European Consolidation: Serious Competition for Big Pharma?
Merck KGAA surprised observers when it announced the €10.6 billion takeover of Europe's biggest biotech, Serono. There was more consolidation to come. That same day, the Danish pharmaceutical group Nycomed Group said it would acquire Altana Pharma for about €4.5 billion in cash. Only a couple days later, UCB SA entered the fray with the acquisition of Schwarz Pharma AG for €4.2 billion in cash and stock. Can these bulked up companies present serious competition for Big Pharma on the licensing front?
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Merck KGAA’s $13 billion acquisition of Serono in 2006 created an unwieldy pharmaceutical organization further hobbled by expensive clinical setbacks. Seven years later, driven by new leadership, it is in the midst of an overdue transformation.
In contrast to some Big Pharmas, mid-sized UCB has shifted from a diversified to a very focused business model. That means it's relying heavily on commercial success for its three newest drugs. If the new products take off, UCB could by 2012 be delivering stronger earnings growth than its more diversified peers, just as some of them begin to face the worst of their patent cliffs. But it has little room to maneuver if even one of these disappoints.
In a bold move it says will bolster its late-stage pipeline and provide necessary scale in sales and biologics manufacturing, Schering-Plough Corp. is acquiring the CNS and women's health specialist Organon BioSciences from Dutch conglomerate Akzo Nobel for $14.4 billion. For the acquisition to be a success, SP will have to find value where others have not--specifically in Organon's Phase III schizophrenia treatment asenapine, which was handed back to the company by Pfizer after disappoinging clinical results.