One word: Biotech. As if acting on some wise elder's tip-off, Pharma got its biotech groove on in 2007. The reasoning is clear. Biologic drugs are among the pharma industry's hottest performers. Pharma badly needs new blockbusters. So, hoping to pump up deflated pipelines, drug makers licensed in-development drugs or simply bought entire companies.
Some of the numbers are eye-popping. AstraZeneca shelled out $15.2 billion for MedImmune. Schering-Plough paid $14.4 billion for Organon BioSciences (FYI, that's a 37 percent premium). By comparison, the $2.65 billion Shire plunked down for New River Pharmaceuticals looks like pocket change. Then there's Merck's $1.1 billion buyout of Sirna Therapeutics; the additional $350 million for NovaCardia look like pocket change. Pfizer snapped up Coley Pharmaceutical Group for $164 million--plus it invested $50 million in biotech startups, and it launched a new bio-oriented research center in California.
Meanwhile, licensing deals are flying. Merck KGaA just made a $421 million deal with Idera for cancer therapies. AstraZeneca inked a $400 million deal with Silence Therapeutics, developer of siRNA technologies for use in respiratory diseases and cancer. GlaxoSmithKline paired up with OncoMed to the tune of $1.4 billion, hoping to turn one of its oncologic candidates into the next big thing. And many, many, many more. In fact, biotech is so big in the industry, the old chemical-based drugs are passé, to the point that career chemists are finding their places at the bench dwindling.
The big question is whether drug makers can cherry-pick enough biotech candidates to fill their new-product baskets. Is the old model of in-house R&D on its last legs? Is Big Pharma just too big to deliver real innovation? Stay tuned in 2008.
- see our report on the top five buyouts of the first half of 2007
- read about Big Pharma's love affair with biotech at CNN Money
Burrill bullish on M&As. Report
Should Pharma take the M&A cure? Report
M&A activity heats up as biotech IPOs struggle. Report