We’ve heard this one before.
Some industry analysts are pointing to Irvine-based Allergan Inc. as a midsize drug maker that could be attractive to some big companies seeking deals this year.
Allergan, which makes eye drugs and wrinkle-reducer Botox, was one of three potential targets named in a recent Wall Street Journal story.
The others were Millennium Pharmaceuticals Inc. of Cambridge, Mass., which has a drug for bone cancer, and West Chester, Pa.-based Cephalon Inc., which has four drugs awaiting approval.
Allergan declined to comment on the story.
The drug maker’s stock barely budged after the report came out. As of last week, Allergan counted a market value of nearly $10 billion.
Two big New York-based drug makers, Pfizer Inc. and Merck & Co., were named as possible acquirers of midsize companies. So was Britain’s GlaxoSmithKline PLC.
Allergan once was part of SmithKline Beecham, a precursor to GlaxoSmithKline. As a midsize player in an industry dominated by big names, Allergan often pops up in consolidation stories.
But there’s a twist this time. The big drug companies are flush with cash, the story said. And they could be looking to fill holes in their product pipelines and boost growth, it said.
Also, a one-time federal tax break that allows the repatriation of overseas profits at a 5.25% tax rate,instead of the typical 35%,could provide Big Pharma with the money it needs to do deals.
The Treasury Department isn’t going to allow companies to use the repatriated money to buy back shares or up dividends. But the department gave some guidance that acquisitions of companies with U.S. assets would be permitted. Companies expect further word from the government later this year.
In particular, Pfizer, with $52.5 billion in 2004 sales, could have as much as $38 billion from repatriated profits, along with other cash on hand.
Merck, which has been battered by a safety controversy over Vioxx, has about $14 billion in cash and investments, along with $15 billion eligible for repatriation. The company said it hasn’t decided how much money it will bring back.
As for Allergan, it continues to see strong growth for Botox.
Figures from the American Society for Aesthetic Plastic Surgery show Botox injections were the most frequently performed non-surgical cosmetic procedure in 2004. Botox, with total procedures of 2.8 million, far outstripped laser hair removal at 1.4 million.
Of the 2.8 million Botox injections performed in the U.S. last year, 2.5 million of them were performed on women. But the 311,916 Botox procedures performed on men also topped that gender’s non-surgical roster.
Tenet Unit, Health Net Settle
Tenet California, the Santa Ana-based unit of Tenet Healthcare Corp., and Health Net Inc., a Woodland Hills-based health plan, resolved payment disputes.
Health Net, which has some 147,000 enrolled members in Orange County, agreed to pay Tenet $28.5 million.
The settlement related to claims that arose prior to a two-year contract between Tenet and Health Net that began Nov. 1.
In 2003, hospitals owned by Tenet filed an arbitration demand for about $45 million in claim underpayments by Health Net of California, according to a federal filing.
Last October, Tenet amended the arbitration demand to increase the alleged underpayments to about $77 million, plus interest, fees and damages, and later said it would seek up to $120 million. Health Net then filed counterclaims seeking about $100 million.
Tenet, which is based in Dallas, recently sold four of its OC hospitals for $70 million to Integrated Healthcare Holdings Inc. Some doctors and patient advocates are critical of the deal because Dr. Kali Chaudhuri, who ran several failed medical groups earlier this decade, is involved with Integrated Healthcare.
PacifiCare’s Asian Advertising
PacifiCare Health Systems Inc. of Cypress picked AAAZa Inc. of Los Angeles to handle its $850,000 Asian American advertising account.
AAAZa is set to do general advertising and media buying for the health plan’s Asian American marketing. Plans call for radio and TV ads in Mandarin and Cantonese. The theme is set to be “Caring with devotion. Serving with commitment,” a Chinese version of PacifiCare’s “Caring is good. Doing something is better” theme.
Separately, PacifiCare’s disease management programs were highlighted on the CSPAN cable TV network earlier this month. The segment, which called disease management programs “a sensible way to control costs,” included a bit about PacifiCare saving $244 million through its existing programs to its 720,000 Medicare beneficiary members.
Bits and Pieces:
The Medical Design and Manufacturing Show, a trade show that draws some 40,000 attendees annually, signed a five-year contract with the Anaheim Convention Center. Anaheim city officials expect the deal to generate some $60 million Ista Pharmaceuticals Inc., Irvine, made financial presentations this month at Roth Capital Partners LLC’s growth stock conference at the St. Regis Monarch Beach hotel in Dana Point, and the BIO CEO and Investor conference in New York.
