This week, I’ll be finishing my commentary on Andrew Bary’s recent cover story in Barron’s (The article is available online only for subscribers, a short preview is available at http://online.barrons.com/article/SB50001424052970203296004575320891909686872.html .) about the future prospects for drug stocks.
I started this series of blogs because after reading the article for the first time I was astonished at the lack of analysis of what simply appeared to be regurgitations of pharmaceuticals’ public relations flacks. The other interesting aspect of the article is the long term view that I takes. When the dates that Andrew is writing about finally come around no one’s going to remember either this article or him. I wish I could get writing gigs like that.
Last time I left off just as Andrew was about to tackle Roche. He quotes unnamed “bulls” as saying that this company has the best potential of the nine companies he’s writing about. He assumes the stock could rise 30% simply from earnings growth in the next several years. OK, why? Or, better yet, given all that we know that is out there working against this industry why should we expect earnings to simply “increase”? Especially since maybe $1 billion in annual revenues could be at risk if the FDA reconsiders its previous approval of the breast cancer drug Avastin. Check out the Bloomberg Businessweek article for more details (http://www.businessweek.com/news/2010-07-16/roche-avastin-trials-not-as-good-as-early-tests.html ).
Next up, Andrew tackles GlaxoSmithKline. This one is going to be easy. (You can tell that I’m enjoying this can’t you?) Now, Andrew couldn’t have known that the Avandia story (http://www.cbsnews.com/8301-504763_162-20010767-10391704.html ) would have broken so soon after he wrote his article. In fairness, his comments about the drug are probably his most insightful in the entire article. But, once again, he misses the obvious to follow lemming-like the unnamed bulls that he appears to be so enamored with. What gives here?
Andrew reviews three more companies in his article, Lilly, Bristol Meyers Squibb, and Astra-Zeneca. I won’t prolong the torture by going through these one by one. But, the same themes are there. A long term look at 2015, the current dividends are good, or yeah, there’re problems but there’s always tomorrow. (I’m expecting Annie to get some credits here.) Can this guy really believe all this?
I think Barron’s and Andrew really missed an opportunity here. I’m also disappointed with Barron’s, they typically run tougher pieces that challenge the conventional thinking.
It’s not like this hasn’t happened before in the U.S. economy. The auto and banking industries are good current examples. The personal computer industry is a slightly older example and the mainframe computer industry in the Sixties is another good example. How many of you out there remember Snow White and the Seven Dwarves? (Larry will tell you, I’m a serious student of history.)
One more thing, I’ll take a look back on this article in 2015 and see just well Andrew called this one.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Showing posts with label AstraZeneca. Show all posts
Showing posts with label AstraZeneca. Show all posts
Monday, July 19, 2010
Friday, January 23, 2009
Pfizer-Wyeth-Are We Kidding? If Not, Who and What is Next??
A Pfizer Wyeth Merger—Are We Kidding? If not, Who's Next??
This morning, January 23rd, The Wall Street Journal “speculates” that there have been talks between Pfizer and Wyeth about a combined company, although they quickly point out that there is nothing imminent. My colleague Guy de Lastin recently wrote in this blog that there isn't a rational business reason for big pharmaceutical company mergers this year and has been notably supported in The Journal with "The record of big mergers and acquisitions in big pharma has just not been good. There's just been an enormous amount of shareholder wealth destroyed," said Gary Pisano, a Harvard Business School professor who has written about the issue.
Admittedly there are contravening forces at play here-Pfizer among others has been notably non-productive in its R&D sector spending over $7.5 billion a year with little tangible payoff—in fact they announced 800+ layoffs for this particular group in the last week or so. On the other hand, Wyeth has had a bit more success with a newly re-engineered R&D organization—having said that, both companies have major blockbusters, Lipitor and Enbrel come from acquisitions, not in house development. Clearly there are enormous “synergy targets” should two such massive businesses merge. Combine these factors with an investment community that is pushing for consolidation, and a lower market cap this year than last mixed together with a cash position of over $25 billion for Pfizer and a market capitalization of just over $50 billion for Wyeth—maybe, just maybe this could happen.
If Pfizer-Wyeth becomes a reality, we enter a new realm of what we call “Super-Mega-Global” Pharmaceutical giants. This may force other merely mega-globals into a merger frenzy. Europe's big 3, Glaxo, Novartis and Sanofi may view the world in a different way and look in their backyards at the likes of AstraZeneca, Bayer and even Roche as feeding fodder. How about the likes of Merck, J&J, Abbott or BristolMyers looking over the landscape at each other or such potentially delectable morsels as Amgen, ScheringPlough or others or each other or some large generics, or...... You get the point, in an industry known for follow-the-leader mentality, the investment bankers, lawyers and our friends the consultants are in for some major paydays.
Contributed by Larry Rothman
This morning, January 23rd, The Wall Street Journal “speculates” that there have been talks between Pfizer and Wyeth about a combined company, although they quickly point out that there is nothing imminent. My colleague Guy de Lastin recently wrote in this blog that there isn't a rational business reason for big pharmaceutical company mergers this year and has been notably supported in The Journal with "The record of big mergers and acquisitions in big pharma has just not been good. There's just been an enormous amount of shareholder wealth destroyed," said Gary Pisano, a Harvard Business School professor who has written about the issue.
Admittedly there are contravening forces at play here-Pfizer among others has been notably non-productive in its R&D sector spending over $7.5 billion a year with little tangible payoff—in fact they announced 800+ layoffs for this particular group in the last week or so. On the other hand, Wyeth has had a bit more success with a newly re-engineered R&D organization—having said that, both companies have major blockbusters, Lipitor and Enbrel come from acquisitions, not in house development. Clearly there are enormous “synergy targets” should two such massive businesses merge. Combine these factors with an investment community that is pushing for consolidation, and a lower market cap this year than last mixed together with a cash position of over $25 billion for Pfizer and a market capitalization of just over $50 billion for Wyeth—maybe, just maybe this could happen.
If Pfizer-Wyeth becomes a reality, we enter a new realm of what we call “Super-Mega-Global” Pharmaceutical giants. This may force other merely mega-globals into a merger frenzy. Europe's big 3, Glaxo, Novartis and Sanofi may view the world in a different way and look in their backyards at the likes of AstraZeneca, Bayer and even Roche as feeding fodder. How about the likes of Merck, J&J, Abbott or BristolMyers looking over the landscape at each other or such potentially delectable morsels as Amgen, ScheringPlough or others or each other or some large generics, or...... You get the point, in an industry known for follow-the-leader mentality, the investment bankers, lawyers and our friends the consultants are in for some major paydays.
Contributed by Larry Rothman
Monday, August 18, 2008
Is this the time we all predicted....Transformation of the Pharmaceutical Biotechnology Industry?
Is this the time we all predicted....Transformation of the Pharmaceutical Biotechnology Industry?
Can the Services Industry be of help?
It is fairly obvious to those of us who are involved with the Bio-Pharmaceutical Industry that things could not stay as is. The industry is suffering with a multiplicity of challenges including but not limited to:
1.With dry (or near dry) pipelines despite massive spend on R&D.
2.Negative productivity gain from additional sales force additions (interestingly enough this could be a salvation as the industry consolidates and/or continues buying pipelines or licensing deals from biotech companies).
3.Massive governmental pressure on pricing and a hyper-vigilante, highly politically charged FDA making new drug approvals difficult, costly and lengthy.
4.Significant reductions in value for both Pharmaceuticals and to an extent Biotechnology companies that are traded on the stock exchanges.
5.Throw in for good measure that generic drugs now represent somewhere over 60% of all volume of prescriptions while accounting for under 20% of dollar spend and that there is a concurrent consolidation in that business.
Is this not the making of the perfect storm and is it possible that the service providers can help the industry in this regard?
One doesn't need to look much further than the business press to recognize the enormous change taking place, just look at these 5 deals that have taken place or will that are in aggregate way over $100 billion:
1.Roche wanting to buy the remaining share it doesn't own in Genentech
2.BMS bidding to buy what it doesn't own of Imclone
3.Pfizer's multiple Biotech purchases
4.Takeda's takeover for Millenium
5.AstraZeneca's purchase of Medimmune
There are several other interesting consolidations that are taking place within generics as well:
1.Teva of Israel buying IVAX (US) and now Barr (US)
2.Daichii Sankyo of Japan buying Ranbaxy of India
3.Novartis's earlier adding EON Labs (US) and Hexcel (Germany)
My thinking is that we are rapidly seeing consolidations on at least two concurrent fronts-and both are global:
1.Large pharmaceutical companies paying high premiums to acquire a combination of soon to be commercially attractive pipelines and/or complimentary product lines to add to their existing therapeutic areas.
2.Companies of various size forcing a major global consolidation in the generic space. This becomes a most interesting aspect of the equation as more and more drugs go off patent over the next few years and pricing and reimbursement pressures mount.
3.What about the next targets—it's easy to speculate about Amgen, Genzyme, Biogen-Idec and Gilead as the big fish here—but what about those big pharmas such as Merck and ScheringPlough potentially getting together and what that could mean?
Since part of our target audience are service providers to the industry, the question/challenge I pose is-what can you do to help?
As always your comments are welcome at larryrothmansblog@gmail.com
Can the Services Industry be of help?
It is fairly obvious to those of us who are involved with the Bio-Pharmaceutical Industry that things could not stay as is. The industry is suffering with a multiplicity of challenges including but not limited to:
1.With dry (or near dry) pipelines despite massive spend on R&D.
2.Negative productivity gain from additional sales force additions (interestingly enough this could be a salvation as the industry consolidates and/or continues buying pipelines or licensing deals from biotech companies).
3.Massive governmental pressure on pricing and a hyper-vigilante, highly politically charged FDA making new drug approvals difficult, costly and lengthy.
4.Significant reductions in value for both Pharmaceuticals and to an extent Biotechnology companies that are traded on the stock exchanges.
5.Throw in for good measure that generic drugs now represent somewhere over 60% of all volume of prescriptions while accounting for under 20% of dollar spend and that there is a concurrent consolidation in that business.
Is this not the making of the perfect storm and is it possible that the service providers can help the industry in this regard?
One doesn't need to look much further than the business press to recognize the enormous change taking place, just look at these 5 deals that have taken place or will that are in aggregate way over $100 billion:
1.Roche wanting to buy the remaining share it doesn't own in Genentech
2.BMS bidding to buy what it doesn't own of Imclone
3.Pfizer's multiple Biotech purchases
4.Takeda's takeover for Millenium
5.AstraZeneca's purchase of Medimmune
There are several other interesting consolidations that are taking place within generics as well:
1.Teva of Israel buying IVAX (US) and now Barr (US)
2.Daichii Sankyo of Japan buying Ranbaxy of India
3.Novartis's earlier adding EON Labs (US) and Hexcel (Germany)
My thinking is that we are rapidly seeing consolidations on at least two concurrent fronts-and both are global:
1.Large pharmaceutical companies paying high premiums to acquire a combination of soon to be commercially attractive pipelines and/or complimentary product lines to add to their existing therapeutic areas.
2.Companies of various size forcing a major global consolidation in the generic space. This becomes a most interesting aspect of the equation as more and more drugs go off patent over the next few years and pricing and reimbursement pressures mount.
3.What about the next targets—it's easy to speculate about Amgen, Genzyme, Biogen-Idec and Gilead as the big fish here—but what about those big pharmas such as Merck and ScheringPlough potentially getting together and what that could mean?
Since part of our target audience are service providers to the industry, the question/challenge I pose is-what can you do to help?
As always your comments are welcome at larryrothmansblog@gmail.com
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