The last few weeks have been full of pharma deal news. GlaxoSmithKline ($GSK) offers $2.6 billion for Benlysta partner Human Genome Sciences ($HGSI). Roche ($RHHBY) drops its $7 billion bid for gene-sequencing specialist Illumina. Amgen ($AMGN) snaps up Turkish generics maker MN Pharma. Watson Pharmaceuticals ($WPI) announced its $5.9 billion deal for rival generics firm Actavis. Valeant Pharmaceuticals ($VRX) has announced a couple of buys, the latest in its continued M&A march.
And then there are the potential deals: Amylin Pharmaceuticals ($AMLN) is looking at its options, after turning away a bid from Bristol-Myers Squibb ($BMY). Bayer CEO Marijn Dekkers has been scouting deals for some time, and now he's rumored to be close to a multibillion-dollar buy. Incoming Johnson & Johnson ($JNJ) CEO Alex Gorsky says he's going to be looking around for buyouts. And so on.
The reasons behind the dealmaking aren't new: Established markets are slowing down as emerging markets speed up, sending companies shopping in the developing world. Generic competition has drugmakers diversifying, either by buying up generics firms to get a piece of that action, or by beefing up in consumer healthcare or eye care or animal health or a combination. Big Pharma has found R&D more and more difficult--and more and more expensive--so companies are filling out their pipelines with biotech acquisitions. And then there's the fact that companies are increasingly turning to smaller, bolt-on deals, which are easier to finance and easier to swallow--allowing for more of them--than the megamergers of a few years ago.
Targeted deals are a sign of the times, Shire ($SHPGY) CEO Angus Russell tells The Wall Street Journal. "Many of the pharmaceutical companies started producing everything in-house out of their own R&D organizations, and over time they've failed to produce enough that way. So the industry is now coalescing around a 50-50 model of half on your own and half bought in. There are some things we'll do for ourselves but we need to be constantly on the lookout for new technologies."
Russell's speaking as a buyer here, but his company is often fingered as a buyout target, too. For a couple of years now, in fact. As Forbes points out, the current frenzy of deals is just part of a long-term consolidation in the industry. Whether the deals will continue to come hard and fast--or not--they're sure to continue.
- get the WSJ piece
- see the Forbes column