March 20, 2009 5:20 AM

Dealmakers of the Week: A $42.5 Billion Pharma Duo

Posted by Brian Baxter

We haven't completely forgotten about our weekly "Dealmaker" duties here at The Am Law Daily.

The column had to lie dormant for a few weeks as the market bottomed out--despite our dying medium, we remain optimists here.

But last week we saw a flurry of consolidations in the pharmaceutical industry. So we couldn't let those deals pass without stopping to acknowledge the work of two lawyers in particular.

Cooley Godward Kronish's Richard Climan and Fried, Frank, Harris, Shriver & Jacobson's David Shine nab our dealmaker honors for their respective roles advising on Gilead Sciences's $1.4 billion acquisition of CV Therapeutics and Merck's $41 billion merger with Schering-Plough.

Climan (right), the head of Cooley's M&A group, helped Gilead sidestep a hostile $1 billion bid for CV by Japan's Astellas Pharma. Cooley has served as longtime outside counsel to Foster City, Calif.-based Gilead, which only got in on the CV sweepstakes in the last few weeks.

Astellas, advised by Morrison & Foerster partners Michael Braun and Michael O'Bryan, chose not to match Gilead's offer and dropped its hostile bid for Palo Alto-based CV earlier this week.

Fried Frank's Shine (left) also enjoys a close relationship with his client, Merck--he's advised on the company's $1.1 billion acquisition of Sirna Therapeutics and its $400 million all-cash deal for GlycoFi in 2006.

Whitehouse Station, N.J.-based Merck had been looking at acquiring its Kenilworth, N.J.-based neighbor Schering-Plough for several months. But Merck needed to structure its acquisition agreement in a way that avoided triggering "change of control rights" to specific drugs. (Head over to the NYT's DealBook for the nitty gritty on the matter.)

One individual familiar with the merger calls Shine "a brilliant guy" who was instrumental in outlining the deal's framework. It's a process we could see repeated again and again over the next few months.

With Bristol-Myers Squibb and Johnson & Johnson still sitting on the sidelines, some M&A insiders expect even more pharmaceutical merger activity.

"The pharma sector is consolidating for a number of reasons," says Sullivan & Cromwell M&A partner Francis "Frank" Aquila, who was uninvolved in the Merck and Gilead transactions.

Aquila cites an overcapacity in research and development and operations coupled with the loss of patent protection for key drugs and products as the primary drivers for megamergers like Merck/Schering-Plough and Pfizer/Wyeth.

"These deals allow the combined companies to make needed cuts and reap significant synergy savings," Aquila says. "We have and will see a lot of different structures but the bottom line will be to quickly add revenue and cut costs. The massive consolidation of the pharma and health care sectors will continue unabated."

That's music to the ears of these M&A lawyers.

Additional reporting by Julie Triedman.

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