Eli Lilly & Co. (NYSE:LLY) CEO John Lechleiter (pictured) wants to stop the mega-merger madness. He told the Financial Times the recent big
drug mergers are "driven more by weakness" and are short-term fixes that fail to address long-term productivity problems. He specifically rejected the idea of a combo with Bristol-Myers Squibb Co., which many pundits think is the next big drug firm to seek a merger.
Instead, Lechleiter said he's focused on improving Lilly's internal development and making smaller-scale buyouts. Last fall, the firm swooped in with $6.5 billion to outbid Bristol for ImClone Systems Inc., a biotech with one cancer drug on the market.
For years Lilly has resisted the siren call of mega-mergers, but it's wise to take any ultimatums with a timed-release gel capsule of salt. After all, Pfizer CEO Jeffrey Kindler swore off huge deals last year, calling Pfizer's previous attempts
"extremely disruptive" moves that "impacted R&D productivity."
Lechleiter's not the only drug CEO to pooh-pooh the trend. Earlier this month GlaxoSmithKline plc's Andrew Witty talked about
diversification, not consolidation, and Novartis AG chief Daniel Vasella also just said no. (Though he's not completely against flashing big bucks -- Novartis last year spent $10 billion for a 25% stake in eye-care firm Alcon Inc. with an option to buy the remaining portion for up to $28 billion.)
As a backdrop to Lechleiter's comments, Lilly revealed Sunday at a schizophrenia conference that its next-generation experimental schizophrenia drug, code-named mGlu2/3, hit an
unanticipated snag in Phase 2 clinical trials, in which it performed no better than a placebo.
Because of the unusually high response to the placebo, Lilly said it would re-test the drug. Lilly's best-selling schizophrenia treatment Zyprexa loses patent protection in 2011. -
Alex Lash
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Juergen Lasowski
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Companies are finding value in all sizes of deals. Pfizer's Kindler calls attempts at hugh deals "disruptive." This may be due to the fact that Pfizer was not set up for a deal of that scale. Lechleiter is taking a different approach to looking for value and adding it to Eli. Which ever approach CEOs want to take, a good game plan is needed to execute and integrate to achieve to most value possible in an M&A transaction.
Thomas Bowen
www.tx2systems.com