In April alone this year, pharmaceutical firms around the world announced $74 billion worth of merger and acquisition deals, some pending and others already fixed.
The figure includes the bid for Botox manufacturer Allergan, which is seen to be worth at least $45.6 billion, and deals between Novartis and GlaxoSmithKline. In January, Pfizer proposed a takeover to AstraZeneca, a British firm specialized in cancer drugs, worth almost $100 billion.
More are likely to come, industry watchers said.
|A Pfizer logo sits on the lab coat of an employee at the research laboratory of Neusentis Ltd., a unit of Pfizer Inc., in Cambridge, England. (Bloomberg)|
The global firms are hoping to cope with lost revenues from patent expirations and the effects of cuts on health care spending.
Instead of pouring more money into developing new drugs that may or may not yield profit, companies appear to be opting to buy those that have already proven to be a success.
Less vigor in Korea
Back home in Korea, there are also several deals pending, but with much less vigor.
The biggest deal in recent months was Handok Pharma’s acquisition of Pacific Pharma, the pharmaceutical unit of the nation’s leading cosmetics maker AmorePacific, for 57.5 billion won ($54.5 million). In 2013, the two firms’ combined sales were just 400 billion won.
Hanwha Chemical also recently announced its intention to sell its stake in its drugmaking unit Dreampharma Group to cut costs. But the firm, which specializes in psychotropic drugs related to diabetes, has yet to find a bidder.
“Deals among local firms are less attractive and less likely to lead to synergy because most produce generic drugs with no specialty drugs to their names,” said one industry source, declining to be identified.
Further, they are also reluctant to undergo hostile bids because most are family-owned companies whose owners enjoy closely knit ties with one another, according to critics.
The few exceptions include the January deal when Green Cross secured a 29.36 percent stake in Ildong Pharma to become the largest shareholder.
Green Cross specializes in vaccine production while Ildong is mostly involved in over-the-counter items such as its popular vitamin supplement Aronamin.
Industry watchers talked of a synergy effect, but Green Cross seemed to be more concerned about its image, and at the time had denied that it would be taking over Ildong or any other pharmaceutical company.
“If Green Cross tries to completely take over a firm, it would be branded as a traitor to the industry,” said another source.
Despite the problems, it seems inevitable for smaller drug makers to seek merger and acquisition opportunities to survive in the crowded Korean market that currently has up to 700 players.
They may now look beyond Korea to search for foreign partners, who may help pave the way to international markets, industry watchers say.
As some cases in point, in 2012, Alvogen acquired Korea’s Kunwha Pharmaceutical, while Teva, a global generic drug maker, established a joint venture with Handok in the same year.
By Lee Ji-yoon (email@example.com)