BtoBio Innovation


Author: Jean-Claude Muller, 穆卓Executive Editor at BtoBioInnovation







The Top 10 Biopharmaceutical recent M&A Failures




Earlier this week Fierce Pharma has reported fifteen M&A deals that were considered as major failures. We have picked ten of them, which ranged from $63 billion to $8 billion and try to explain the underlying reasons of the shortfalls.



Bayer-Monsanto with a deal size of $63 billion, announced September 14, 2016


As the agriculture industry consolidated Bayer thought that Monsanto, with its genetically modified crop seeds and pesticides business would be a perfect target to increase its presence in the US. The deal became difficult right away. Bayer had to propose three sweeties ranging from $122 to $128 per share and the European and US anti-trusts reviews hit what Bayer CEO Werner Bauman called “unimaginable depths” obliging Bayer to sell a large part of its new portfolio asset to German rival BASF. A few weeks later, 42,700 plaintiffs claiming Monsanto Roundup weed-killer caused cancer came in. Since Bayer has lost all three cases that have come to a decision so far, slashing about 30% of Bayer stock value at its lowest and wiping out the entire value of the Monsanto deal. Prospect of potential settlements are helping the share price to slowly tick upward but investors are worried that the required cash will drain resources away from the fast-growing pharma business and are concerned that no money would be available to pull off a significant pharma deal. The concern is however somehow offset by Bayer’s recent full control of Vitravki’s and LOXO-195, two oncology treatments, and by the acquisition of the remaining stake in its cell therapy venture BlueRock Therapeutics with a pluripotent stem cell pipeline.  But nothing comes for free and Bauman has set Bayer on a major restructuring path with 12,000 job cuts including the selling of its animal health unit to Elanco for $7.6 billion. Earlier this year Bayer announced its intention to invest about $38 billion in the company‘s future by 2022 with R&D accounting for two-thirds of that number.


Teva-Allergan with a deal size of $40.5 billion, announced July 27, 2015.


At the time of the agreement, then CEO Erez Vigodman saw US Allergan’s generic business acquisition as a win “we will establish a strong foundation for long-term sustainable growth” he said. Obviously, he had underestimated that competition would drive generic prices drastically lower, that the company would have to saddle with a huge deal-related debt and on top make several revenue guidance revisions. Teva’s stock was trading at around $62 per share before the deal and raised to $70 on the news. Earlier this week Teva’s shares were trading at around $10. Meanwhile Teva has about $26.6 billion in debt, has cut 10,000 positions and retrenches with a $3 billion savings plan. The big winner in the deal are Allergan’s shareholders and Brent Saunders its CEO which did not have to deal with the generic business when he sold the remaining Allergan business to AbbVie in a $63 billion deal, earlier this year.

Shire-Baxalta with a deal size of $32 billion, announced January 11, 2016

The deal was announced during the 2016 J.P. Morgan Healthcare Conference in San Francisco and Shire and Baxter launched the Baxalta spinoff deal for $32 million. Shire intended to finance the deal with $20 billion sales by 2020 while becoming a rare-disease giant. But contrary to the statement Baxalta was only bringing haemophilia treatments and no cutting-edge products. “Success of alternatives approaches to haemophilia treatment could devastate its business” Bernstein analyst Ronny Gal wrote in 2016, predicting that 40% of the haemophilia business could take a direct hit from coming therapies, including RNAi products, gene therapies and Roche’s antibody Hemlibra.  In the first quarter post-integration, haematology products sales decreased by 6%, dragging Shire’s total sales down by 3% below consensus.  Full value of the deal never materialized after a disappointing 2018 guidance and the Shire buyout for $62 billion by Takeda in 2018.

Johnson & Johnson–Actelion with a deal size of $30 billion, announced June 16, 2017

The deal between the two companies was a long-fought battle, with Sanofi coming to the table at sometime, and raising doubts right at the closing that the final $30 billion price was outrageous. Under the terms of the deal J&J was buying Tracleer, to treat pulmonary arterial hypertension (PAH) with sales of around $2 billion plus two follow-up drugs, Opsumit and Uptravi. In October, a few months after the closing, analysts from SVB Leerink issued a report listing the deal between Actelion’s and J&J as one of the worst biopharma acquisitions because it would destroy value to the tune of about $15 billion. “If our estimate of the value of the assets today and cumulatively is equal to or less than 80% of the transaction price, we consider the deal a failure” they wrote. In January 2017, Opsumit failed a phase 3 trial in patients with Eisenmenger syndrome, a heart condition that causes PAH. In January 2019, the US FDA did not approve Opsumit for another new indication citing the need for more data.  In the Actelion portfolio J&J also got two late stage assets: cadazolid, an antibiotic and ponesimod a treatment for multiple sclerosis. In April 2018, J&J stopped the development of cadazolid for the treatment of Clostridium difficile associated diarrhea, while ponsimod seems to be doing better than Sanofi’s Aubagio in lessening the incidence of fatigue. Under the terms of the deal Jean-Paul and Martine Clozel, Actelion’s founders, have also received $1 billion in cash from J&J to keep Actelions discovery portfolio and develop it with close to 700 people in the newly formed Idorsia company.

Gilead-Kite with a deal size of $11.9 billion, announced August 28, 2017.

A bit more than two years after Gilead acquired Kite, Yescarta, Kite’s CAR-T cell and only approved product, made $118 million in worldwide sales last quarter, far from the yearly $2 billion in peak sales some analysts predicted for the drug at the time of approval in October 2017. To place it in the right context, Novarti’s Kymriah, the only other CAR-T cell drug has posted sales of $79 million over the same time period. “Gilead believes that cell therapy- a potential life-saving treatment for many patients with no options, has the potential to become the cornerstone of treating many cancers. Cell therapy is a pioneering platform and with that comes expected challenges”. Even those who believe it was too early to heavily invest in the CAR-T technology, recognise that Kite had merits as an acquisition target. The issue of Gilead was that it was flushed with cash coming from hepatitis C drugs Sovaldi and Harvoni and that it was not making any big deal for years, when suddenly both drugs revenues started crashing. It is clearly too early to tell if CAR-T cells will deliver the promise of cell therapies, but for sure the Kite acquisition was not the right buy at the right time and SVB Leerink calls it a “misfire”.

Bayer-Merck consumer health care, with a deal size of $14.2 billion, announced May 6, 2014.

When Bayer acquired Merck & Co’s consumer health business, the German conglomerate aimed at becoming the world leader of over-the-counter (OTC) company. At the time the deal sounded appropriate with established OTC and consumer healthcare (CHC) far less risky than prescriptions drugs with its build in patent cliffs. But the expected stability did not occur and four years after the deal closure, Bayer announced a major restructuring, with the divestments of Dr. Scholl’s, the sunscreen brand Coppertone and finally a write- off of $3 billion covering the Merck buy and the purchase of Dihon Pharmaceutical, a Chinese company. Noting that the purchase was 6.5 times as large as the CHC unit’s sales, Bernstein analyst wrote “This implies that the business has been poorly run since acquisition or Bayer overpaid for this asset… or probably both”. The Coppertone business was divested to Beiersdorf for $550 million in May 2019 and Dr Scholl’s was sold to Yellow Wood Partners for $585 million and was completed in November 2019. Several other brands, including Claritin are not doing well with substantial drops in sales in 2018 and 2019. Since 2018, most big pharma triggered an exodus from consumer health care with Novartis, Merck KgaA, Bristol-Myers Squibb selling off parts of their business. GSK which took full control of Novartis consumer joint venture has now formed another one with Pfizer which is due to be spinned off in three years. According to a Bloomberg report, Sanofi’s incoming CEO, Paul Hudson, is also considering a spinoff of the company $5 billion consumer health business.

Sanofi-Bioverativ with a deal size of $11.6 billion, announced January 22, 2018.

In early 2018, Sanofi’s former CEO, Olivier Brandicourt, announced back-to-back two deals to booster its presence in rare disease. The first one was Bioverativ, a $11.6 billion buyout to access haemophilia therapies and the second one Ablynx for $4.8 billion to access new technologies and products in the area of nanobodies. Both deals did not sound very logical after the company had earlier announced its intention to re-enter the oncology field. Very rapidly Sanofi had to admit that the Bioverativ portfolio was stumbling because of Roche’s successful launch of haemophilia drug Hemlibra. Bioverativ’s Eloctate had sales of €174 million, whereas Hemlibra picked up label expansions to treat all haemophilia A patients, with or without factor VIII inhibitors and is poised to generate sales of more than $2 billion by 2025. In summer Sanofi announced at $2 billion write-down due to a second straight quarter of “real disappointment” for Elocate’s performance and “admitted underestimating Hemlibra and expecting the competitive pressure to continue”. Sanofi company is now working on building a rare blood disorder franchise that is broader than haemophilia and should announce more on the topic on Capital Market Day’s presentation on December 10.

Amgen-Onyx with a deal size of $10.4 billion, announced August 25, 2013.

When Amgen acquired Onyx, for $10.4 billion, Kyprolis, the multiple myeloma drug was central to the deal. With sales of $64 million in the first quarter after launch and $124 million in the first few months of 2013, Kyprolis was expected to reach $2 to $3 billion in 2019, once Amgen would put its extensive experience in running clinical trials and marketing drugs in the cancer arena. But Kyprolis did not get close to it. With $778 million worldwide sales in the first months of 2019 it may reach the $1 billion, although US third-quarter sales where only $20 million ahead of where they were the same period last year. Amgen could not get the line extensions it had planned and Kyprolis’ myeloma competitors have multiplied in recent years: Celgene’s Pomalyst launched one year after Kyprolys has booked sales of $1.84 billion through the first nine months of 2019 and J&J Darzelex, with now first-line treatment approval had sales of $2.17 million over the same period. Amgen, in spending $10.4 billion for a company whose product has brought a combined $4.19 billion through its first six years, may now be in need of cash for its biosimilar defense battle.

AbbVie-Stemcentrx with a deal size of $10.2 billion, announced April 28, 2016.

AbbVie paid $5.8 billion upfront and had reserved another $4 billion in milestones to acquire Stemcentrx in 2016 and Rova-T, which at the time looked to the be the first targeted therapy for small cell lung cancer. The initial approval was scheduled for 2018 and forecasts were at $5 billion in peak sales. The originality of the product came from its mechanism of action: targeting the stem cell protein DLL3 that is found in many small cell lung cancers. Early preliminary results from a phase 1 study showed that Rova-T elicited a positive response in 39% patients with high levels of DDL3 and achieved 68% of clinical benefits. But industry watchers were not impressed in pointing out that the survival benefit was only marginal over historical average. In 2018, results from phase 2 studies showed objective response rates of 16% with median overall survival of 5.6 months, forcing AbbVie into two phase 3 studies in the first-and second-line settings. In December 2018, AbbVie stopped enrolment in one of the phase 3 study, after a data monitoring committee found that patients on standard chemotherapy lived longer than those in the Rova-T arm. In February 2019, AbbVie took a 5.1 billion write-off related to the Stemcentrx acquisition and halted all the Rova-T development in August 2019. In the meantime, BMS’ Opdivo, Merck’s Keytruda and Roche’s Tecentriq gained worldwide approvals as treatments of small cell lung cancer.

Merck-Cubist with a deal size of $8.4 billion, announced December 8, 2014

On the day Merck & Co announced its acquisition of Cubist Pharmaceuticals, a antibiotics-focused company, for 8.4 billion, the US court invalidated key patents covering Cubicin, a product which had already generated $700 million in the first nine months of 2014. Merck opted to move forward but Cubicin sales are now suffering from generic competition and revenues have slipped to $207 million in the first nine months of 2019. Merck has since got approval and line extension for Zerbaxa, another antibiotic within the Cubist’s portfolio, but sales were not significant enough to be reported by Merck as a line item in the 2019 third quarter report. Business analysts figured that the Merck may have overpaid Cubist by $2 to $3 billion.


We are not in a position to further explain, a posteriori, some of the challenges which were intrinsic to many of the larger and smaller failed deals in the Biopharmaceutical arena except for one. During the due diligence process, we have often seen that the meticulous work of assessing the overall competitive landscape of the deal is not performed with the same attention and depth as financial topics are being investigated.

December 4, 2019



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