Drug companies are carefully navigating the current stretch of industry consolidation as giants merge and promising small firms seek interested buyers.
With conditional FDA clearance earlier this month, Pfizer and Wyeth merged in one of the largest corporate marriages of all time. The new organization will manage a merged portfolio of products that the FDA described as 'highly complementary.' Despite that promise, however, concerns remain about the merger's effect on issues ranging from long-term shareholder value to the retention of talented employees.
"In some ways, mega-deals like this one create more questions than answers," says Jason Richardson, president of Cutting Edge Information. "It will be years before we know how effective this merger actually was."
While the media focuses on large deals such as this one or the yet-to-close Merck/Schering-Plough merger, most acquisitions lack the flash to make major headlines. The bulk of M&A activity involves smaller organizations. The past year has been especially active for such mergers, according to "Pharmaceutical Mergers and Acquisitions," (http://www.cuttingedgeinformation.com/mergers-acquisitions/) a new report from Cutting Edge Information.
"Pressure from both sides of a deal drives the merger activity we're seeing," says Richardson. "Larger companies make acquisitions to position themselves in certain markets and to prepare for patent expirations. A lot of smaller and startup companies, meanwhile, face tremendous financial pressure as operating capital dwindles and access to funding remains tight."