Pharm Industry On The Road To Oligopoly

24 July 1994

The recent spate of pharmaceutical industry mergers and acquisitions in the USA is aimed at collecting market share, and is evidence of the necessity of scale to leverage pricing and costs, according to Barbara Ryan and Mara Goldstein of US stockbroker Alex Brown & Sons.

There have been no unfriendly acquisitions in the drug segment, they say, although there was rivalry for Sterling Drug between Hoffmann-La Roche and Kodak in 1986, with the latter winning (although recently selling out its prescription medicine drug business to its Sterling Winthrop alliance partner Sanofi Marketletter June 27 and having plans to divest the over-the-counter business as well).

Interestingly, they add, "despite the carnage in drug stock valuations over the past two years, deals have recently begun to surface at much the same multiples as those deals done in the mid-to-late 1990s," about 2.0-2.5 times revenues and around 20 times earnings.

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