Pfizer Prices US$5bn Bond As Corporate Debt Deluge Continues

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Under the terms of the transaction, Pfizer will receive a 32% equity stake in the JV, with GlaxoSmithKline the remaining 68%.

The companies expect the transaction to fetch US$650m in peak cost synergies and to be slightly accretive for Pfizer in each of the first three years after the close of the transaction, which is anticipated during the second half of 2019, subject to GSK shareholder approval and regulatory approvals, as well as other customary closing conditions.

Elsewhere, Bristol-Myers Squibb (NYSE: BMY) also recently agreed to swallow-up cancer treatment giant Celgene Corp (Nasdaq: CELG) for an estimated US$74bn to bolster its cancer-fighting efforts.

The combined company is slated to have nine products, with the potential to generate more than US$1bn in annual sales, as well as growth in the core disease areas of oncology, immunology and inflammation and cardiovascular disease.

Among other touted benefits, the merged entity will also gain expanded innovation capabilities in small molecule design, biologics/synthetic biologics, protein homeostasis, antibody engine, ring and cell therapy.

Also, in January 2018, Celgene agreed to acquire Seattle-based biopharma company Juno Therapeutics (Nasdaq: JUNO) for about US$9bn to boost its cancer treatment program.

Celgene CEO Mark Alles said the tie-up builds on his firm’s “shared vision to discover and develop transformative medicines for patients with incurable blood cancers.” He added that Juno’s advanced cellular immunotherapy portfolio and research capabilities “strengthen Celgene’s global leadership in hematology and adds new drivers for growth beyond 2020”.

M&A trends

The combinations seem to agree with the recent trend of pharma-related M&A, which some analysts expect to continue, amid tax incentives, as well as critical operational strategies.

Strategists at McKinsey recently noted that pharmaceutical companies’ portfolios and pipelines “continually need refreshing to account for inevitable declines in revenue when patents on brand-name drugs expire and companies lose the right to manufacture and market them exclusively.”

While it can be challenging to accurately pinpoint patent-expiration dates, McKinsey suggests the total value of revenues at risk from patent expiries over the next three years, for the top 25 pharmaceutical companies, is roughly US$85bn.

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