We have been expecting this for the better part of four full years, now. The third of a billion dollars in cash is a nice bump -- the balance is non-cash.
And so. . . the event is finally here. The 1998 JV between AstraZeneca and Whitehouse Station is being reclaimed by AZ. All with a plethora of various payments, and deferred additional true-up possible payments -- to be made to Merck. Nice. Barely material, but nice. From the SEC Form 10-Q, filed overnight -- at page 16, then.
. . . .In April 2014, AstraZeneca notified the Company it was exercising its option to purchase Merck’s interest in KBI which will be based in part on the value of Merck’s interest in Nexium and Prilosec. AstraZeneca will make a payment to Merck upon closing (which is expected to occur on June 30, 2014) of $327 million, reflecting an estimate of the fair value of Merck’s interest in Nexium and Prilosec. This portion of the exercise price is subject to a true-up in 2018 based on actual sales from closing in 2014 to June 2018. The exercise price will also include an additional amount equal to amultiple of ten times Merck’s average 1% annual profit allocation in the partnership for the three years prior to exercise. As a result of AstraZeneca exercising its option, as of July 1, 2014 (if the closing occurs on June 30, 2014 as expected), the Company will no longer record equity income from AZLP and supply sales to AZLP will terminate. In addition, the Company will recognize a pretax gain of approximately $700 million which will be primarily non-cash. . . .
So it goes. At these prices (at about 1X annual sales) -- and with Nexium® having long since gone generic -- this is a pretty sweet deal for AZ. But it was cut long ago -- no fault to/of Merck -- at all.
5 comments:
Is "KBI" KBI Biopharma???
Hmmm. . . I can't be sure (as all of this below deeply predates my following of matters Merck, or AZ). . . but don't think so -- this KBI is from a 1998-era AZ JV. . . thus (same SEC Form 10-Q):
. . . .In 1998, Merck and Astra completed the restructuring of the ownership and operations of their existing joint venture whereby Merck acquired Astra’s interest in KBI Inc. (“KBI”) and contributed KBI’s operating assets to a new U.S. limited partnership, Astra Pharmaceuticals L.P. (the “Partnership”), in exchange for a 1% limited partner interest. Astra contributed the net assets of its wholly owned subsidiary, Astra USA, Inc., to the Partnership in exchange for a 99% general partner interest. The Partnership, renamed AstraZeneca LP (“AZLP”) upon Astra’s 1999 merger with Zeneca Group Plc, became the exclusive distributor of the products for which KBI retained rights. . . .
Was the Boulder facility arond in 1998? I have no idea.
Namaste!
The "Boulder" plant is the site of failure...perhaps it is haunted. Somatogen built the plant in 1991/2>>>>Baxter purchased in 1998>>>>Insmed purchased in 2004>>>>Merck purchased in 2009>>>>KBI Biopharma "purchased" in 2014.
The plant is the size of a pilot plant. KBI wants to make the plant a large scale commercial plant but the plant can only produce one product at a time (One Purification suite, One Refold Suite, One Fermentation Suite, and One Buffer prep room). KBI's plan to make the plant a commercial dynamo has failed so far, with the Coherus disaster and customers pulling out, and KBi is losing tens of millions a year. However, JSR, the Japanese company which owns KBI, does not care how much they lose as they believe there is a future financial bonanza in biosimilars. We could also talk about how the Japanese are buying up U.S. pharma companies such as KBI and USL.
Okay -- small world story: I greatly appreciate all of this, but at least as to the 1998 Baxter deal, I will have to fall silent. Attorney client privilege prevents me from saying more. . . . [I represented one of the parties to that deal].
That said, later today -- there will be a new graphic added to this post. Click the graphic to see it full size. There you will see my "tombstone" from that Somatogen deal. It's in a box in my office, right now.
Hilarious. And so I don't think it was Merck's JV with AZ in 1998 -- as Baxter bought it that year.
Namaste -- and thanks for the memories!
Lest I be misunderstood -- I am also asking the readership to chime in, if any of you know anything recent, about the state of the play with FDA, relative to KBI's Boulder property.
I am looking to help a friend here -- no one will be identified. Ever.
Namaste
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