Legal Business

Consolidating pharma giants to drive global M&A as advisers secure major deals from Novartis and Shire

The pharmaceutical industry is the driving force behind a number of recent high-value M&A transactions as drugs companies look for new ways to consolidate, and address patent expiration in a trend forecast to continue.

In November, Novartis sold off part of its operation, its blood transfusion diagnostics unit, to Barcelona-based Grifols for an estimated $1.68bn, as the Swiss pharma giant conducts a wholesale review of its business.

Basel-based Novartis was advised by Allen & Overy’s US M&A head Eric Shube in New York, who previously advised the company on its $52bn acquisition of a majority stake in NYSE-listed eyecare company Alcon, the largest acquisition ever undertaken by the pharma group. On the other side for Grifols was Proskauer Rose, led by New York corporate partners Peter Samuels and Daniel Ganitsky.

Spanish multinational Grifols, a leader in the European market for blood plasma-based products, also turned to Osborne Clarke’s Spanish arm, with head of life sciences and healthcare Tomás Dagá and M&A partner Raimon Grifols heading the team, alongside partners David Miranda (finance), Silvia Steiner (antitrust) and Núria Martín (capital markets). Raimon Grifols has been a secretary at his namesake company since 2001, according to Thomson Reuters, and previously advised on its €37m acquisition of a 60% stake in biotechnology firm Progenika in March.

Osborne Clarke’s UK head of life sciences and healthcare group, Janita Good, said: ‘Quite a lot of the work we’ve seen is the US picking up interesting life sciences assets in Europe, so we’ve done a lot of work on the disposal side.’ The latest statistics from Dealogic show that pharma deals have dramatically outperformed the wider global M&A market, with growth of 38% worldwide compared with 9.3%.

Taylor Wessing’s life sciences and IP partner Tim Worden said: ‘Pharma companies have been under pressure for some years now to bolster their pipeline of products, and they are also facing pricing pressures and patent expiration in the market, so there’s a real need for them to innovate.’

The Novartis deal coincided with Covington & Burling and Latham & Watkins securing key roles on Salix Pharmaceutical’s $2.6bn acquisition of speciality pharmaceutical company Santarus to cement its position in the gastrointestinal medicine market. This deal was announced in November.

Leading for Salix were Covington corporate partners Edward Britton and Catherine Dargan out of Washington, while Latham advised Santarus in a team led by corporate partner and San Diego office head Scott Wolfe.

A further multibillion-dollar pharma deal saw Irish biopharmaceutical giant Shire instruct Davis Polk & Wardwell on its $4.2bn acquisition of rare tissue disease specialists ViroPharma, which turned to Skadden, Arps, Slate, Meagher & Flom for advice.

The Davis Polk team was led by corporate partners George Bason and William Chudd, while Skadden fielded M&A specialists Eileen Nugent and Michael Rogan for ViroPharma. The deal will provide the company with estimated annual cost synergies of $150m by 2015.

Research compiled by Bloomberg shows there have been 44 acquisitions of speciality drug companies for $500m plus in the last three years, creating plenty of opportunity for industry-specialist firms to reap the rewards.

‘There will remain a handful of firms that genuinely have a top-tier reputation within the sector,’ noted Worden. ‘There’ll be lots of activity for M&A in this sector, as companies seek to acquire diagnostics and niche products in particular. Companies will also continue to seek to bolster their pipeline through licensing and partnering deals with biotechnology companies. All of that has a large amount of legal work connected to it.’

Deal Watch: Corporate activity in November

CHEVRON AND UKRAINE UNITE FOR SHALE GAS PROJECT

Energy giant Chevron Corporation turned to top-tier oil and gas adviser Clifford Chance on its $10bn shale gas exploration project with the Ukrainian government, which could end the region’s dependence on natural gas from Russia by 2020. Morgan, Lewis & Bockius, led by Moscow business and finance partner Jonathan Hines, is advising the government alongside Ukrainian independent Asters.

A&O ADVISE ADVENT ON DUTCH SOFTWARE DEAL

Private equity firm Advent International turned to longstanding adviser Allen & Overy for its $1.6bn acquisition of Dutch software company UNIT4, following a competitive bidding process. A&O’s Amsterdam-based corporate partner Jan Louis Burggraaf led on the deal alongside London-based finance partner George Link, while UNIT4 instructed De Brauw Blackstone Westbroek corporate partner Arne Grimme, who led a 13-strong team.

TRAVERS SMITH ADVISES NOBLE ON $9.9BN MIGRATION TO UK

Leading offshore drilling contractor Noble Corporation turned to Travers Smith corporate partner Richard Spedding, who has been leading a team advising as English counsel on the $9.9bn cross-border merger of Noble Corporation (Switzerland) with Noble Corporation plc to facilitate the company’s migration to the UK. Noble was also advised by Baker Botts on US law, as well as by Pestalozzi on Swiss law.

DLA PIPER AND FFW ADVISE ON CABINET OFFICE’S SHARED SERVICE VENTURE

DLA Piper and Field Fisher Waterhouse (FFW) advised the Cabinet Office on a joint venture between HM Government and IT provider Steria that will consolidate government back-office functions, potentially worth more than £1bn over ten years. Legal support came from Cabinet Office in-house lawyers, the Treasury Solicitor’s Department, DLA Piper’s commercial/IT partner Richard Bonnar, and technology/media partner Sarah Bell. FFW’s technology/outsourcing partner James Buckingham led a team of nine.