Wednesday, December 23, 2009

And the Big Pharma Deal of the Year Nominees Are ...

OK readers, it's time to have your say! This year we've set up a special IVBDOTY web page where you can vote in all three categories. CLICK HERE TO GO TO THE VOTING BOOTH.

And so here, in no particular order, are your IN VIVO Blog 2009 Big Pharma Deal of the Year nominees. Please do comment on this post about any and all of these deals, and why you voted the way you did.

Dollars for Donuts: Is the biggest deal for Big Pharma in 2009 the $80 billion deal struck by the brand name trade association PhRMA as its contribution to health care reform? We call it "Dollars for Donuts" because a key element of the deal is the industry's commitment to offer a 50% discount on drugs purchased by Medicare beneficiaries in the Part D coverage gap, a.k.a. the "donut hole" in the prescription drug benefit for seniors and the disabled. It's not a traditional biz dev opportunity, we admit. But if Big Pharma dealmaking is about anything, it is about paying up front for access to new commercial opportunities downstream. And this deal fits that model perfectly.

Pfizer/Wyeth: This is the deal that marked the beginning of a new kind of Big Pharma. For better or for worse, it turns Pfizer from an R&D-focused, high-risk, high-reward company into a diversified, industrialized group whose investment appeal is less about growth than about dividends, efficiency and value. In its scale, the transaction symbolized the scope of Pfizer's--and other Big Pharma's--challenges, and in its content, it captured--in one fell swoop--many of the individual strategies drug firms are pursuing in order to escape from their R&D productivity problems.

Pfizer/DOJ Bexxtra Settlement: Pfizer’s September settlement is by far the biggest in the wave of industry prosecutions that defined the decade of the 2000s. But these settlements have always been more important than the dollars. Each case—and the headlines it generates—marks another step down in the reputation of the industry. They have helped stoke a puritanical fire in the medical establishment, one that aims to root out all industry influence over clinical research, medical education, and clinical practice standards, a movement that could, taken to extremes, jeopardize the entire private sector biomedical model.

Merck/Schering-Plough: Merck might've only been buying time through this deal--time to figure out what on Earth to do about a $4 billion patent-expiry problem--and will be doing the usual, un-prize-worthy cost-slashing (the deal's synergies represent a whopping 40% of sales). But what it lacks in headliners it makes up for, we argue, in behind-the-scenes cleverness.

GSK/Pfizer ViiV Healthcare JV: It's not every day that Big Pharmas join forces in an important way. The HIV joint venture between Pfizer and GSK, announced in April, and later labeled ViiV, may be industry's biggest exception. The company combines GSK's and Pfizer's marketed HIV portfolios and pipelines into a standalone with more clout than either party would have individually, helping reduce both sides' cost, and infusing accountability and productivity in a way that only a smaller outfit can. Negotiating the terms wasn't easy, but if this tie-up works, it might not be the last. "If there's another opportunity to do the same thing again with GSK, we'd do it," said Bill Ringo, SVP BD at Pfizer.

Roche/Genentech: With its landmark agreement with Genentech already nearing a sunset, Roche made a preemptive strike, betting it would gain more by owning 100% of sales juggernauts such as Avastin and the ability to slash duplicative infrastructure than it stood to lose if the top talent at Genentech hung up their lab coats. This tie-up isn't about innovation, it's about efficiency. And the acquisition's final price tag--$95-a-share, while certainly a great deal more than the intitial $89-a-share bid price, is more than matched by the likely earnings potential of Genentech's already marketed products. Furthermore, analysts estimate the biotech's mid- to late-stage pipeline more than adequately supplies Roche with a pipeline reservoir through 2016.

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