Merger game in full play

After an industry pause, the heads of some major pharmaceutical companies indicated that mergers are possible and one acquisition is in progress. However, the consultant firm KPMG said continued merger activity faces problems.

GlaxoSmithKline (GSK) recently held talks with Bristol-Myers Squibb,

according to a May 31 news report from Reuters. A GSK spokesman indicated that no deal was imminent, but earlier reports quoted CEO JT Garnier saying, "If a company has a good pipeline and is available at a reasonable price, of course we'll take it under consideration." Bristol-Myers declined to comment.

Tom McKillop, CEO of AstraZeneca said "the economic equation is changing fundamentally and that would suggest that there would be more consolidation ... ." However, "in AstraZeneca we are completely focused on organic growth," he said. In contrast, Roche Holdings is focused on acquiring Chugai Pharmaceutical Co. of Japan. It raised its offer by $161 million, over the $1.2 to $1.6 billion original takeover price offer.

KPMG feels that "large-scale mergers are now increasingly less likely because of fundamental limits inherent in U.S. anti-trust and EU competition law," according to a report from eyeforpharma.com. There has been a focus on limiting market share that requires the divestment of existing and potential products.

"The synergistic benefits of many potential mergers would be more than offset by the sacrifices needed to be made to satisfy the competition authorities," said John Morris, head of KPMG's European Pharmaceuticals Practice.