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Medical M&A Rules The Day As Abbott, AbbVie Make Buys, Sanofi Bids

Big money was moving in the medical field Thursday as three giant companies announced — or attempted — multibillion-dollar buyouts. Abbott Laboratories ( ABT ) announced an agreement to acquire fellow cardiac-device maker St. Jude Medical ( STJ ) in a deal worth $25 billion. Meanwhile, AbbVie ( ABBV ), which used to be Abbott’s biopharma division before it was spun out, agreed to buy biotech Stemcentrx, for $5.8 billion upfront and up to $4 billion in milestone payments. Another cancer-focused biotech, Medivation ( MDVN ) confirmed that it had received an unsolicited $9.3 billion bid from big pharma Sanofi ( SNY ) after weeks of rumors. Abbott agreed to pay $46.75 plus 0.8708 Abbott share for every St. Jude share. Based on Abbott’s five-day average share price, the deal valued St. Jude stock at $85 apiece. Abbott said the deal will add 21 cents to its EPS next year and 28 cents the following year. It expects to save $500 million in costs from the combination by 2020. Abbott will also assume or refinance St. Jude’s $5.7 billion in debt. The move will greatly enlarge Abbott’s cardiovascular device business, which now represents 19% of its revenue. “St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair,” Abbott said in a press release. “Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or No. 2 positions across large and high-growth cardiovascular device markets.” Leerink analyst Danielle Antalffy agreed. St. Jude’s flat-to-negative sales growth over the last few years picked up to 8% in Q1, and she wrote in a research note that it’s set up to continue, while Abbott looked to be growing only in the low single digits. Nonetheless, Abbott’s share fell 7.8% to close at 40.42, while St. Jude’s rose 25.6% to 77.79. IBD’s Take: How healthy is Abbott Labs’ stock? Find out at IBD Stock Checkup AbbVie, Sanofi Look To Expand Their Drug Pipelines AbbVie and Sanofi, meanwhile, are both big pharmas looking to fill out their pipelines with innovative drugs as their lead products face slowdowns. AbbVie’s immunology drug Humira is one of the best-selling drugs in the world, but it patents could start expiring inside of five years. Sanofi has had to scale back expectations for its diabetes franchise as the increasingly competitive space has pushed down prices. Stemcentrx’s lead late-stage asset is called rovalpituzumab tesirine (Rova-T), and it’s already in registrational trials for small-cell lung cancer. AbbVie says that it will pay $2 billion of the $5.8 billion purchase price in cash and the rest in stock. Stemcentrx will also receive up to $4 billion in cash milestone payments if the drug successfully clears its regulatory and development hurdles. In the meantime, however, it will be a financial drain. “AbbVie expects this transaction to be approximately (20 cents) dilutive to our ongoing earnings per share in 2016, with accretion beginning in 2020,” the company said in its announcement, lowering its 2016 EPS guidance to $4.62 from $4.82. Meanwhile, AbbVie early Thursday reported Q1 earnings that beat Wall Street estimates while falling a tad short on revenue. AbbVie said that it earned $1.15 per share minus items in Q1, up 22% and two cents better than analysts expected, on $5.958 billion in sales, up 18%. Analysts polled by Thomson Reuters had expected $5.966 billion. Global Humira sales rose 19% excluding foreign-exchange impacts, AbbVie said. In a Thursday research note to investors, Evercore ISI analyst Mark Schoenebaum cited an approximately 7%, $151 million beat on U.S. Humira sales as “largely offset” by a $111 million miss on global Viekira revenue, “primarily driven by a U.S. miss, possibly due to competition from Merck ( MRK ) as well.” AbbVie put total Humira sales at $3.577 billion for Q1, with U.S. sales up 32% to $2.195 billion. Viekira, which treats hepatitis C, is AbbVie’s No. 2 drug, generating $414 million globally, or about 6.9% of total sales, AbbVie said. AbbVie stock ended 0.8% higher on the stock market today , above 61.20. Medivation Had Been Subject Of Takeover Rumors Sanofi’s unsolicited offer was for $52.50 a share cash for Medivation, making the deal worth $9.3 billion. Medivation has been the subject of takeover rumors in recent weeks, with AstraZeneca ( AZN ) and Sanofi among the rumored suitors. Medivation’s sole commercial product is prostate-cancer drug Xtandi, marketed by Japan’s Astellas. Xtandi’s success since its 2012 launch has helped drive Medivation’s stock to an excellent Composite Rating of 98. The proposed purchase price represents a premium of over 50% to Medivation’s two-month volume weighted average price before the buyout talk began, Sanofi said. Medivation stock rose 7.9% Thursday to 56.18, suggesting that investors think that bids will go higher. Sanofi stock finished down 1.8%. Image provided by Shutterstock .

Abbott Boosts Cardio Device Business With $25 Billion St. Jude Buy

Two giants in cardiac devices agreed to merge Thursday, as Abbott Laboratories ( ABT ) announced an agreement to acquire St. Jude Medical ( STJ ) in a deal worth $25 billion. Abbott agreed to pay $46.75 plus 0.8708 Abbott share for every St. Jude share. Based on Abbott’s five-day average share price, the deal valued St. Jude shares at $85 apiece. St. Jude stock was up more than 25% in morning trading on the stock market today , near 78, while Abbott stock was down more than 7%, below 41. Abbott said that the deal will add 21 cents to its EPS next year and 28 cents the following year. It expects to save $500 million in costs from the combination by 2020. Abbott will also assume or refinance St. Jude’s $5.7 billion in debt. The move will greatly enlarge Abbott’s cardiovascular device business, which now represents 19% of its revenue. “St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair,” said Abbott’s press release. “Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets.” Leerink analyst Danielle Antalffy agreed. St. Jude’s flat-to-negative sales growth over the last few years picked up to 8% in Q1, and she wrote in a research note that it’s set up to continue, while Abbott looked to be growing only in the low single digits. Antalffy also wrote that a competing bid is unlikely. “The most logical buyer beyond Abbott in our view would be Johnson & Johnson ( JNJ ),” Antalffy wrote. “In our meetings with J&J in mid-2015, management emphasized that the company is not interested in what they deemed ‘value’ markets within MedTech, specifically calling out cardiac rhythm management (nearly 30% of St. Jude’s total sales) and drug-eluting stents.” The deal announcement came on a busy day for M&A in medical field. Biotech Medivation ( MDVN ) confirmed that it had received an unsolicited $9.3 billion bid from big pharma Sanofi ( SNY ), while AbbVie ( ABBV ), which used to be Abbott’s biopharma division before it was spun out, agreed to buy another cancer-focused biotech, Stemcentrx, for $5.8 billion.

Abbott Labs Will Buy St. Jude Medical For $25 Billion

Abbott Laboratories ( ABT ) agreed to buy St. Jude Medical ( STJ ) in a deal that values the maker of heart devices at $25 billion, making its biggest ever acquisition as the industry consolidates to gain bargaining power with hospitals. St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 share of Abbott common stock, representing a total of approximately $85 per share, according to a statement Thursday. Medical devices makers are merging to get access to new technology as hospitals push for lower prices. St. Jude last year acquired Thoratec for $3.4 billion, adding left ventricular pump devices that take over for a failing heart. The combined Abbott-St. Jude medical company will have a pipeline of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care, according to the statement. Abbott said in the statement it has financing for both St. Jude Medical and for its planned acquisition of Alere ( ALR ) for $5.8 billion, sending Alere shares higher in early trading on the stock market today . Abbott Chief Executive Officer Miles White declined to reiterate his commitment to the Alere deal last week on the company’s earnings call. Alere hasn’t yet filed its 10-K report with U.S. regulators and has been subpoenaed by the Justice Department. St. Jude Medical closed Wednesday at $61.95, giving the company a market value of about $17.6 billion. The stock jumped to $78.66 before the markets opened in New York. Abbott dropped 5 percent to $41.65 in early trading, while Alere rose 3.5 percent to $44.35. The acquisition will further reshape Abbott, which split off its brand name pharmaceutical business to AbbVie ( ABBV ) in 2013. Since then, the company has shied away from major acquisitions and pursued many smaller deals, even as the CEO talked often about his desire for larger purchases. Abbott has cash on hand, obtained by selling its generic drug business for medicines marketed in Europe and the developed world to Mylan ( MYL ).