London-based pharma market intelligence report publisher URCH Publishing, which itself
recently acquired pharma research firm Spectra Intelligence,
is making predictions about who among the top 10 pharmas will follow in the footsteps of the sector's three biggest deals this year, with Bristol-Myers Squibb Co. (NYSE:BMY), Bayer AG and Novartis AG (NYSE:NVS) being among some of the candidates.
So far, the industry biggies are: Pfizer Inc.'s (NYSE:PFE) $68 billion acquisition of smaller U.S. rival Wyeth; Merck & Co. (NYSE:MRK) acquiring Schering-Plough Corp. (NYSE:SGP) for $41 billion; and Roche Holding AG (SWX:ROG) buying out biotech group Genentech Inc. for $46.8 billion.
The URHC report, entitled "Mergers and Acquisitions in the Pharmaceuticals Sector, 2009 - Critical success factors for competing in a consolidating market," says the companies under most pressure to enter into a significant M&A are Eli Lilly and Co. (NYSE:LLY), GlaxoSmithKline plc (NYSE:GSK) and Japan's Takeda Pharmaceutical Co. Ltd.,
which last year bought Cambridge, Mass.-based Millennium Pharmaceuticals Inc. for nearly $9 billion.
Steve Seget, the report's author, said, "The two most likely deals appear to be the acquisitions of Bristol-Myers and Bayer. Currently the best placed acquisitors appear to be Sanofi-Aventis SA (NYSE:SNY) and Novartis, but we should not rule out Johnson & Johnson (NYSE: JNJ) or GlaxoSmithKline, if its acquisition of Allergan Inc. (NYSE:AGN) does not come to fruition." In March, Glaxo was
rumored to be planning a takeover of cosmetic drug developer Allergan.
We've been tracking healthcare dealmaking for some time, and judging by the corporate strategy of some of URCH's picks for megamerging companies, it doesn't seem likely we'll be hearing about giant deals from them. Some pharmas think the way to battle shrinking pipelines and the loss
of patent protection on blockbuster drugs isn't massive
dealmaking. Instead they're looking for smaller deals to
gain in the generic and emerging markets. Deals the size of Pfizer-Wyeth carry big risks in terms of disruption to the companies and integration difficulties.
Take Glaxo CEO Andrew Witty for example, who, at the time Pfizer and Wyeth were in talks in January, said megamergers are a
bad idea. Earlier this week, Glaxo said it was
buying the world's largest independent dermatology company, Stiefel Laboratories Inc., for up to $3.6 billion. Eli Lilly CEO John Lechleiter 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.
The likelihood of a Bristol-Myers sale has
dwindled as well. (In April, by the way, it
paid Japan's Otsuka Pharmaceutical Co. $400 million to extend a sales agreement for schizophrenia drug Abilify.) Bayer hasn't been sold, but in March biotech Genzyme Corp. said it was
buying commercialization rights to a Bayer drug portfolio in a deal potentially worth more than $1.25 billion over the next decade.
As for Novartis, in February the Swiss pharma did
raise $5 billion through five- and 10-year bond offerings.
Paris' Sanofi seems to be keen for deals, though not necessarily for a megamerger. It's been on a
streak of acquisitions in emerging markets, spending billions of dollars to boost its generics business among other places it feels it needs a bolt-on. The Wall Street Journal says Sanofi is
taking a hard look at deals in China as well. -
Baz HiralalSee the URCH press release
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