Summary
Patent expiries, tightening healthcare budgets and a stricter regulatory climate in the aftermath of the Vioxx withdrawal presented major challenges to the pharmaceutical industry in 2006. These tougher operating conditions may partly explain why companies that are less reliant on pharmaceuticals seem to have performed so well last year. Johnson & Johnson, which only has 43% of its revenue coming from pharmaceuticals, for example, toppled Pfizer from its position at the top of the total revenue table for 2006.
The tough operating conditions can also be seen reflected in the general wave of industry restructuring among generics and speciality pharma companies. Among the generics players, consolidation changed the landscape quite dramatically last year with Watson Pharmaceuticals acquiring Andrx to become the third largest player in the US market, Barr Pharmaceuticals (formerly known as Barr Laboratories) acquiring the Croatian firm Pliva, and a number of smaller acquisitions by Indian companies, Dr Reddy's and Ranbaxy Laboratories.
A similar story can be seen in Europe. In Germany, for example, Bayer beat Merck KGaA to acquire Schering AG. Merck KGaA, meanwhile, went on to absorb Europe's largest biotech company, Serono, into its business. Other European deals included Danish Nycomed's surprise acquisition of Altana Pharma at the very end of the year, and the purchase by Belgium's UCB of Schwarz Pharma.
Biotech companies also saw considerable movement with, among other deals, Crucell acquiring Berna Biotech for $476 million and Genzyme acquiring Anormed for $584 million.
Mergers among the top players are rare these days, if only because there are so few potential partners. There was one major acquisition in 2006 (when Schering AG became part of Bayer) although in Japan, traditionally so averse to mergers, Dainippon Sumitomo Pharma was created from Dainippon Pharmaceutical and Sumitomo Pharmaceuticals at the very end of 2005.
A fair number of interesting smaller companies were bought by the larger players in a bid to replenish their pipelines. Last year saw Pfizer buy Powdermed and Rinat Neuroscience, for example. Merck & Co acquired Abmaxis, Glycofi and Sirna Therapeutics; Astrazeneca bought Cambridge Antibody Technology; Novartis bought Neutec Pharma; Abbott Laboratories acquired Kos Pharmaceuticals, and Lilly extended its long-standing research partnership with Icos by bringing it into the fold.
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