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International Clinical Trials
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Back in November 2015, a record $160 billion merger between Pfizer and
Allergan was announced. Unlike many previous company mergers, the
primary motivation for this particular transaction appears to have been
financial, rather than commercial. It is understood that the plan was to
move the headquarters of the merged businesses to Ireland, where
corporation taxes would have been significantly lower than in the US,
and allow the company to ‘repatriate’ billions of dollars of offshore
funds. Recent legislation passed by the US Congress seems to have dealt a
significant blow to this financial engineering – to such an extent that
the merger has been called off.
In 1990, the number one ranked
organisation in the pharma industry was Merck & Co, followed by
Bristol-Myers Squibb and other companies, as listed in Table 1 (see full
PDF).
By 2000, mergers had changed the ranking list quite
significantly, as you can see from Table 2 (see full PDF), and the
latest listing that I have been able to find is shown in Table 3 (see
full PDF).
The extent of mergers and acquisitions (M&A) in
pharma can be judged by the fact that, of the top 10 companies in 1990,
only three now rank in the top 10. The other organisations have
generally been acquired or merged, while several new companies have
surfaced – including Gilead Sciences and Takeda. The motivation for
acquisitions in the past seems to have been for businesses to move into
therapeutic areas in which they were weak, or into new geographical
regions.
Many of these acquisitions, of course, have been
followed by disposals of less profitable divisions of the merged company
such as consumer products, vaccines or generics and, in some cases,
even creating spin-off CROs based on part of the R&D of the merged
company – which was regarded as being superfluous to the needs of the
company going forward. Some of these spun-off CROs have, in turn, been
acquired or merged with some of the major contract houses.
All
this M&A activity and the considerable re-alignment of the industry
prompts a few questions: has it been profitable for the stakeholders in
global healthcare? Are more drugs being developed at a faster rate? Is
the average price of healthcare diminishing, or increasing? The record
of the pharma industry over the past 25 years has been at best patchy in
terms of new chemical entities being developed on a year-on-year basis.
Looking at the figures for the registration of new drugs, one
would doubt whether M&A activity has had any major positive effect
on these numbers. It seems unlikely that bigger is better and faster is
appropriate. The same is probably also true for speed of development.
The development time for a new drug has stuck at around the 11-year time
period from discovery to first marketing, and shows little prospect of
improving. Has the cost of healthcare – the drug’s budget – gone up or
down, you may well ask? Certainly, as drugs have come off patent, the
price of these has, in many cases, dropped like a stone. But as I have
mentioned in previous End Points, the cost of new drugs – especially
those derived from biotechnology – seems to be rising dramatically.
All
this would suggest that M&A has produced little benefit for
consumers, but may well have delivered significant benefits for
shareholders, if not the stakeholders in healthcare. Now that financial
engineering routes – such as those sought by Pfizer and Allergan – seem
to be closing down, perhaps the incentive to merge companies may
dissolve and the industry can enter a period of relative calm.
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