Mergers alter R&D activity

In an analysis of 22 pharmaceutical companies that merged between 1988 and 1999, Boston-based CenterWatch found that clinical research spending and productivity declined sharply in the three years following a merger.

Results of the CenterWatch analysis show that merged companies curtail research and development spending dramatically during the three years immediately following a merger as they trim their drug pipelines. Three years after companies merge, the average number of development projects - preclinical through phase III - declines by 34% below cumulative pre-merger company levels, according to the CenterWatch analysis.

"This analysis suggests that in the first several years after consolidating, major pharmaceutical companies are not achieving critical productivity objectives," said Ken Getz, president and CEO of CenterWatch. "It is widely recognized that companies will need to double the level of innovation in order to sustain their growth in revenue and earnings. In the short term, mergers are not meeting certain strategic research and development objectives and may even harm the industry's longer-term ability to innovate," he said.

Annick de Bruin, CenterWatch's research manager, added that in this industry, perceptions may not reflect short-term reality. "A number of professionals believe that, in the long run, mergers create better companies," he said. "But in the short term, these megamergers cause disruptions in internal operations and project cancellations with contract research organizations and with investigative sites." PR