Lecture 1.5 (business practices)

Question 1

What is a merger?

Answer 1

The combination of two companies into one larger company. Usually voluntary between the two companies involving stock swap or cash payment.

Question 2

Give an example of a merger?

Answer 2

Glaxo Wellome merged with SmithKline Beecham in 2000 to become the largest pharma company GSK at that time

Question 3

What kind of acquisitions/takeovers are there?

Answer 3

1. Friendly takeover – cooperate in negotiation.
2. Hostile takeover – the takeover company (target) is unwilling to be bought.

Question 4

Give an example of a hostile takeover

Answer 4

Pfizer take over Warner Lambert in 2000 to secure full right of Warner’s Lipitor

Question 5

Give an example of a friendly takeover

Answer 5

• Pfizer take over Wyeth in 2009 to become the largest pharma company
• Bristol Myers Squibb acquired Celgene for USD 74Bln in 2019

Question 6

What is the purpose of mergers and acquisitions?

Answer 6

1. Sustain/expand business
2. Generic competition especially for blockbuster products.
3. Economic of scales for business operations.
4. Cost reduction.
5. Facilitate pipeline - R&D?

Question 7

What is strategic alliance?

Answer 7

A formal relationship formed between 2 companies to pursue agreed upon goals while remaining independent companies.

It is aimed to create synergy through the
alliance. In areas of research, manufacturing, marketing and sales.

Question 8

What is the advantage of forming strategic alliance?

Answer 8

Strategic partners may provide resources such as products, R&D facilities, manufacturing facilities, knowledge, expertise, intellectual property.

Question 9

Give an example of ‘strategic alliance’ in pharmaceutical industry.

Answer 9

-BioNtech with Pfizer for clinical trials and subsequent production and distribution (sales) of Covid 19 vaccine.

Eisai and Biogen to co-promote monoclonal antibody Leqembi for Alzheimer’s Disease.

Question 10

What is a joint venture?

Answer 10

A business entity created by two parties or more, with shared ownership, shared risks and shared management.

–>Gain scale efficiencies by combining assets, products and operations.

Question 11

State examples of joint ventures

Answer 11

Pfizer and GSK formed a Joint Venture in consumer healthcare with OTC portfolio with leadership position in 2019.

Question 12

What is streamlining?

Answer 12

A company sells off its non-core business to another company with a profit.

Question 13

Give an example of ‘streamlining’

Answer 13

Pfizer sold their baby food business to Nestle, Switzerland.

Question 14

What is ‘licensing in and out’?

Answer 14

One company offers another company to market/sell its product(s)

Question 15

Give an example of ‘licensing in and out’

Answer 15

Asenapine, an anti-psychotic drug made by Merck, was licensed out to Lundbeck, a pharma company specialised in mental diseases, for sales and marketing.

Question 16

Name some ways through which pharmaceutical companies can ‘expand’ their businesses

Answer 16

1. Mergers
2. Acquisitions
   -friendly takeover
   -hostile takeover
3. strategic alliance
4. joint ventures
5. streamlining
6. licensing in and out
7. public offering to raise fund (IPO)

Question 17

Why is M&A one of the most important strategies for the pharma industry?

Answer 17

Due to off-patent of block-busters

Question 18

What are some drawbacks of M&A?

Answer 18

1. huge job loss due to restructuring.
2. stressful experience especially to the company being acquired
3. conflicts of company culture (participative type vs top-down management).
4. reduction / slash R&D spending (also headcount)