More Pharmaceutical Industry Consolidation: Thinning Out the Middle

So far this year there has been a lot in the news about M&A activity within the pharmaceutical industry, and lately the coverage seems to be about what’s happening with mid-tier companies, or specialty pharmaceutical companies. These companies are by no means small, but they aren’t on the same level as the top 10 global pharmaceutical companies.

So far this year there has been a lot in the news about M&A activity within the pharmaceutical industry, and lately the coverage seems to be about what’s happening with mid-tier companies, or specialty pharmaceutical companies. These companies are by no means small, but they aren’t on the same level as the top 10 global pharmaceutical companies. And they tend to be focused in markets where they have particular strengths.

Most recently, I’ve been reading a lot about two acquisitions; Actavis’ $66 billion buyout of Allergan, and Valeant’s recent bid to buy Salix Pharmaceuticals for more than $10.4 billion. These are sizable deals for both companies, each of which has ambitions to break into the top 10 list of global integrated pharmaceutical companies, joining the likes of Pfizer, AstraZeneca, GSK and the rest.

It will be interesting to see, over the long term, how this consolidation works out for both companies, and the industry as a whole. I would argue that for many of the top global pharmaceutical companies, looking back over the past 20 years, consolidation hasn’t been all that great. Not for R&D productivity, not for profitability, and certainly not for jobs in the industry.

As in all things, only time will tell.