How Not to Do An Acquisition: AstraZeneca-MedImmune
When AstraZeneca ponied up more than $15 billion for the biotech MedImmune just over a year ago, the deal suggested that desperate Big Pharmas were willing to open their wallets wide for biotechs without looking too closely into the question of whether they were really worth the money. As I suggested at the time, it wasn't at all clear that AstraZeneca knew what it was getting into, and lo and behold, that turns out to have been largely the case.
Not quite two weeks ago, former MedImmune CEO David Mott, who'd agreed to stay with the company following the acquisition, announced he was leaving in a terse statement. Mott, who'd made out handsomely in the arrangement -- he was paid more than $145 million in cash -- presumably was either contractually bound to remain or stood to receive a retention payout of some sort if he stuck with MedImmune for at least a year, as his departure fell exactly one year and one week after the deal closed. The fact that he felt the need for freedom so quickly certainly isn't a good sign.
Neither is the fact that two other key executives -- Jim Young, the president of R&D, and Ed Mathers, a vice president for corporate development -- left at about the same time. Young, by the way, also made out like a bandit, pocketing about $60 million following the merger. (Mathers' employment agreement wasn't disclosed.)
So, the rats are deserting. Is the ship sinking? Over at SeekingAlpha, the "comment and analysis" firm EP Vantage suggests the answer is yes:
An NPV analysis of MedImmune's products suggests the criticisms levelled at AstraZeneca for over-paying are likely to continue. The total NPV of all products acquired from MedImmune amount to $8.21bn, still only half of the acquisition price, according to EvaluatePharma's NPV Analyzer....Let's see. Excessive payouts to former execs? Check. Sagging sales of main products acquired? Check. Uncertainty and turmoil in the new-product pipeline? Check.Over the five years between 2008 and 2012, current consensus forecasts for MedImmune's products are $940m lower than was previously expected in May last year, just prior to the acquisition....
Specifically, the combined sales of the Numax/Synagis franchise are also lower than hoped. Sales of $1.17bn in 2012 are lower than the $1.36bn that were forecast a year ago.
Of the 47 products acquired that were in development, eight candidates have advanced at least one stage over the last 12 months, whilst nine research projects have been terminated, mostly from pre-clinical studies.
Small wonder that the expected wave of pharmas taking out biotechs never really materialized, setting aside a few outliers like the Takeda-Millennium deal. (Of course, I expect that one to end in tears as well.) It must be small consolation to AstraZeneca's executives that they've provided such an inspiring negative example for the industry.
