Use Acquisitions Strategically—Not for Scale
Perhaps the biggest change at Bayer in Higgins' tenure is the acquisition of Schering AG, a $20 billion deal—the largest in
Bayer's history—which was approved by Schering's stockholders last month.
The deal was one Bayer had in mind for a number of years, Higgins explains. The main attraction was Schering's success in
specialty drugs. "There are very few companies that had a higher percentage of their business coming from specialty," he says.
"Most companies of that size are primarily driven by primary care products. That wasn't the case with Schering. If people
were to look at companies with revenue between three and six billion—a number where Bayer could consider making an acquisition—Schering
was far and away the best opportunity available."
Schering brings to the prospective Bayer-Schering Pharma its strengths in gynecology and andrology (its Yasmin is the
top selling birth control pill), oncology, diagnostic imaging, and multiple sclerosis (led by its best-selling product, Betaferon/Betaseron
"We were looking for a company that would significantly improve the percentage of our business coming from specialty pharmaceuticals,"
says Higgins. "With this transactions we will have over 70 percent of our revenues coming from specialty products, which is
one of the highest percentages in the industry. The combined company will have nine specialty products with annual sales of
over $200 million, and those products last year grew at a very impressive 20 percent, when the pharmaceutical industry as
a whole was growing at 7 to 8 percent. We have put in place a strong foundation for building one of the world's premiere specialty
Look to the Future
Early in his career, Higgins was put through the exercise of looking into the future—not just short term, but mid- and long-term
as well. It became a habit with him, and as he copes with today's market forces (many of which were part of the picture he
and his colleagues created close to 20 years ago), he's looking forward. Here's what he sees:
"In the short term, one to two years," he says, "I think you'll still see a lot of concern about the sustainability of the
business model. I think that that is going to increase. You're going to see significant pressure here in the US to bring in
measures that are not industry friendly. Medium-term I see further consolidation despite the fact that no one really believes
that it is the answer.
"And then in ten to fifteen years you will see people spinning out their businesses, and obtaining value by spinning out their
cardiovascular business, their oncology business. They're just no longer able to deal with the complexity.
"I believe you'll see smarter healthcare delivery in ten to fifteen years. There will be better examples of personalized medicine
and a phenomenal increase in information as a value driver in healthcare delivery. A lot of us will have a situation where
you can do your glucose testing or blood pressure with your portable phone, and results will go into a data management system.
"Information technology will play a tremendous role. The technology's already here. It's just the players don't have the financial
incentive to make it work. It's a little bit like the car industry. We could have had a more efficient engine, but what was
the financial incentive to do that?
"What will make change inevitable is just the same issue we saw twenty years ago. The appetite for health is insatiable, and
the number of people growing older will consume more and more. It means we're just going to have to come up with a different