Hassan: in the pharmaceutical sector, difficulties are relaunching concentrations "Sector stocks were once considered defensive: not anymore, especially for players focused on ethics"
by Stefano Carrer
The pharmaceutical industry is heading towards "the most difficult period in its history": discovering and introducing new products is increasingly problematic, downward pressures on prices are generalized and the challenges to the "sacredness" and duration of patents are multiplying. Even if there are factors of support – from the aging of the population in advanced countries to the growing demand for health care of the expanding middle classes in emerging countries – the harshness of the market situation will favor a further phase of consolidation of the sector, which will concern, more than mega-mergers, the takeover of medium-sized companies by larger companies.
This is the vision of Fred Hassan, president of the International Federation of Pharmaceutical Manufacturers & Associations (Ifpma) and number one of the American group Schering-Plough. Born in Pakistan 62 years ago, studied in London and Harvard, considered by many to be the best top manager in the pill industry, Hassan is a veteran of mergers: he accompanied the merger of Ahp with Cyanamid and piloted those of Pharmacia & Upjohn with Monsanto and then with Pfizer. So much so that he left bad moods in our area, as it was he who put an end to the dream of a global pharmaceutical company based on three pillars, one of which is in Italy: Hassan in fact shifted the corporate focus of Pharmacia & Upjohn (heir among other things of Farmitalia-Carlo Erba) from the Sweden-Italy axis to the USA.
He arrived at Schering-Plough as CEO in 2003, in a moment of crisis – immediately cutting everyone's bonuses, even his own two million dollar one – and launched a recovery plan over 6-8 years. Hassan has just given proof of what he claims, with the acquisition of the Dutch Organon Biosciences for about 11 billion euros. This week he chose Rome to bring together the international managers of the two companies and start the integration process. Post-merger, Hassan now leads a group of over 50,000 employees, of which more than 1,200 in Italy, with two factories (one near Lodi and one in Aprilia), plus a research center at San Raffaele in Milan.
Is the time of pharmaceutical mega-mergers over? Yet from time to time market rumors are not lacking.
I'm not saying that one or two more can't happen, but in the US and Great Britain they have already happened, while it has become more difficult to convince investors that they create sustainable value over time, beyond immediate cost savings. I see more probable acquisitions of medium-sized companies, which strengthen the larger ones.
On the model of what you did with Organon, convincing the parent company Akzo Nobel at the last moment to sell the subsidiary rather than proceed with an IPO…
For us it is an important strategic opportunity. The bottom line is that we not only capture revenue, but we gain strength in R&D, product pipeline, animal health, geographic footprint, and new therapeutic areas.
Is it the lower productivity of internal research that forces large companies to acquire pipelines, to diversify and to cut costs?
With this operation we combine two strengths, not two weaknesses. There will be personnel cuts in individual countries, especially to avoid duplicate functions, but the perspective is that of growth. It is a fact that the general context has changed: the Vioxx case (the Merck drug they discovered
