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Barry Cohen
Barry Cohen
Articles (172) 

Bayer and Teva Double Down on Worst M&A Deals of Decade

The companies both hit the dubious roster twice, but are joined by many of the biggest names in the drug industry

In a late October article, Bayer (XTER:BAYN) was credited with making one of the worst corporate deals ever with its acquisition of Monsanto. Now, FierceBiotech has published a list of the worst 15 corporate buys over the past 10 years, with Bayer and Teva (NYSE:TEVA) cited twice.

Biopharma companies have spent hundreds of billions of dollars on mergers and acquisitions over the last decade that changed the face of the drug industry and resulted in large layoffs, facilities being shut down, research and development  programs being stopped and (for some companies) a burdensome pile of debt.

That’s not to say all deals were bad. For example, Gilead Science’s (NASDAQ:GILD) purchase of Pharmasset in 2011 gave it hepatitis drugs that successfully treated patients. The downside of that deal was the Pharmasset products cannibalized part of Gilead’s own hepatitis business.

The reasons the 15 deals listed in the article didn’t work out included failed product launches and legal problems.

Bayer’s other big swing and miss was the 2014 acquisition of Merck’s (NYSE:MRK) consumer health business for more than $14 billion. At the time the papers were signed, the deal appeared to be a winner. Bayer was looking for a business much less risky than drugs, but the franchise failed to meet its quest for stability. Four years post-deal, Bayer jettisoned two of the brands that were supposed to be the crown jewels of the franchise—Dr. Scholl’s and Coppertone.

Bayer can take some consolation in that it wasn’t the only company that whiffed on a consumer acquisition. Novartis (NYSE:NVS), Merck KGaA, Bristol-Myers Squibb (NYSE:BMY) and Pfizer (NYSE:PFE) each sold off all or pieces of their consumer businesses in 2018. Meanwhile, GlaxoSmithKline (NYSE:GSK) gained control of a former Novartis consumer joint venture, then formed another one with Pfizer, aiming to prep it for spinoff in three years.

On Teva’s misplays, one was large and one much smaller. The former was the Israeli company’s more than $40 million agreement to buy Allergan’s generic drug business in 2015. Touted as a transformative move by Teva’s CEO at the time, the deal may rank as one of the worst of all time. After acquiring the business, Teva was blindsided by intense scrutiny of the generic drug industry and a deep drop in pricing.

The company has had other issues, but it’s no coincidence that since the deal was announced, Teva shares are down 80% to $10.26. As noted in a November 19 GuruFocus article, Teva was listed among 31 companies likely to file bankruptcy in the next year.

Following is a complete list of the biggest merger and acquisition blunders of the past decade:

• Bayer/Monsanto

• Teva/Allergan generics

• Shire (LSE:SHP)/Baxalta

• Johnson & Johnson (JNJ)/Actelion

• Bayer/Merck consumer health

• Gilead Sciences (NASDAQ:GILD)/Kite

• Sanofi (SNY)/Bioverativ

• Amgen (AMGN)/Onyx

• AbbVie (ABBV)/Stemcentrx

• Merck/Cubist

• Alexion (ALXN)/Synageva

• Mallinckrodt (MNK)/Questcor

• Teva/Rimsa

• Allergan/Kythera

• Valeant/Sprout Pharmaceuticals

Disclosure: The author has positions in Teva, Gilead, Johnson & Johnson and Amgen.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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