Frenetic activity won't fix the pharmaceutical industry's problems

 

Outlook The pharmaceutical sector is creating more excitement in the world's financial centres than the opening of a warehouse full of free Viagra in a retirement community.

That drug's American maker, Pfizer, is said to have played footsie with AstraZeneca over the possibility of a blockbuster bid. At the same time European rivals Glaxo and Novartis are hoping to cure what ails them by playing a game of billion-dollar swapsies.

Both appear to make sense, at least on the face of it.

It's not warehouses full of its signature drug that Pfizer needs to dispose of so much as it is the warehouses full of cash that the company has stashed overseas.

Spending that money outside the US is logical because of the cut Uncle Sam would take were it to flow back home. Hence the news of an approach to Astra. It helps that some analysts feel Astra is a prime target on account of its being under-valued by European investors, who, let's face it, are probably feeling more than a little bruised by the company's hugely disappointing recent history combined with the prospect of five years of falling revenues.

Astra's shareholders might be very interested in hearing what Pfizer has to say. But what about Pfizer's shareholders? Their company's market capitalisation is now less than the amount of their money it used to pay for three previous mega-deals. Blockbuster drugs might generate shareholder value but, as a rule, blockbuster deals don't.

Which brings us to Glaxo and Novartis. Bribery allegations have left the former, once the bluest of blue chips, looking a bit grey of late. Promising shareholders a $4bn (£2.37bn) bung as a result of it shaking its portfolio up should at least stop them from fretting too much in the short term.

So Glaxo is selling its subscale cancer drugs business to Norvartis for what looks like a tasty price. The latter, meanwhile, is sending its vaccines business (minus 'flu) in the opposite direction, while the two are combining their consumer-products operations with Glaxo in the driving seat. Glaxo also gets a transfer fee as a result of the swap, some of which is earmarked for the shareholder largesse I mentioned. Phew!

This is about both focusing on what they're really good at, an eminently sensible strategy, and both could ultimately emerge as winners from the deal.

But none of this frenetic activity fixes the industry's core problems. They are its continuing struggles to replace one-time blockbuster drugs whose patents are expiring with similarly lucrative new treatments combined with the harsh spotlight that is being shone on industry practices.

All this pharma M&A could easily be compared to Tamiflu, the controversial 'flu drug made by Roche: It only treats symptoms, and even its effectiveness against them is questionable. Plus it's expensive, and there are side effects that can make the patient feel worse than the illness.

Life and Style
Customers can get their caffeine fix on the move
food + drink
Life and Style
techCould new invention save millions in healthcare bills?
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
PROMOTED VIDEO
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + ents
News
peoplePamela Anderson rejects ice bucket challenge because of ALS experiments on animals
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Arts and Entertainment
tvExecutive says content is not 'without any purpose'
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
Arts and Entertainment
tvSpielberg involved in bringing his 2002 film to the small screen
Sport
sportLeague Managers' Association had described Malky Mackay texts as 'friendly banter'
News
A polar bear’s diet is rich in seal blubber and half of its own body weight is composed of fat
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
peopleCareer spanned 70 years, including work with Holocaust survivors
News
people
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
News
London is the most expensive city in Europe for cultural activities such as ballet
arts
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Application Support - Enterprise Java, SQL, Oracle, SQL Server

£45000 - £55000 per annum: Harrington Starr: A well-established financial soft...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape