Sector News

Valeant rejected joint takeover approach from Takeda, TPG

May 30, 2016
Life sciences

Valeant Pharmaceuticals International Inc. received a joint takeover approach this spring from Japan’s Takeda Pharmaceutical Co. and private-equity firm TPG that the beleaguered drugmaker rejected, according to people familiar with the matter.

The approach came a month or two ago, before Valeant named Joseph Papa as its new chief executive, and didn’t include a firm price, the people said, adding that there are no current talks. The board is seeking to give Mr. Papa, who was hired in late April, time to chart a course for the company, the people said.

At the time of the advance, Valeant was buffeted by an accounting scandal and questions over its debt load, and was seeking a replacement for Michael Pearson as chief executive. The stock had fallen by some 90%, slicing the company’s market capitalization to around $10 billion—a level from which it has yet to recover.

The turmoil led to pressure on Valeant from analysts and investors to sell noncore assets, which the company has said it is exploring. It has now received inquiries about a variety of assets, but the offer for the whole company was unique, some of the people said.

The approach shows the value that some of Valeant’s businesses still have and suggests a deal for the entire company at some point isn’t out of the question.

As part of the approach, Takeda would take the business of Salix Pharmaceuticals, which treats stomach disorders like traveler’s diarrhea and irritable bowel syndrome, or IBS, some of the people said. TPG would take much of the rest, they said.

Valeant won a bidding contest for Salix last year by paying about $11 billion. Takeda, Japan’s largest drugmaker by revenue, was one of the bidders in that auction, people familiar with the matter have said.

Takeda sells gastrointestinal, oncology and central-nervous-system products. A deal with Valeant would give Takeda access to Xifaxan, a drug for IBS. Valeant has high hopes for the drug, predicting it could have $1 billion in sales this year.

IBS is a priority for the Japanese drugmaker. In March, Takeda’s U.S. unit said it was reorganizing to focus on treating such gastrointestinal disorders along with a few other conditions.

By adding gastrointestinal drugs, Takeda could better leverage its sales force, which already sells products like its fast-growing ulcerative-colitis drug Entyvio.

The company is best known for its Actos diabetes drug. Last year, Takeda agreed to pay up to $2.4 billion to settle U.S. suits charging that it hid the cancer risk of Actos.

Takeda’s largest deal ever was its 2011 purchase of Nycomed for around $14 billion.

TPG, which is perhaps best-known these days for investments in hot technology startups such as Airbnb Inc., has a number of health-care holdings in its portfolio including Alder BioPharmaceuticals and a stake in Endo International PLC.

By David Benoit, Dana Mattioli and Jonathan D. Rockoff

Source: Wall Street Journal

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