Gilead Sciences Inc. yesterday is acquiring CV Therapeutics Inc. for $1.4 billion, the latest in a recent flurry of drug-industry mergers.
Gilead, based in Foster City, California, will pay $20 for each share of Palo Alto, California-based CV in a tender offer and second-step merger. The offer represents a 25-per cent premium above CV's closing price Wednesday of $16.
''The acquisition of CV Therapeutics represents a unique opportunity to complement and strengthen our growing cardiovascular portfolio,'' said Gilead CEO John C. Martin.
The closing of the offer is subject to various conditions, including the tender of at least a majority of the outstanding shares of CV Therapeutics common stock in the tender offer.
Merrill Lynch & Co. is acting as the exclusive financial advisor to Gilead in the transaction. Barclays Capital and Goldman, Sachs & Co. are acting as financial advisors to CV Therapeutics. Cooley Godward Kronish LLP is serving as legal counsel to Gilead and Latham & Watkins LLP is serving as legal counsel to CV Therapeutics.
CV's board has approved the Gilead transaction, which will occur through a tender offer and second-step merger, and will recommend it to shareholders. Gilead said the transaction would be dilutive to its earnings in 2009, neutral to accretive in 2010, and accretive in 2011.
Shares of CV had nearly doubled in value since the start of 2009 after Astellas Pharma made an offer of $1 billion, or $16 a share. CV rejected the bid as too low. The stock jumped 28.5 per cent in early morning trading on Thursday to $20.55. Gilead shares were down 4.8 per cent to $41.96.
CV Therapeutics focuses on the development of small molecule drugs for the treatment of cardiovascular diseases. In 2008, its two marketed products - Ranexa for the treatment of chronic angina, and Lexiscan for use as a stress agent in some patients unable to undergo adequate exercise stress - contributed to total revenues of $154.5 million. The company's pipeline includes multiple product candidates currently being evaluated for the treatment of atrial fibrillation, pulmonary diseases and diabetes.
In 2008, CV posted a net loss of $98.5 million, although sales rose 86 per cent to $ 154 million from a year earlier. Highly profitable Gilead generated $5.3 billion in revenue in 2008.
Gilead's planned purchase of CV follows quick on the heels of a deal for Genentech Inc., the biotech bellwether that's agreed to sell out to majority owner Roche of Switzerland. Already in 2009, Merck & Co. has agreed to buy Schering-Plough (See: Merck to acquire Schering- Plough for $41 billion), while Pfizer Inc. is acquiring Wyeth. ( See: Pfizer-Wyeth create $68-billion blockbuster deal)
Large pharma companies are under pressure to consolidate in part because some highly profitable drugs will lose patent protection in the near future, exposing them to competition from generic alternatives and becaue new drug candidates have been slow in coming up. Some analysts also say the industry expects stiffer regulation under the Obama administration, with industry executives looking to bulk their companies up as a means to protect their profits.
Smaller biotech companies, meanwhile, are under severe strain as the global economic slump cuts into sales and their ability to raise fresh cash to fund new research. Those that lose money have been urged by investors to find bigger partners.