Doing deals has become Big Pharma's lifeline, and that fact is more evident in 2008 than ever before. With patents on megablockbusters
falling like dominoes, and in-house R&D no match for vanishing sales, industry giants are reaching into their deep pockets
to bridge the growth gap. This has drugmakers rolling the dice on more products that are in early-stage development.
"The proportion of revenues of products sold last year from partnered products is up to half or more," says Lulu Pickering,
biotech program director at Decision Resources. "So deals are running the gamut from Phase II to pre-discovery, with a lot
of pressure going toward early-stage products, technologies, and targets."
These M&As, licensing deals, and other strategic alliances are proliferating as drugmakers try to meet a growing range of
challenges, from adding revenues or filling pipelines, to entering new markets or exiting therapeutic areas, to diversifying
or streamlining a business model.
"Given the amount of uncertainty in the industry, no company knows what will be the most successful business model. We are
seeing more experimentation, trying out more strategies—products, diagnostics, services," says Jeff Greene, partner and transaction
executive at Ernst & Young. "You need M&A to accomplish this."
Yet for a variety of reasons, pharma has put the brakes on its M&A activity this year. For the first three quarters of 2008,
the volume of M&As was $28.9 billion, a dramatic decrease from last year's total of $79.5 billion, according to Young &
Partners. Q308, at $6.2 billion, was especially slow. M&As done by biotechs are up, however: $4.2 billion for the first three
quarters, compared to last year's total, $3.97 billion. The number of deals is also on track: 16 and 21, respectively.
Says Young & Partner president Peter Young: "The need to acquire biotech companies has not slowed down because the business
logic is still strong, and Big Pharma has the cash. The slowdown in pharma acquisitions, however, comes as many companies
focus on cost-cutting and other deals—alliances, biotech acquisitions, in-licensing, and operational improvements on the ethical
pharma side. The generic consolidations and Japanese pharma's efforts to break into the US markets are the only things fueling
the current level." (See "The Top 15 Deals of 2008".)
Top 15 Deals of 2008
With that in mind, here are the highlights of the year in deals. Warning: Every deal mentioned, with the exception of Roche/Genentech,
has been agreed to by both parties, but many of them have yet to close—and some may not survive the FTC and other hurdles
GlaxoSmithKline likely set some kind of record during a recent eight-week a spree. Starting in late August, the British drug
giant inked, among other deals, a $1.5 billion collaboration with the privately owned Cellzome, whose technology is used to
identify small molecule inhibitors of specific kinase targets in inflammatory diseases; an $820 million collaboration with
Valeant to develop its Phase III epilepsy drug; a $553 million licensing deal for Affiris's experimental Alzheimer's vaccines;
a $210 million acquisition of BMS's Egyptian drug business; and a $57 million buyout of Genelabs, developer of hepatitis C
In October, after reporting third quarter earnings that beat analyst estimates, GSK CEO Andrew Witty told the Financial Times that he was reducing stock buybacks and using those savings for acquisitions. "We're not reserving capital for a rainy day
that may, or may not come," says Witty. "Opportunities are surfacing with some frequency on the small to medium scale."
And GSK isn't even the year's top shopper. According to Datamonitor, the firm was outpaced in M&A activity by both Pfizer
and Roche, and tied with Johnson & Johnson.