Burrill: A useless 10 years of pharma M&A

Big Pharma's megamergers have come in for plenty of debate. But question pharma M&A altogether? That's what Steven Burrill says in his company's latest report on the industry. The noted life sciences investment firm says drugmakers' dealmaking over the past 10 years has utterly and completely failed to build value in the industry. In fact, Burrill says, Big Pharma has actually lost almost $1 trillion in value during the past decade.

Here's Burrill's math: The drug industry's 17 most active buyers had a combined market value of $1.57 trillion at the end of 2000. By the end of 2010, that value had shrunk to $1.04 trillion--notwithstanding the $425 billion in acquisitions these companies made during the decade. (Burrill excludes Johnson & Johnson, which, as a conglomerate, is a different beast.) Total loss: $955 billion.

In Burrill's estimation, major drugmakers tried to build themselves up via dealmaking, but it was like pouring water into a leaky bucket. Big Pharma wasn't delivering innovative products, and acquisitions couldn't make up for that. And now, drugmakers are watching their biggest products fall over the patent cliff and scrambling to replace the lost sales.

Needless to say, Burrill is less than sympathetic. "The loss of revenue the leading pharmaceutical companies are looking at over the next several years does not just reflect the impact of competition from generic drugs, but also the failure of Big Pharma's research and development to generate innovative products to replace those going off patent," Burrill said in a statement. "If the industry is to return to the type of growth it once enjoyed, it must innovate its way out of its current predicament."

- read the Burrill & Co. release
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