Pharma will use its cash to buy while biotech is cheap
Big pharma is taking a well deserved rest from the megamerger mania that gripped the industry during the first half of 2009. Now that Roche has got Genentech, and Pfizer is getting together with Wyeth, and Merck is taking Schering-Plough, there are only about a dozen bona fide big pharmas left on the global playing field, and there just aren’t that many giant deals to be done anymore. It’s just as well, because that practice of big companies being swallowed by bigger companies is a defensive maneuver designed to absorb competition and downsize workforces. It is basic survival. Now the real work begins as pharma embarks upon its destiny which is to incorporate biotechnology into its mainstream pipeline—this time, for real.
There hasn’t been a better time in recent history for cash-rich pharmas to acquire products and companies that have been devalued in an unprecedented and sustained period of faltering confidence by institutional investors.
In more robust times mutual funds and pensions would be anxious to own pipeline-rich mid- and small-sized biotech companies, but their aversion to downside risk has put them on the defensive over the past three years.
The consensus—true or not—is that development stage products are worthless in the hands of companies that don’t have enough bottomless pockets of cash to put experimental products through to approval and to market. Nowhere is this scenario illustrated better than when Bristol-Myers Squibb struck a USD 2.4 billion deal announced on July 22 to acquire Princeton, New Jersey-based Medarex, which has an early and late stage pipeline of monoclonal antibodies that could be worth many billions of dollars per year at their peak.
All big pharmas will join in to take advantage of the fire sale in progress, but what companies will they choose? In large part it depends on their needs. If you want a hint, take a look at who their drug development partners are. In the case of Bristol-Myers, it has a late stage development project in progress with Medarex to commercialize its anti-CTLA4 monoclonal antibody Ipilimumab which is being evaluated for melanoma, prostate, lung and other cancers. When the acquisition closes, Bristol-Myers will own it all. There are other interesting scenarios that will emerge over the next year to 18 months, and the party is about to begin.
For more details on our predictions please refer to the October edition of BioPharma Dealmakers which is available in October Nature Biotechnology and November Nature Reviews Drug Discovery and to all delegates at BIO-Europe 2009.
If you would like to create a Partnering Profile in this edition, please contact Graham Combe at g.combe@nature.com
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