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Yesterday, I met up with a health care venture capitalist. He mentioned that M&A is likely to be a big factor over the next few years. After all, major pharma companies will have a variety of their blockbuster drugs go off-patent.
Well, interestingly enough, we got a mega-deal today; that is, Takeda Pharmaceuticals (the top drug company in Japan) has agreed to pay $8.8 billion for Millennium Pharmaceuticals (NASDAQ: MLNM), which develops biopharmaceuticals for such things as cancer and inflammatory diseases (its top drug is Velcade). There is also a key strategic relationship with Johnson & Johnson (NYSE: JNJ).
No doubt, the Millennium deal is fairly rich – with a valuation at 17 times revenues. Then again, Millennium is growing quickly and has a promising stable of drugs. And as for Takeda, it has two major drugs -- Prevacid and Actos – that will come off-patent in 2009 and 2011. In other words, the company has really no other option but to pay up on deals.
In today's trading, Millennium's stock price is up 49.72% to $24.48.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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