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United Therapeutics reported in play

August 5, 2017

United Therapeutics (UTHR) is rumored to be considering acquisition offers.

The top contender is reportedly Foster City, Calif.-based Gilead Sciences (GILD), with Basel, Switzerland-based Novartis (NVS) and London, U.K.-based GlaxoSmithKline (GSK) also in the running.

United Therapeutics was founded by Martine Rothblatt, one of the co-founders of Sirius XM satellite radio. The company has five marketed products, four for pulmonary arterial hypertension, and the fifth for pediatric oncology.

Investors and analysts have been pushing Gilead (GILD) for several years to acquire somebody. The most recent rumors in June were that it was in talks with Tesaro (TSRO). According to those same rumors, Sanofi (SNY) was also interested, and if Pfizer (PFE) wasn’t, it should be. So far nothing has come of those rumors.

Gilead’s chief financial officer, Robin Washington, said in a statement in May that the company was “prioritizing the use of capital for investing in the long-term growth of our business, including partnerships and acquisitions.”

Anything, investors feel, to bolster its sagging hepatitis C franchise.

GSK is an interesting choice, though. Under the new leadership of Emma Walmsley, the company is undergoing significant restructuring, with plans to kill more than 30 preclinical and clinical programs and allocate 80 percent of its research-and-development budget to respiratory and HIV/infectious diseases. It will over time withdraw support for its diabetes drug Tanzeum and wrap up a collaboration with Johnson & Johnson (JNJ) over sirukumab for rheumatoid arthritis.

GSK recently decided to sell off the UK portion of its Horlicks malted milk beverage. Sales have slowed in the UK, but is still popular in India. It plans to sell off its MaxiNutrition sports drink brand. As part of its restructuring, the company has halted its plans for a biopharmaceutical manufacturing facility in Cumbria, UK. It is also reviewing the possibility of selling its antibiotics business located in Ulverston, UK. The plant makes antibiotics such as Zinnat, Zinacef, and Fortum. It also has indicated it is selling manufacturing facilities in Verona, Italy.

It also plans to cut overhead in manufacturing, and will reduce its supply base in manufacturing by 25 percent by 2020.

If it is up for sale, United would likely cost $200 per share, or around $8.7 billion, which would be consistent with most bolt-on acquisitions that range in $5 billion to $10 billion. Which is exactly what Walmsley has indicated she’s interested in, although so are other big biopharma companies that are reluctant or unable to go after megamergers.

Novartis’ chief executive officer, Joe Jimenez, as recently as June, told investors, “We don’t need a big deal. Our strategy in M&A is to do bolt-on acquisitions.”

It’s not clear how United’s products would fit into Novartis’ strategy and pipeline. And the companies have done battle in the past. In late 2014, United won a lawsuit in a patent dispute that prevented Novartis’ Sandoz unit from selling a generic version of United’s Remodulin hypertension drug.

United Therapeutics stock is currently trading for $137.82.


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