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Buying Innovation: A Look at Pharmaceutical Mergers and Acquisitions

Scientist on May 14, 2012

We’ve looked at what happens to a drug when a patent expires, but what happens to the patent owner? As patents have expired and many blockbuster drugs become generic, pharmaceutical companies have looked to new drugs and innovations to replace the lost income. Getting a drug through regulatory hurdles, such as clinical trials and safety testing, is difficult and millions of dollars can be lost from an unexpected failure. As many patents have expired and only a few drugs have replaced them in the past decade, pharmaceutical companies have looked to mergers and acquisitions for new products and drugs in an effort to buy innovation.

Just in the past couple weeks there have been a bevy of attempted and completed pharmaceutical mergers and acquisitions:

  • Amylin exploring a sale to AstraZeneca
  • AstraZeneca acquires Ardea Biosciences for 1.26 Billion
  • Illumina rejects attempted $6.5 billion buyout by Roche
  • Nabi Biopharmaceuticals merges with Biota Holdings Limited

Pharmaceutical Mergers and Acquisitions (M&A) drastically change the layout of the industry, but it is not always the answer. Our new infographic outlines the past acquisitions in the last decade, the biggest deals, and how much market value was lost after M&A; I’ll sneak out a spoiler and say that over $1 trillion dollars in market value was lost in the last decade. I can see why there is concern over the stability of some of the most household pharma company names.

What’s the answer then? Many companies have also resorted to restructurings and refocusing (such as Pfizer selling its infant-nutrition division to Nestle). At the depot, we believe a better solution is to empower scientists with effective and efficient ways of doing research, which can come in the form of open science or new research tools. Some pharmaceutical companies have taken a step in the right direction. In La Jolla, Merck has invested $90 million in a new research institute and Janssen has created an incubator for start-up drug and devices companies. New web-based research tools, such as CDD’s database software, IDBS’s E-workbooks, or our own Research Exchange platform, allow scientists to take advantage of the best tools that have been developed for the consumer web. It is only by empowering all scientists can we achieve the ultimate goal of promoting innovation while cutting costs. Ultimately, the scientists are the ones innovating and they need the tools to make it happen.