Damian Trouse of the Houston Chronicle writes:
Licensing deals between pharmaceutical and biotechnology companies is the norm for the industry, giving development stage companies the money to continue developing products, while larger companies get a chance to bolster their product pipelines.
But with more large companies facing pipeline holes, biotech companies are seeing more money being thrown their way for innovative products, and the deals could lead to future acquisitions.
“That’s going to continue to heat up and pick up,” said Jason Napadano, senior biotechnology analyst at Zach’s Investment Research. “The reason it’s happening is that you have these large pharmaceutical companies with an unprecedented number of products going off patent.”
That could amount to billions of dollars in losses for some of the major pharmaceutical companies.
He goes on to say:
In October, Merck & Co. said it would buy small biotechnology outfit Sirna Therapeutics Inc. for $1.1 billion. Abbott Laboratories is in the process of buying Kos Pharmaceuticals for $3.7 billion.
“Big pharma could start knocking on the door of biotech with market caps of $5 billion,” said Morningstar analyst Karen Andersen.
“If you’re a pharmaceutical company and you want these products and need these products, biotech can continue to demand these types of big prices,” Zack’s Napadano said.
By most estimates, the market for licensing deals and pricier acquisitions will continue into 2007. News last week that Pfizer Inc. ended a late-stage program on its experimental heart drug highlighted the company’s pipeline problems, with many analysts predicting it will acquire another company, possibly within the next year.
I hardly think drug companies buying out small biotech firms in order to procure new drugs is the same thing as in-house development. It speaks poorly of Big Pharma’s R&D efforts. The sports analogy would be a team that has to bring in big-name free agents because it doesn’t have a good farm system or doesn’t draft well.
Which raises the question: Doesn’t the government gives Big Pharma the monopoly on the American drug market in order to promote new and innovative drugs? And if that’s not happening, why are American consumers suffering in order to boost Big Pharma’s profits?39