2007. Pharma companies shelled out $168 million last year, a 32% increase over 2006, to influence politicians to take their side on issues including prescription drug ads and drug importation. And they were largely successful, according to an analysis from watchdog journalism group Center for Public Integrity. The organization’s figure jumps to $189 million when you add in medical equipment and other health-related product makers that commiserate with big pharma on issues such as patent laws and CMS reimbursement.

The drugmaking industry already held the top position among lobbying industries, outshining big spenders such as energy firms and industrial manufacturers. The top 5 big corporate spenders were Amgen, Pfizer, Roche, Sanofi-Aventis, and GlaxoSmithKline, all of which are working ardently to hang onto their leading market positions. Many of the companies on the watchdog group’s list are represented by trade organizations who support common pharma interests, such as the #1 overall spender, Pharmaceutical Research and Manufacturers of America (PhRMA).

The Center for Public Integrity points to a large slate of medical-related legislation and the Democrats’ takeover of Congress as possible causes for the sharp increase in spending. When you consider the problems drug companies have been running into recently, such as questions about Amgen’s anemia drugs and Pfizer’s smoking cessation drug, as well as general industry issues such as patent litigation and generic competition, it’s not terribly surprising that these drugmakers are clamoring for political support.

Likewise, looking at the amount of money the companies are forking over, it’s not a shock that they usually get their way.

The announced deal in which #3 Japanese pharmaceuticals firm Daiichi Sankyo will purchase a controlling stake in India’s #1 pharma company (and Top 10 global generic drug manufacturer), Ranbaxy, is a shining example of two recent trends that have emerged in the industry: (1) Japanese price cuts are prompting the country’s drugmakers to branch out aggressively into new markets, and (2) global companies that have traditionally focused on brand-name drugs are reaching toward new industries to balance lagging sales.

Other recent transactions that signify trend #1 include Takeda’s acquisition of US biotech Millennium Pharmaceuticals and Eisai’s similar purchase of MGI PHARMA. Daiichi Sankyo itself announced another deal earlier this year in which it will buy German biotech U3 Pharma. While deals such as these were not previously unheard of, merger announcements in 2008 have skyrocketed as the Japanese government is enforcing price cuts and encouraging generic competition.

Daiichi Sankyo will gain a strong foothold not only in India’s booming drug market, but it will bolster its operations worldwide through Ranbaxy’s presence selling generic drugs in some 50 countries. Ranbaxy itself will also benefit as it will gain wide access to the Japanese generic drug market.

Like many international pharmaceutical companies suffering from patent-expiration/sluggish-pipeline disease, Daiichi Sankyo is also following trend #2 where companies expand into new industries such as biotechnology, over-the-counter drugs, and animal health products to reduce their dependence on traditional prescription drugs. Some drugmakers have fallen into the “if you can’t beat ’em, join ’em” mentality in regards to generic drug companies as the patent-protected vs. generics battle heats up (with generics often coming out ahead).

Overall, the hookup of Daiichi Sankyo and Ranbaxy looks to be pretty smart, despite the companies’ differing backgrounds, and comes as no major surprise considering the state of the industry. The deal may even pave the way for larger marriages between previous generic/branded drug-making enemies.