Tuesday, March 10, 2009

Global mergers and R&D Impact

We've all been reading about Merck's plan to acquire SGP or Schering-Plough. The staggering amount of $41 billion is poised to improve the bottom line.

However, a growing concern that experts in the legal field have is that the proposed merger will cut about 16,000 staffers as part of its efforts to streamlines operating costs. That apart, some of Merck's big drugs are at the brink of losing the umbrella of patent protection. That spells a rather gloomy state of affairs altogether. Take the example of Pfizer which seems to have sagging R&D prospects too.

To those of us who are keenly watching the global mergers and changes in the pharma industry, these trends have several implications. The Schering's purchase of a Dutch company known as Organon hardly yieled production of new drugs. Numbers wise, Pfizer spent over $60 billion for its R&D segment for eight years. Have you heard of the company producing a single drug worth its name from this? Mergers impact R&D culture in a rather negative way though they solve some short-term problems.

Takeovers may be just quick fixes for Merck and Pfizer as their best-selling drugs may lose patent protection in the next couple of years. They would have to face generic competition too. Another significant first time for them. Undoubtedly, the legal implications of such defensive acquisitions are bound to be interesting for lawyers.

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