Hussain, who heads up F&S' pharmaceutical and biotechnology coverage team, said that the strong cash position of the drug industry, coupled with a reluctance to invest in R&D in the current economic climate and the impending loss of patent protection for blockbusters will accelerate the rate of M&A activity as companies try to survive.
He went on to suggest a range of potential deals, opining most notably that Sanofi-Aventis, which has been actively seeking to wrestle the top spot from Pfizer, may well forge a deal with Bristol-Myers Squibb (BMS) to maintain the momentum developed through the purchase of Zentiva last year.
Other potential tie-ups offered by Hussain include suggestions that: Sanofi may bid for cell culture specialist Crucell, now that Wyeth has dropped out; Eli Lilly may table an offer for Japan’s Takeda, given their collaboration on diabetes drugs; and that Johnson & Johnson (J&J) is well positioned for a run at Vertex Pharmaceuticals.
Hussain added however that growth through M&A’s was not a sustainable strategy long-term as it reduces the level of innovative R&D. He went on to describe Pfizer’s takeover of Wyeth as “a stopgap arrangement, [intended to help the firm] stay afloat during Lipitor patent expiration”.
Hussain concluded that such merger deals are “crisis management measures” designed to enhance stock prices and are perhaps an indication of wider problems within the drug industry.
Roche closes door to suitors
One firm that looks unlikely to be involved in M&A talks any time soon is Switzerland’s Roche. Earlier this week the firm announced that its majority shareholder had agreed to keep its stake in one pool for an unlimited period, protecting the firm from potential takeover.
Roche’s move follows comments by Daniel Vasella, CEO of Novartis which has a 33 per cent holding in Swiss rival Roche, that a Novartis-Roche hybrid would be a “great company”.