Japanese drugmaker Takeda Pharmaceutical will buy U.S. cancer drug developer Ariad Pharmaceuticals in a $5.2 billion deal that the companies expect to close by the end of February.
Takeda will pay $24 in cash for each Ariad share, a premium of nearly 75 percent to the stock's $13.74 closing price Friday. Ariad said Monday the deal still needs regulatory approval.
Ariad shares are soaring in premarket trading.
Cambridge, Mass.-based Ariad Pharmaceuticals develops treatments for rare forms of leukemia and lung cancer.
The drugmaker drew criticism from members of Congress last fall over price hikes for the leukemia treatment Iclusig. The company raised the cost of the drug four times in 2016 to an almost $200,000 yearly cost, an increase of more than $80,000 over the last several years.
|The Takeda Pharmaceutical Co. campus stands in Cambridge, Massachusetts, U.S., on Friday, Aug. 5, 2016.Photographer: Scott Eisen/Bloomberg|
Ariad's $5.2 Billion Sale To Takeda Nets $260 Million Windfall For Hedge Fund
Takeda’s $5.2 billion takeover of Ariad Pharmaceuticals is turning into a major payday for a weighty but unheralded investor in the drug sector. Sarissa Capital, run by Carl Icahn protégé Alex Denner, stands to make $260 million on Monday’s deal.
Ariad, which sells a $199,000 a year treatment for blood clots called Iclusig, is being taken over by Takeda for $24 a share, or a 75% premium to its Friday closing price. But that eye-popping takeover premium only hints at Sarissa Capital’s Ariad payday.
In the fall of 2013 the hedge fund paid $49 million to build a 6.8% stake in Ariad at a cost of $3.81 a share. At the time, Ariad’s shares were plunging due to a decision by the Food and Drug Administration to have the company pull Iclusig from the market due to safety issues. In a handful of trading days, Ariad’s stock fell from nearly $20 to below $3.
As others fled, Denner took the plunge as an opportunity. Assuming Takeda’s $24 a share offer price, Sarissa’s Ariad holding is now worth $309 million, a gain of 531% in just over three years’ time, according to an analysis by FORBES.
Japan's Takeda to buy U.S. cancer drug maker Ariad in $5.2 billion deal
Japan's Takeda Pharmaceutical Co Ltd (4502.T) said it would buy cancer drug maker Ariad Pharmaceuticals Inc (ARIA.O) in a deal valued at $5.20 billion, to beef up its oncology pipeline.
Takeda — which in September revealed it was scouting for multi-billion dollar acquisitions to reduce its dependence on domestic sales — agreed to pay $24 for each Ariad share, a premium of about 75 percent to its Friday close. reut.rs/2chTguK
Ariad stock was up 73 percent at $23.77 in morning trading on Monday. In 2016, its shares had nearly doubled.
Takeda's top-selling blood cancer drug Velcade is expected to face generic competition this year and other key products go off patent from 2020.
Cancer drugs are appealing to large drugmakers, with high prices being paid for promising assets. San Francisco-based Medivation was bought by Pfizer Inc (PFE.N) for $14 billion in August.
Given the scarcity of commercial-stage oncology assets and significant potential synergies, other Ariad bidders could emerge, SunTrust Robinson analysts said.
In November, Reuters reported that Takeda's negotiations to acquire Valeant Pharmaceuticals International Inc's (VRX.TO) Salix stomach-drug business had stalled, citing sources.
With the Ariad deal, the Japanese drug giant gains access to the leukemia drug, Iclusig, which is expected to generate sales of $170 million-$180 million in 2016.
Ariad came under fire in October for price increases of Iclusig.
A U.S. Food and Drug Administration decision on its lung cancer treatment, brigatinib, which is being touted as a potential blockbuster, is expected by April.
Sarissa Capital Management LP, a hedge fund run by investor Carl Icahn's former healthcare lieutenant, had announced a stake in Ariad in 2013.
Sarissa will tender its shares to Takeda, if the deal goes through.
Ariad suspended Iclusig sales in 2013 after data showed it was associated with serious complications, but resumed marketing after the FDA sanctioned its use in a narrower patient population.
The equity value of the deal, which is expected to add to Takeda's earnings in 2018, is $4.66 billion, according to Reuters calculations. Takeda plans to fund the transaction by taking on $4 billion in new debt.
Evercore Partners is Takeda's financial adviser, while Cleary Gottlieb Steen & Hamilton LLP are providing legal counsel. Ariad's financial advisers include J.P. Morgan, Goldman Sachs and Lazard, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal counsel.
Takeda's last major deal was in 2011 when it paid nearly $14 billion for Swiss drugmaker Nycomed.