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Issue 6
22nd
March 2010
C&I Magazine
Pharma tackles pipelines
Emma Dorey,
22/03/2010
Merger and acquisition activity
continues apace in the bioscience
sector as the threat of generics and
dwindling pipelines leads larger
pharmaceuticals to seek out ailing
biotech companies to provide them
with new drug options.
The German pharmaceutical
and chemical company Merck, for
example, is set to acquire life science
firm Millipore in a deal valued at
€5.3bn. Japanese pharmaceutical
company Astellas Pharma has
launched a $3.5bn hostile takeover
bid of OSI Pharmaceuticals. And
drug giant Pfizer is thought to be
keen to get its hands on generic firm
Ratiopharm.
‘Because the pharmaceutical
industry has continued to
outperform other sectors during the
period of global recession, there
has not been a notable decline in
the number of M&A events,’ says
Datamonitor analyst Simon King.
‘Furthermore, the financial climate
has improved the ability of Big
Pharma players to acquire smaller
biotechs who have suffered in terms
of investment.’
In the face of patent expiries
and the threat to profits from
generics, large and medium-sized
pharmaceutical firms are expected
to continue merging with and
acquiring biotech companies in an
effort to end their reliance on small
molecules.
However, King says the need
for companies to diversify their
activities, such as increased
investment in emerging markets,
and over-the-counter and generic
drugs, is perhaps making them
pickier.
Indeed, acquiring Millipore
would transform Merck, giving it a
significant presence in life sciences.
The combination ‘will allow us to
cover the entire value chain for our
pharma and biopharma customers,
offering integrated solutions beyond
chemicals,’ said Karl-Ludwig Kley,
chair of Merck’s executive board.
Meanwhile, Ratiopharm would
bring biosimilars to Pfizer, helping
it to deal with patent expiries. And
Astellas, for which sales of its key
product, anti-rejection drug Prograf,
are expected to decline, would gain
more cancer drugs by acquiring OSI.
In fact Astellas has offered to pay
$52/share of OSI – a premium of
53% on the company’s three-month
average – and has filed a lawsuit to
protect the hostile bid.
‘Monoclonal antibodies in
particular remain a key area of
interest and investment given that
this technology is now proven from
a commercial perspective, but also
retains the potential for sales growth
linked to new market opportunities,’
says King. Abbott, for example,
recently agreed to acquire Facet
Biotech in a $450m deal that gives
Abbott access to biologics, including
a monoclonal antibody for multiple
sclerosis. The acquisition builds on
earlier success that Abbott has had in
the antibodies market via its purchase
of Knoll from BASF, says King.
Krishan Maggon, an independent
R&D consultant in Geneva,
Switzerland, says the two hottest
areas for M&A deals over $1bn are
monoclonal antibodies and vaccines
– two sectors in which he expects to
see more M&A activity.
Meanwhile, King says there
is a race to demonstrate which
technologies will emerge as the
next conduit for drug development
that is commercially successful.
‘A number of companies, such
as Roche and Merck & Co, have
invested significantly in RNAi – often
touted as the next breakthrough
technology,’ he says.