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M&A in pharma

Explores the merits of mega-deal in contrast to a more measured portfolio growth strategy

"2009 is set to redefine the structure and dynamics of the pharmaceutical industry in a way not seen since the year 2000"

Background

On 26th January 2009, Pfizer announced plans to acquire Wyeth for $68 billion. Pfizer’s CEO, Jeffrey B Kindler, insisted the deal would be different from the company’s earlier mega-deals involving the acquisitions of Pharmacia (2002) and Warner-Lambert (2000) – the acquisition of Wyeth would provide a broad and diversified portfolio, rather than been focused on a single product or cost-cutting. Pfizer’s strategy of growing its portfolio through a mega M&A deals follows the 2008 acquisitions of Millennium by Takeda and ImClone by Eli Lilly.

These major deals are likely to result in two alternative industry responses:

• a wave of consolidation involving further mega-deals;

• the emergence of independent players that continue to build their portfolios through internal development, licensing and smaller scale acquisitions.

Leading pharmaceutical and biotechnology companies must decide how best to respond Pfizer’s proposition that ‘size matters’. Those that choose to consolidate will have to identify the best prospects, consolidate portfolios and execute synergy cost savings. Those that choose not to embark down the mega-deal path will still have to adapt to a more consolidated world in which broad, diverse portfolios and an efficient cost base or a minimum requirement to compete.

Report Purpose

Mergers and Acquisitions in the Pharmaceuticals Sector, 2009 - Critical success factors for competing in a consolidating market from URCH Publishing, explores the merits of the mega-deal in contrast to a more measured portfolio growth strategy and highlights the key opportunities and challenges presented by both business models. A detailed assessment of recent deals will identify the key issues and success factors, while the future M&A strategies of the leading pharmaceutical and biotechnology companies will also be assessed. Finally, the impact of consolidation in the industry will evaluated both at the organizational and therapeutic market level. All companies, big and small will be affected by the shake-up. This report will help to understand the key opportunities and challenges that lie ahead in order to formulate a robust response to a changing competitive landscape.

Some key findings from the report

• Significant industry consolidation will lead to a fundamental shift in the market dynamics across all major product categories.
• Since the beginning of 2006 a total of seven deals have been agreed with total transaction fees in excess of US$10 billion.
• It appears likely that the mega-M&A wave started by the 3 deals in Q109 is not yet finished.
• A handful of major players will follow in the footsteps of Pfizer and enter into major M&A transactions involving a significant step change in market shares and industry consolidation.

Reasons to buy this report

• Understand the M&A environment in the pharmaceuticals industry.
• Be informed about likely mergers and analyse companies that could be acquired in the near future
• Assess the success factors that underlie a successful acquisition and review those which have delivered long-term shareholder value.
• Draw on advice to manage your company to compete in an increasingly consolidated marketplace.
• Gain insight into how drug portfolios are managed in an M&A situation and best value is extracted.

Summary
Pfizer's acquisition of Wyeth changes the game
A case of history repeating
Recent M&A trends
The future M&A landscape
Competing in a consolidated market

Chapter 1. Pfizer's acquisition of Wyeth changes the game
Introduction
Pfizer breaks away from the pack
Further consolidation is inevitable
Competing in a new world

Chapter 2. A case of history repeating
21st century consolidation
Major pharmaceutical M&A deals
Degree of success and failure

Chapter 3 Recent M&A trends
Recent M&A deals
Key deal characteristics
Critical success factors

Chapter 4. The future M&A landscape
Mega-M&A growth strategy
Incremental growth strategy
Leading pharmaceutical company growth strategies

Summary of future M&A activity

Chapter 5 Competing in a consolidated market
Managing disruption
Delivering scale and scope
Balancing scale with focus
Critical success factors
Choose a path…
Execute a strategy…
Adapt to changes…
Appendices
Data sources
Key M&A deals
Leading pharmaceutical companies
Leading company profiles

Figures

Figure 1: Competing in a post Pfizer/Wyeth world
Figure 2: 21st century M&A trends
Figure 3: Relative success of M&A versus non-M&A growth strategies
Figure 4: Bayer's acquisition of Schering AG, July 2006
Figure 5: Merck KGaA's acquisition of Serono, September 2006
Figure 6: Nycomed's acquisition of Altana Pharma, September 2006
Figure 7: UCB's acquisition of Schwarz Pharma, September 2006
Figure 8: Mitsubishi's merger with Tanabe, February 2007
Figure 9: Schering-Plough's acquisition of Organon, March 2007
Figure 10: AstraZeneca's acquisition of MedImmune, April 2007
Figure 11: Mylan's acquisition of Merck Serono's generics unit, May 2007
Figure 12: Eisai's acquisition of MGI Pharma, December 2007
Figure 13: Takeda's acquisition of Millennium, April 2008
Figure 14: Teva's acquisition of Barr Labs, July 2008
Figure 15: Eli Lilly's acquisition of ImClone, October 2008
Figure 16: Daiichi-Sankyo's acquisition of controlling interest in Ranbaxy, November 2008
Figure 17: Pfizer's acquisition of Wyeth, January 2009
Figure 18: Merck's acquisition of Schering-Plough, March 2009
Figure 19: Roche's acquisition of remaining interest in Genentech, March 2009
Figure 20: Mega-M&A growth strategy
Figure 21: Incremental growth strategy
Figure 22: The M&A lifecycle
Figure 23: Delivering growth while minimizing risk
Figure 24: Pfizer: Integrated M&A and portfolio management
Figure 25: Protecting innovation and flexibility
Figure 26: Johnson & Johnson: Umbrella M&A and independent responsibility
Figure 27: Critical success factors in a consolidating market

Tables

Table 1: Top 10 pharmaceutical companies market share, 1999-2008
Table 2: The class of 1999
Table 3: Leading pharmaceutical M&A deals, 2000-2009
Table 4: Key performance indicators for M&A companies, 2007-08
Table 5: Key performance indicators for non-M&A companies, 2007-08
Table 6: Leading pharmaceutical M&A deals, 2006-2009
Table 7: Key performance indicators for Bayer's acquisition of Schering AG
Table 8: Key performance indicators for Merck KGaA's acquisition of Serono
Table 9: Key performance indicators for Mitsubishi's merger with Tanabe
Table 10: Key performance indicators for Schering-Plough's acquisition of Organon
Table 11: Key performance indicators for AstraZeneca's acquisition of MedImmune
Table 12: Key performance indicators for Mylan's acquisition of Merck Serono's generics division
Table 13: Top 20 pharmaceutical companies, 2008
Table 14: Pfizer's future growth strategy
Table 15: Sanofi-Aventis' future growth strategy
Table 16: GlaxoSmithKline's future growth strategy
Table 17: Novartis' future growth strategy
Table 18: AstraZeneca's future growth strategy
Table 19: Johnson & Johnson's future growth strategy
Table 20: Merck's future growth strategy
Table 21: Eli Lilly's future growth strategy
Table 22: Roche's future growth strategy
Table 23: Wyeth's future growth strategy
Table 24: Bristol-Myers Squibb's future growth strategy
Table 25: Abbott Labs' future growth strategy
Table 26: Bayer's future growth strategy
Table 27: Amgen's future growth strategy
Table 28: Schering-Plough's future growth strategy
Table 29: Boehringer Ingelheim's future growth strategy
Table 30: Takeda's future growth strategy
Table 31: Genentech's future growth strategy
Table 32: Teva's future growth strategy
Table 33: Novo Nordisk's future growth strategy
Table 34: Key M&A deals, 2000-09
Table 35: Top 50 pharmaceutical companies, 1999
Table36: Top 50 pharmaceutical companies, 1999 (continued)
Table 37: Top 20 pharmaceutical companies, 2008
Table 38: Pfizer: detailed company profile, 2008
Table 39: Sanofi-Aventis: detailed company profile, 2008
Table 40: GlaxoSmithKline: detailed company profile, 2008
Table 41: Novartis: detailed company profile, 2008
Table 42: AstraZeneca: detailed company profile, 2008
Table 43: Johnson & Johnson: detailed company profile, 2008
Table 44: Merck: detailed company profile, 2008
Table 45: Eli Lilly: detailed company profile, 2008
Table 46: Roche: detailed company profile, 2008
Table 47: Wyeth: detailed company profile, 2008
Table 48: Bristol-Myers Squibb: detailed company profile, 2008
Table 49: Abbott Labs: detailed company profile, 2008
Table 50: Bayer: detailed company profile, 2008
Table 51: Amgen: detailed company profile, 2008
Table 52: Schering-Plough: detailed company profile, 2008
Table 53: Boehringer Ingelheim: detailed company profile, 2008
Table 54: Takeda: detailed company profile, 2008
Table 55: Genentech: detailed company profile, 2008
Table 56: Teva: detailed company profile, 2008
Table 57: Novo Nordisk: detailed company profile, 2008