First floor

The summer of Big Pharma: a 260 billion risk

Mergers and acquisitions propel the pharmaceutical sector. Signal in contrast with investments in research, which continue to fall: -14% in the last year


TURIN – 08/18/2014 – THE PRESS Economy

The blaze of April, a July of record quarterly results, the interweaving of negotiations which, in recent days, has rekindled the spotlights. Big Pharma is shedding its skin, and has no intention of stopping. The latest leap is signed by Roche, which offers 10 billion dollars to buy the 40% that it does not yet control from the Japanese Chugai. Despite the usual denials, the operation, with which the Swiss giant aims to strengthen itself in Asia, could be announced this week. If it materialises, the value of deals concluded during 2014 in the pharmaceutical, bio-technological and medical sectors will fly over 260 billion dollars. A historical record, according to data from Mergermarket, double compared to the same period of 2013, but also a sign in contrast with respect to investments in research, which continue to fall: -14% in the last year. In short, the risk - analysts reason - is above all financial: just look at the numbers in the United States, where the S&P Pharmaceuticals Index, the sector index, jumped by 32.38% in one year.

The climbing season

Within three months, Roche was shopping in the US, buying Seragon Pharmaceuticals for $1.7 billion, and in Denmark, where it paid out $450 million for Santaris Pharma. However, the hyper-activism of the Swiss is small compared to the maxi-takeover bid unleashed by Pfizer, which in the spring put up to 120 billion on the plate for its rival Astrazeneca. Offer also rejected due to resistance from the British government, but the soap opera is not finished. Instead, the takeover of Allergan (a Californian company that produces botox) attempted by William Ackman, the US hedge fund magnate, has ended, and very badly. An operation whose value is estimated at 46 billion dollars which triggered the investigations of the SEC, the US stock market authority.

Between slowdowns and changes of pace, the most significant agreement is the one signed between Novartis and the British GlaxoSmithKline, which is worth 28.5 billion dollars. In detail, the big Swiss bought the oncology branch of Glaxo for 16 billion and sold him its vaccine division for 7.1 billion. An alliance was then created between the two industries with a 10.9 billion turnover in consumer products, from the painkillers Voltaren and Excedrin to Sensodyne toothpastes. For the moment, however, vaccines against the flu remain excluded from the agreement: from the Swiss group they let it be known that a different buyer will be sought "to maximize its value". Not even Bayer misses a beat, which bought Merck's over-the-counter drugs for 14.2 billion dollars.

The patent knot

Behind the wave of acquisitions there is above all the need of the groups to strengthen themselves to face the advance of generic drugs and the barrage of expiring patents. «It is better to be the leader in a specific sector, rather than in the back-up positions in various fields», is the reasoning of Johan Utterman, Swiss, manager of Lombard Odier Im.

The Italian way

Italy also participates in the grand ball of mergers. Not always with the right pace. At the beginning of August, Moody's placed the "B1" rating of Rottapharm under observation, for a possible downgrade. billion. There is also a lot of Italy behind the maxi check for 15.3 billion issued by the US Walgreen to take over the 55% of Alliance Boots, led by Stefano Pessina. The former nuclear engineer transformed the pharmaceutical business of the Naples family into the giant Alliance UniChem, which in 2006 was "married" to the English Boots.


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Fedaiisf Federazione delle Associazioni Italiane degli Informatori Scientifici del Farmaco e del Parafarmaco