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2009 is the era of pharma merger mania
 
 
  16 June 2009 pharmatimes
 
The first half of 2009 has already seen four mega merger/acquisitions as patent expiry of blockbuster molecules, regulatory hurdles, generics competition and a low R&D productivity lead to lower stock valuations stock - a situation exacerbated by the current economic climate.
 
Large pharmaceutical companies with strong drug development pipelines and low exposure to patent expiries are the most attractive M&A targets, says a new report from analysts Frost & Sullivan. For instance, Schering-Plough had about 18 drugs in Phase III and relative low exposure to patent expiries, which were the key reasons for its acquisition by Merck & Co.
 
Future, large-sized M&A deals may be driven by BMS, AstraZeneca, Sanofi-Aventis, GSK, Novartis and J&J due to their strong cash positions, further consolidating the industry, they say.
 
However, the real intention behind these mergers remains a question as past mergers have not yielded substantial value additions in terms of R&D productivity. Also, these mega M&As invariably lead to further M&A activities, since some non core units would need to be divested.
 
Greater bargaining power
One clear outcome of the rapid consolidation of the pharmaceutical industry would be the augmented bargaining power of big pharma vis-a-vis payors and the government, say the analysts. But further strengthening of the big pharma cartel may not necessarily provide benefits to the patients.
 
Another notable trend is the steady shift of big pharma towards biotech and from a small-molecule based blockbuster model to a biologics based blockbuster, for example Rituxan, Avastin and Enbrel. Having realised the tremendous opportunity in biologics especially in high growth therapeutics like oncology, auto-immune, CNS, etc, there has been a surge in M&A activities in the pharma-biotech space. Also, manufacturing and commercialisation of biosimilars is challenging compared to small molecule generic drugs, which ensures a lower generics threat for biologics.
 
Big pharma to 'big biopharm'
So a shift from 'big pharma' to 'big biopharma' is evident, and emphasized by a plethora of recent acquisitions, such as Scios by Johnson & Johnson, Serenex & CovX by Pfizer, Domantis by GSK, and NovaCardia, Abmaxis, GlycoFi & Sirna Therapeutics by Merck & Co.
 
Indeed, past partnerships & alliances with biotech companies are being cemented through outright acquisitions by big pharma, notes F&S, adding that biotech companies with existing alliances and licensing deals could be key acquisition targets.
 
Furthermore, a substantial number of biotech/biotech M&A deals are expected both because of the possible entry of biogenerics/biosimilars in the next few years as well as the need to expand their existing product lines to remain competitive. The recent acquisition of CV Therapeutics by Gilead Sciences for $1.40 billion displays the appetite for mega M&As by large biotech firms. However, there is a high possibility for large biotech companies like Gilead Sciences, Biogen-Idec, Celgene, Genzyme, in turn, becoming potential targets for big pharma.
 
The pharma industry should seize this opportunity to acquire more small and medium sized biotech companies rather than focusing on high profile mega M&As, stresses F&S. This would save not only the struggling biotech industry but also the pharmaceutical industry in the long run.
 
M&A Trends in Pharma-Biotech: An Analysis of a Business Model
 
 
 
 
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