As we have noted since the Central Banksters started to rapidly raise interest rates, the decade’s long merger and acquisition spree is over. However, the “Bigs” keep getting bigger, as they buy out overleveraged companies that can’t afford to borrow at high rates to refinance and gobble up those they want to gain broader market share and/or eliminate the competition. All the “Bigs” with big money want is to get bigger, and they will do what they can to buy out competitors and/or expand in new directions.

ROCHE BUYS TELAVANT IN LATEST BIG PHARMA DEAL

Pharma giant Roche has agreed to pay about $7.25 billion for Telavant Therapeutics, a start-up developing treatments for bowel diseases.

The deal will give Roche rights to Telavant’s RVT-3101 drug now beginning a late-stage clinical trial to treat inflammatory bowel disease, which affects about eight million people worldwide, the company said.

The drug has “transformational potential,” Roche CEO Thomas Schinecker said in a statement announcing the purchase, and could produce revenue of $15 billion annually.

Under the deal’s terms, Roche will pay $7.1 billion now to Pfizer and Roivant Sciences, Telavant’s joint owners. Roche will make a milestone payment of $150 million later. Pfizer will keep rights to distribute the new drug everywhere except in the U.S. and Japan.

Big pharma companies have been on a buying spree recently as patents expire on top-selling drugs. 

Companies are using their cash and stock to buy development-stage drugs with large market potential instead of waiting years to develop and test their own from scratch, as we noted in “Biotech M&As Make a Comeback” (15 Aug 2023).

In July, Eli Lilly paid more than $1.9 billion to own Versanis Bio, which is developing an anti-obesity drug.

Merck bought Prometheus Biosciences for $10.8 billion in cash in April. Prometheus develops drugs for autoimmune conditions. 

Merck is buying start-ups with an aim to replace revenues from Keytruda, its best-selling cancer drug that generated $20 billion in sales last year and will lose patent protection later this decade.

EXXONMOBIL PATROLLING FOR MORE ACQUISITIONS

After snapping up Pioneer Natural Resources (“ExxonMobil Buys Major Shale Producer for $59.5 Billion in Stock” 17 Oct 2023), a major shale oil producer earlier this month, for $59.5 billion in stock, ExxonMobil has let it be known it still is shopping for more takeover targets.

“We’re always looking,” CFO Kathy Mikells told the Financial Times. “I’ve described us as very inquisitive but also very picky. A deal has got to be ‘one plus one equals three’.”

Buying Prairie is an example.

The deal gave ExxonMobil another 850,000 acres in the high-return Permian Basin oilpatch, which spans the border between New Mexico and Texas, bringing the company’s holdings there to more than 1.4 million acres.

The new, bigger ExxonMobil will own about 16 billion barrels of oil equivalent in the Permian and will double its production to 1.3 million barrels a day, rising to as much as two million by 2027, depending on the oil market’s strength.

The strategy of piling up more oil reserves seems contrary to forecasts by China, the International Energy Agency, and others that oil demand will peak before 2030.

The company acknowledges that outlook. “We’re in a depletion business with” exploration and production, Mikells acknowledged. Buying Pioneer “puts us in a good position for the long term,” she said.

By buying proven reserves, a company can stockpile oil without making capital investments in drilling for new deposits, which is often a hit-and-miss proposition.

Other oil majors are expected to hew to the same strategy, leading to a wave of consolidation in the industry, analysts told the FT.

Earlier this month, Chevron bought Hess Corp., a deal we reported in “Chevron Grabs Hess for $53 Billion in Stock” (24 Oct 2023). When asked by The Wall Street Journal, Chevron refused to comment on possible future purchases.