Merck joins the cost-cutting bandwagon
With big pharma reaching for the tried and trusted remedy of mergers and acquiasitions, Merck has bid $44bn for rival Schering-Plough.
Big pharma is "reaching for a familiar old remedy", said Ian King in The Times: mergers and acquisitions. In January, Pfizer forked out $68bn for Wyeth. Rochehas upped its bid to buy out Genentech to $46.7bn. And now Merck has bid $44bn for rival Schering-Plough. Companies are scrambling to consolidate because blockbusters are coming off patent, generic competition is on the rise, and now Obama's health reforms "could blow a hole" in drugmakers' profits by forcing drug costs down.
Mergers are designed to beef up pipelines and save a fortune in costs. The big motivation for Merck is up to $25bn in potential cost cuts, said Robert Cyran on Breakingviews which works out as more than double the premium it's paying Schering-Plough. Merck will also double the number of late-stage drugs in its research portfolio and gain better access to overseas markets.
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