ddn Online

The Blog of Drug Discovery News

Good news, bad news

As is so often the case, I greet stories of mergers with a sense of “yes, a company successful enough to be bought out by (or combine with) someone larger…congrats to them!” that is mixed with the “oh crap, more people are going to be jobless now, probably” feeling.

Case in point: Valeant Pharmaceuticals in California is laying off 500 people subsequent to the fall merger deal with the former Biovail, which had been Canada’s largest publicly traded pharma company…

Read more (and try not to weep; at least it isn’t the thousands upon thousands that so many Big Pharmas have announced are getting the axe in recent months, as ddn Chief Editor Amy Swinderman talked about here and here.)

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January 14, 2011 Posted by | Corporate, M&A activity | , , , , , | Leave a comment

Season’s mergings

So, I just finished writing one of my articles for the January issue, which is on the Johnson & Johnson and Crucell acquisition bid for Crucell. As I noted in the blog (here), one of the sticking points in the M&A journey for these two companies has been the opinion of the second-largest shareholder, Van Herk Groep, that J&J just isn’t offering a satisfactory per-share price in its bid.

Well, in the few months that have passed since the two companies told everyone they were courting, there have been some manufacturing problems at a Crucell plant in South Korea that were bad enough to affect third-quarter earning and year-end projections.

However, J&J went ahead with a formal acquisition bid earlier this month, and didn’t lower its offer a single penny.

Now, one can only speculate whether Van Herk has still been holding to its opinion that J&J is being a Scrooge. After all, I haven’t heard anything so far that’s made me think their collective minds have changed. And I don’t know how much they think is fair…

…but one wonders whether Van Herk will view this bid as a holiday gift (no change despite manufacturing problems), or still keep looking for a bigger box under the tree for itself.

At least I wonder.

Seasons greetings, everyone, belatedly to those who’ve already celebrated their respective holidays and proactively to everyone else. And let’s hope for a Happy New Year in pharma, whether J&J and Crucell tie the knot in February or not.

December 20, 2010 Posted by | Corporate, M&A activity | , , , , | Leave a comment

Pink slips pile up in Big Pharma

We here at ddn are in the business of covering the business side of Big Pharma. But behind every headline touting million- or billion-dollar price tags for mergers, acquisitions and partnership deals, there are the untold stories of collateral damage.

Those stories are coming to the forefront lately as headlines are taking note of the number of pink slips piling up in the pharmaceutical and biotech industries.

According to the U.S. Bureau of Labor Statistics, unemployment in the United States was 9.6 percent in September. The unemployment rate has hovered around that figure for most of this year, but it’s about to gain a few percentage points, thanks to recently announced layoffs in Big Pharma.

According to PharmaManufacturing.com, the unemployment rate in pharmaceuticals and life sciences is estimated at 16 percent. Market research firm Reportlinker attributes pharma job losses to several factors. Besides the obvious ones—the economic downturn, the rising number of uninsured Americans and the impending 2011 patent cliff—the firm notes that action taken by the U.S. government as part of healthcare reform legislation will also impact Big Pharma.

“U.S. healthcare reform is set to improve coverage but this will be at the expense of containing healthcare costs,” Reportlinker says. “Although the pharma industry will benefit from the rise in insured individuals, measures such as the increased Medicaid drug rebate and Medicare donut hole discount will have an immediate negative impact on revenues out to 2014.”

Ed Silver, editor of Pharmalot, points out that these numbers may not tell the whole story, since not all job cuts are disclosed: “Some companies cut staff in dribs and drabs, and therefore are not required to file notices with their state governments. The implication is that job losses are greater than the survey implies.”

It can be argued that many of the layoffs are part of the life cycle of merger and acquisition activity. Consider the following:

  • Last year, Abbott Labs purchased Solvay’s drug business for $6.2 billion. Abbott is now cutting about 3,000 jobs in commercial, R&D, manufacturing and staff operations. The company will also close Solvay’s U.S. headquarters in Marietta, Ga.
  • Bristol-Myers Squibb Co., which recently acquired ZymoGenetics Inc. for about $885 million, plans to eliminate 3 percent of its headcount—or about 840 jobs—in the next few months.
  • After signing an agreement reportedly worth $1 million with the J. David Gladstone Institutes aimed at identifying treatments for multiple sclerosis, Alzheimer’s and other neurological diseases, Danish drugmaker H. Lundbeck A/S said it will cut 50 people from its R&D operations in the United States and Europe.
  • Just one month after agreeing to buy Penwest Pharmaceuticals for $144 million, Endo Pharmaceuticals is said to be in the process of laying off an unspecified number of sales managers and sales reps.
  • And most recently, sanofi-aventis—which in recent months has dominated our headlines with its many multimillion- and billion-dollar deals and plans to bring more companies into its fold—announced it will eliminate about 1,700 job in the United States, or about 25 percent of the company’s U.S. pharmaceutical operations division.

In announcing its recent agreement to acquire King Pharmaceuticals Inc., Pfizer Inc. focused on the “cost synergies” it expects to see from the $3.6 billion deal. According to Pfizer, it will take only three years for the dust to settle on the consolidation involved in the bolt-on acquisition. By then, it will have cleared a substantial patent expiration hurdle.

We’ll bring you the details of that acquisition in our November issue, but until then, what is your opinion of the mounting job losses we are seeing in Big Pharma?

October 15, 2010 Posted by | M&A activity | , , , , , | 1 Comment