NEWS OF THE WEEK
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T THE JPMORGAN Healthcare Conference
in San Francisco last week, big pharma CEOs painted a picture for investors of how they plan to grow their businesses in an era of fewer blockbuster drugs. They suggested that megamergers would not provide long-term solutions to their problems and that the focus this year will stay on smaller, targeted acquisitions. Growth at major pharmaceutical firms now lags— substantially—growth in the global drug market, according to a report released at the event by Ernst & Young. “It’s hard to present to shareholders over time that you’re not growing as fast as the market,” said Glen Giovannetti, the firm’s global life sciences sector leader. “It is a reality that some of the large companies will look for deals to help, in part, deal with the gap.” At the health care meeting, company executives discussed what those deals might look like. Most anticipate another year of smaller “bolt-on” acquisitions that fill a gap in their firms’ pipelines or bring in a promising technology. “I don’t see us looking for another large combination,” said Merck & Co. CEO Kenneth C. Frazier. That sentiment was echoed by many of his competitors. Looking back at several decades’ worth of deals, Merck has reached the conclusion that its sweet spot is licensing or acquiring projects in the earliest stages of research, Frazier said. “When things get to be late stage,
SANOFI
look to grow through focused acquisitions in 2013
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PHARMACEUTICALS: Companies
you’re in the middle of a bidding war, and it’s hard to acquire in a way that creates value.” Several companies pointed to emerging markets as key areas for growth. Sanofi is interested in acquisitions in the $1 billion to $2 billion range, with emerging markets as a prime target, said CEO Christopher A. Viehbacher. By picking countries where most competitors have yet to arrive, Sanofi has been able to expand without paying a premium for new assets, Viehbacher said. Roughly two-thirds of its sales in emerging markets are outside the big BRIC countries of Brazil, Russia, India, and China, he added. Sanofi is one of several companies keen to tap into the aniFrazier mal health segment. “Significant megatrends” are driving growth in that area, Viehbacher said, pointing to an expanding global middle class that wants to consume higher-quality food. Eli Lilly & Co. also sees emerging markets and animal health as avenues to sustain growth during a tough period. In 2011 the company lost patent exclusivity on its top-selling antipsychotic drug, Lechleiter Zyprexa, and this year will face generic competition on its second-highest-selling drug, the antidepressant Cymbalta. CEO John C. Lechleiter said Lilly’s Elanco subsidiary is the world’s fourth-largest animal health company and the fastest growing. In 2016, he told attendees, four segments—animal health, emerging markets, Japan, and diabetes treatment—could represent more than 60% of Lilly’s sales.—LISA JARVIS ELI LILLY & CO.
DRUG FIRMS EYE SMALLER DEALS
Viehbacher
RESEARCH High court allows federal funding of human embryonic stem cell research Federally funded human embryonic stem cell research can move ahead unimpeded because of a Supreme Court decision announced last week. The Court declined to hear a case, which has dragged on for more than three years, challenging the legality of such stem cell research funding. The original lawsuit against the National Institutes of Health was filed in 2009 by two scientists who work with adult stem cells. They claimed that the agency’s policy for funding human embryonic stem cell research violates the Dickey-Wicker Amendment, an obscure law that prohibits federal funding of any
research that destroys human embryos. Human embryos are destroyed in order to derive such stem cells. In 2010, the case temporarily halted government-funded research on human embryonic stem cells. A federal appeals court lifted the injunction, however, and subsequently ruled that conducting research on these cells is not the same as deriving them. The plaintiffs appealed to the high court last October. Biomedical researchers and NIH officials welcome the justices’ decision to reject the case. “Patients and their families who look forward to new therapies to
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JANUARY 14, 2013
replace cells lost by disease or injury, or who may benefit from new drugs identified by screening using stem cells, should be reassured that NIH will continue supporting this promising research,” says NIH Director Francis S. Collins. Bernard Siegel, spokesman for the Stem Cell Action Coalition, an advocacy group for stem cell research, calls the decision “a major victory for scientifically and ethically responsible innovative research.” But at the same time, he says, “we must remain vigilant against threats at state and other policy-making levels.”—BRITT ERICKSON
