This is just a taste of how complex these negotiations can get...
https://endpts.com/in-a-play-by-play-of-the-9-7b-medco-buyout-novartis-admits-it-overpaid-while-offering-a-huge-windfall-to-execs/December 9, 2019 03:35 PM ESTDeals
In a play-by-play of the $9.7B MedCo buyout, Novartis admits it overpaid while offering a huge windfall to execs
Jason MastEditor
A month into his tenure at The Medicines Company, new CEO Mark Timney reached out to then-Novartis pharma chief Paul Hudson: Any interest in a partnership?
No, Hudson told him. Not now, at least.Paul Hudson
Ten months later, Hudson had left to run Sanofi and Novartis CEO Vas Narasimhan was paying $9.7 billion for the one-drug biotech – the largest in the string of acquisitions Narasimhan has signed since his 2017 appointment.
The deal was the product of an activist investor and his controversial partner working through nearly a year of cat-and-mouse negotiations to secure a deal with Big Pharma’s most expansionist executive. It represented a huge bet in a cardiovascular field that already saw two major busts in recent years and brought massive returns for two of the industry’s most eye-raising names.
Also among the revelations in the SEC filing: Novartis paid more for the drug than their models ultimately determined it was worth.Clive Meanwell
Alex Denner, the high-profile activist investor and Carl Icahn protege, set the buyout in motion when he took control of the board in March, 2018. Denner had helped orchestrate buyouts of Bioverativ and Ariad, and he immediately restructured the board, bringing in 3 directors with close ties and cutting the overall membership from 12 to 7. By June 10, CEO Clive Meanwell had reached out to the first potential global partner about a deal.
At the time, MedCo’s future was still tenuous. That January they had finished selling off their entire infectious disease unit, slashing 85% of its workforce – 350 jobs – in the process. They were doubling down on inclisiran, the RNA-based cholesterol therapy, as mid-stage data began to roll in. The drug had shown it could lower LDL, but it was still early; Phase III data wouldn’t be out for over a year.
The unnamed pharma giant entered a confidentiality agreement with MedCo and for two to three months conducted due diligence before telling the NJ–based biotech they were no longer interested.
That was September. On December 11, Meanwell was out as CEO. Mark Timney, the ex-Purdue Pharma chief named in dozens of lawsuits for allegedly helping mislead the public about the addictiveness of Oxycontin, was in. He didn’t wait two full weeks before reaching out to his first potential Big Pharma partner – a company other than Novartis or the group Meanwell negotiated with. Soon, though, a cat-and-mouse game was underway between The Medicines Company and Novartis.
The discussions with Paul Hudson came in January. Hudson said no, almost passing up Novartis’s one shot as shortly thereafter, “Party B” presented an offer. An offer, though, that the board scorned.Alette Verbeek
In May, positive data came back on a Phase II extension trial and Timney emailed the results to Hudson, along with at least one other company. But when Novartis’ head of business development responded to the email and tried to introduce Timney to their cardiovascular business chief, Alette Verbeek, Timney didn’t respond.
Instead in June, Timney began negotiations with the other email recipient, “Party C.” Through August, he negotiated with A, B, C and others before Verbeek wrote to him on August 7th. They started talks.
Soon the first round of positive Phase III results came out on August 26, sending the stock up $8 and setting the stage for a five-way frenzy in Paris as the European Society of Cardiology’s ESC Congress loomed on the 31st. That became seven-way as two more entered the fray.Peter Wijngaard
Only one would drop out before Narismahan’s offer came in on September 16: The whole company for $74.03 a share. While MedCo mulled a response, positive data from two new trials pushed the stock price over $50. Timney called back on October 7: We’re worth more and there are other offers.
That day, Goldman Sachs and JP Morgan representatives began contacting 12 different pharmaceutical companies to gauge interest, including every company they had previously spoken to besides Party A. Two of the new ones bit, along with three old ones.
On November 5, Novartis offered $85 per share. Goldman Sachs and JP Morgan told MedCo they could get $90 – and Novartis agreed, setting up an announcement on November 18 at the American Heart Association Scientific Sessions.Stephen RodinBut before that was finalized they had questions for Alnylam, the RNAi company from which MedCo originally licensed inclisiran in 2013 for $25 million upfront. Reviewing new documents, Novartis determined the drug wasn’t worth $90 per share. In fact, they said it wasn’t worth the $85 they had offered.
But they told MedCo they would honor that initial offer. On November 22, MedCo’s board unanimously voted to approve the deal.
Alex Denner is cashing in on $368 million worth of stock from the deal. That’s roughly what he earned from the Ariad and Bioverativ sales combined. The rest of the payouts:
CEO Mark Timney – $67 million
Chief innovation officer/Ex-CEO Clive Meanwell — $140 million
Chief development officer Peter Wijngaard — $30 million
Executive vice president Stephen Rodin — $21 million
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