10 Updates

McKinsey's View That Pharma Megamergers Work Is Short Sighted

Feb 24 2014, 7:16am CST | by

In the article, “Why pharma megamergers work” , McKinsey authors Myoung Cha and Theresa Lorriman argue that: “Unlike deals in many industries, big mergers and acquisitions among...

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22 weeks ago

McKinsey's View That Pharma Megamergers Work Is Short Sighted

Feb 24 2014, 7:16am CST | by

In the article, “Why pharma megamergers work” , McKinsey authors Myoung Cha and Theresa Lorriman argue that: “Unlike deals in many industries, big mergers and acquisitions among pharmaceutical companies generally have resulted in positive returns for shareholders.” They believe that megamergers have created shareholder value and that consolidation deals have generated greater economic growth.

Interestingly, they use the three megamergers that Pfizer engaged in over the past 15 years (Warner-Lambert, Pharmacia and then Wyeth) to help make their points. There is no doubt that from an immediate business impact, these deals can make a lot of sense. Benefits include a broader portfolio of products, opportunities to cut costs by eliminating duplication and overlap, and increased availability of working capital. Indeed, it is not unusual for a company’s stock price to increase when such an acquisition is announced.

However, a pharmaceutical company, by the nature of its business, requires a long-term vision. Because the drug discovery and development process can take 12- 15 years, oftentimes the impact of a major event isn’t felt for a number of years. The integration of two organizations is incredibly difficult. This is particularly true in an R&D organization. New organization structures need to be developed; new processes must be implemented; decisions need to be made as to which programs should progress, which should be eliminated; new leaders need to be selected, others moved aside; and, in order to generate the synergies promised to Wall Street, research sites need to be shuttered.

The disruption that the integration process causes is immeasurable. Winners and losers are created as a result of the leader selection process. Scars form as different research teams battle over which projects are superior to others. The angst even extends to one’s home life as people worry if their site will be closed and that they’ll be unemployed or, at best, be asked to uproot their families halfway across the country to a new research location. In such a situation, rumors are rife and speculation rampant. Focus that should be on science inevitably get diverted to one’s personal situation. This isn’t something that lasts just a few weeks. Often the integration process can take as much as a year.

The impact of these changes are not immediate. Rather, they take some years to become apparent. The Pfizer pipeline of experimental medicines, as published on its website, is about 60% of its peak about a decade ago, despite these acquisitions. Clearly, a company’s success isn’t assured by numbers, but one’s chances are enhanced by more R&D opportunities. I would argue these mergers have taken a toll on the R&D organization that wasn’t anticipated a decade ago.

One wonders why McKinsey chose to publish such an article. Perhaps the answer can be found in the article’s closing line. “Given the proven track record of consolidation deals generating economic profit, we would not be surprised to see them come back in vogue.” McKinsey would love for this to happen. They are usually in the middle of facilitating these mergers, generating their own economic benefits.

Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

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Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broke ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

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Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat toda ...
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Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Hus ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last month. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Mo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocatio ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 2 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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