Market will be controlled by few and large companies
Valor Econômico 03/10/2009
The US$ 41 billion agreement of Merck & Co. (Merck Sharp & Dohme, or MSD, in Brazil) to acquire Schering-Plough Corp., announced yesterday, takes place after the agreement of Pfizer. Inc. to acquire the Wyeth by US$ 68 billion, in January, and the seven-month odyssey of Roche Holding AG, which, according to insiders, was about to close a deal for the purchase of Genentech Inc. With the merger between Roche and Genentech, evaluated in US$ 46.7 billion, and the agreement between Marck and Schering-Plough, the pharmaceutical transactions amounted to more than US$ 87 billion only in the last days. The impulse of consolidation is driven by the reality that the research and development departments of these companies are not producing profitable enough medicines in order to keep them growing, since they should lose the patent of important medicines in the next years. The result is that the giant pharmaceutical companies are seeking consolidations that can help them cut costs with the combination of research and sales departments, as well as getting rid of other redundancies. What should be left in this meantime is a sector dominated by gigantic companies, which motivates questions about the future of smaller pharmaceutical companies, as well as countless, yet smaller, companies of biotechnology which are anxious for a purchaser. Even with their R&D departments weakened, the range of products offered by the pharmaceutical companies still assures good profit margins that in turn fill the cash of these companies with resources to spend in new acquisitions. In Europe, besides the expected agreement of the Swiss Roche for the 44% of the American Genentech which it still does not control, Novartis AG had also made a commitment to buy the American producer of ophthalmologic products Alcon Inc. by US$ 39 billion. Roche informed it is not interested in other major acquisitions, whereas Novartis CEO said in January that another major acquisition for the company is "highly improbable". While the mergers and acquisitions cool down, Eli Lilly & Co., Bristol-Myers Squibb Co., AstraZeneca PLC, Sanofi-Aventis SA and Johnson & Johnson seem to be the companies with greater probability of getting involved in the next wave of consolidation, say analysts. Factors like alliances already exist, the chronogram of expiration of patent and how well these companies can absorb several acquisitions may determine who will be the purchaser and who will be sold in this process.