Pharma/Biotech JVs And Mergers More Appealing

Trends in two industries - pharmaceuticals and biotechnology - are combining to lead to the wave of mergers and acquisitions in the pharmaceutical sector designed to cut costs and boost competitive positions, and the dramatic decrease in the ability of the biotechnology group to raise money has made collaboration between the two more and more appealing, according to a number of industry-watchers.

Many drug companies are trying to cut down on in-house research and development to cut fixed costs, according to Robert Esposito of KPMG Peat Marwick, who feels that alliances are going to pick up at a record pace as drug companies realize they have to do more in this area. Meanwhile, medical publisher Mary Anna Liebert notes that with investors less willing to take risks on promise, the entire biotechnology industry was able to raise only $1 billion through the stock market last year, down from $4 billion in 1992. And these collaborations are likely with American biotechnology companies because their science is the best, it was added.

Outside collaborations bring in needed science while providing flexibility, according to Michael Steinmetz, Hoffmann-La Roche's vice president of preclinical R&D. And it is easier to terminate a contract to invest money elsewhere than retraining in-house scientists for a change in direction, he added.