Boost the pipeline…

2009 has heralded in the return of high-profile big pharma acquisitions. R&D costs spiral upwards and there are relatively fewer successful products expected to reach the market. Is the answer to cut costs by merging pipelines and eliminating duplication? Big deals this year have included Pfizer acquiring Wyeth for $64.2 billion, Merck acquiring Schering Plough for $41.1 billion and Roche acquiring Genentech for $46.8 billion.

Large pharmaceutical companies are able to raise cash for acquisitions because they have strong balance sheets even in this difficult credit market and they can secure debt financing. Debt financing is being used to help complete the deals for Pfizer, $13.5 billion, and Roche, $16 billion, while Merck has $8.5 billion from committed financing from JP Morgan.

We can expect more acquisitions. Although mega deals have not always been successful, what else should big pharmaceutical companies do to boost their faltering product pipelines? The real issue lies not in the overall size of the new combined organisations but strengthening the pipelines relative to the size of the company and the success in taking big-selling products to market. Mega mergers are one answer to the problem; another is to have pipeline innovation being truly market-led and linked to rational design of therapeutic agents.

April 8, 2009 05:09 PM | Permalink