Mergers and acquisitions

The majority of experts in the pharmaceutical industry agree that the era of blockbuster drugs is over or at least coming to an end. Many pharmaceutical companies enjoyed a flood of revenue while patents lasted, but with the largest blockbuster drug Lipitor becoming available as a generic at the end of 2011, the landscape for Pharma companies will continue to change, unless something drastic happens in research and development in the next few years. For example, a blockbuster drug to tackle obesity would send profits off the charts, or a blockbuster to cure cancer, or HIV/AIDs. In 2012, Plavix, Seroquel, Singulair, Actos, Lexapro, Advair and Diovan are all expected to come off patent. In total US sales, these drugs are worth over USD 24 billion a year.

Some would describe the pharmaceutical industry as beleaguered, suffering as it is at the moment from declining R&D productivity, patent expirations and the global financial situation driving down costs and profits. One response to this has been an increase in mergers and acquisitions to consolidate research pipelines, create a more efficient and cost-effective business and expand their global activities. Recent mergers include Pfizer-Wyeth and Merck & Co with Schering-Plough. It is interesting to note when looking at drug approvals from the early to mid-1990s, many of those companies no longer exist, having been merged with or acquired by another pharmaceutical company. The latest trend seems to be the acquisition of biotech companies. In 2009, Roche acquired Genentech while in 2011, Sanofi acquired Genzyme and Teva acquired Cephalon. While Roche bore the majority of job cuts post-merger, Genentech employees were promoted to key positions and their research structure was adopted across the company. Sanofi has announced plans to save USD 170 million in annual costs for operations, but it appears that not all of this will be made through cutting costs at Genzyme, as many cuts will be outside of Genzyme’s old headquarters.

This editorial is taken from Issue 1 2012 of European Pharmaceutical Review.