UK
biotechs: biting off more than they can chew
Five
non-profitable UK biotech companies may be considering a merger, creating
a new cancer player capable of competing against the pharmaceutical majors
and of raising the funds needed to create a strong pipeline. But while it
seems exciting, the merger could prove a logistical nightmare. A more
gradual consolidation effort might suit the biotechs better.
In
the 20 years since the UK's biotech industry began, mergers and
acquisitions have been rare; founder-managers have been reluctant to let
go of the reins. However, several of Britain’s biggest biotechs are now
reportedly holding secret talks to forge a major global cancer company.
The
initiative is believed to involve cancer specialists Xenova, Antisoma,
British Biotech and KS Biomedix, and cash-rich Oxford GlycoSciences. Other
possible companies include gene specialist Oxford Biomedica and vaccine
firm Protherics, not to mention Vernalis, Alizyme and PPL Therapeutics.
British
Biotech is a spin-off from Oxford University, as are proteomics-focused
Oxford GlycoSciences and gene therapy firm Oxford Biomedica. The merger of
these three companies would bring synergies in efficiencies, economics,
logistics and technology. Antisoma makes monoclonal antibodies, while
Xenova focuses on small molecules and biologics.
During
the last few years, all the mooted partners have experienced a decline in
the value of their shares, due principally to key pipeline failures such
as the non-approval of OGS’ Vevesca (miglustat) for type I Gaucher’s
disease. Most are also suffering from a lack of the cash required to
develop a strong pipeline.
But
while the drive for funds could make a merger attractive, the resulting
company would immediately be competing head-to-head with major players
such as AstraZeneca, Novartis, Bristol-Myers-Squibb and Roche. And there
has never been a five-company merger in the history of the biotechnology
industry; while potentially exciting, it could be a logistical nightmare.
Instead,
the partners could form an independent joint venture, feeding from all
their technologic and developmental strengths. Alternatively, smaller
initial mergers could be followed by further consolidation over a period
of five years, in a model similar to that seen at the top end of the
pharma industry. Either option would be preferable to a full mega-merger -
or to going it alone.
Related
research: Datamonitor, "Biotechnology Company Growth Strategies"
(DMHC1728)
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order - click
here!
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