Wednesday, February 18, 2009

Pharma Fighting Hard – But will it win?

Hit by the tsunami of recessionary economy causing sales to dip and growth rates forecasted to fall below historic levels, pharma drug companies have hit the panic button and are trying out different ways in their quest to survive.

Mergers & Acquisitions

Pfizer's acquisition of Wyeth for US$68 Billion is a striking example. The company has acted to safeguard itself, owing to the plummeting revenues from it's popular drug “Lipitor” and several other products, which would soon be faced with expired patent protection.

But this is being seen as just the beginning of a whole wave of mergers to come by. Some other expected acquisitions are being speculated such as Roche buying out the remaining share of Genentech, Merck merging with Schering-Plough, a merger between Sanofi and Bristol-Myers Squibb, and more pharma industry mergers.

In fact the general expectation the big pharma companies are all set to taking over smaller player raised the hopes among small biotechnology companies worrying about their own survival soon a bigger firm would approach them with a buy out offer. However, recently panelists attending the BioPartnering North America conference, warned of harboring such an unrealistic expectation that all biotech companies in distress will be rescued. At present pharma firms have their eyes set on other pharma firms rather than biotech product companies.

Job Cuts

Pharma companies are fast reducing their workforce. The Pfizer-Wyeth deal itself if expected lead to a 15 percent reduction of staff for both the firms combined, which translates in to about 130,000 job cuts.

Other recent layoffs include King Pharmaceuticals (KG), (22%, or 760 jobs), KV Pharmaceutical Co (700 job cuts expected), GlaxoSmithKline (10,000 job cuts predicted), and more.


At the same time analysts are skeptical about some aspects of these deals. For example there's apparently no solution to declining sales outlook, as projections about Pfizer-Wyeth will have a combined 2013 total company sales below the 2008 figure of $70 billion. Some suggest that while large-scale mergers between will create cost savings and give these companies time, that won't be sufficient to reinvent pharma.

No comments: