Consolidation redraws pharma marketing map

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In just the first three months of 2009, several of the largest companies in the industry announced mergers that will change the face of an industry dogged by sluggish pipelines.

Pfizer, the top company in terms of US sales, said in January that it would acquire Wyeth for $68 billion, a company with a strong R&D background and vaccine division. Merck joined the fun in March, announcing that it would acquire Schering-Plough for $41.1 billion. Merck hopes Schering-Plough's pipeline and specialized sales force will add value moving forward. Less than a week after Merck's announcement, Roche announced plans to buy all remaining stock in Genentech, for a total acquisition price tag of $46.8 billion.

For the moment, analysts are unsure how the deals will bode for each of the companies. However, the consolidations will certainly affect the way each company does business. In terms of media spend from November 2007 through November 2008, Pfizer led Merck, Schering-Plough and Wyeth by a considerable margin. Pfizer spent $665 million on DTC and professional journal ads combined during that period, compared with Merck's $295 million, Schering-Plough's $158 million and Wyeth's $74 million, according to SDI figures.

Roche said in a statement that its merger would put the company at number seven in terms of overall market share – Genentech is currently the 11th largest pharma company by US sales, at $9.3 billion in 2008, according to IMS Health. Pfizer will most likely remain on top in terms of US sales – Wyeth came in at number 15 in 2008, at $7.6 billion. Merck was in fifth place at $15.5 billion in 2008, and will move up the ladder, potentially passing Johnson & Johnson ($16 billion), AstraZeneca ($16.3 billion) and GSK ($18.4 billion) with Schering-Plough's $4.9 billion in US sales.

According to Goldman Sachs report authored by Jami Rubin, transformational strategic action is inevitable among several of the largest companies, and managements should consider alternative strategies to unlock value. "We believe that further value could be created if these new giants find opportunities to rationalize their lines of business by breaking off or carving out businesses that do not fit strategically, a la Abbott. This is especially notable for Pfizer...Merck has already indicated that it will consider selling part of its animal health business," the report stated.

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