Deals in the pharmaceutical sector worth more than €100 billion are to inject new life into regulatory and lobbying work in the European Union over the coming months.
Lobbyists began picking over the implications of deals announced this week that will have far-reaching implications for the EU’s health and industrial policies.
The transactions under discussion involve major global firms as well as half a dozen smaller companies, and will pull in hundreds of lawyers and public-relations professionals.
GlaxoSmithKline and Novartis aim to swap assets worth $23 billion (€16bn), bolstering their already strong presences in vaccines and oncology, respectively, and to pool their consumer health businesses, which include products from toothpaste to cold reliefs to anti-smoking gum.
In parallel, Novartis will sell its animal health business to Eli Lilly, while Canadian firm Valeant Pharmaceuticals has made a $46bn (€33bn) hostile bid for botox-maker Allergan. Biggest of all, it emerged at the weekend that Pfizer had approached AstraZeneca to discuss a deal potentially worth $100bn (€72bn).
Richard Bergström, director-general of EFPIA, the European trade association of pharmaceutical companies, said the moves showed “the health of the European industry and the continued attraction of Europe”.
But Tim Reed, director of Health Action International, a patients’ campaign group based in Amsterdam, described the plans as “dangerous engineering by transnational companies with a focus on the bottom line rather than patient benefit”.
With much of the focus on the competition issues that the realignments will raise, lawyers said that the scale and number of the envisaged deals could overwhelm the 12 case-handlers in the European Commission’s competition department that deal with mergers in the pharmaceutical sector, led by Henri Piffaut. The deals may already have been discussed informally with the Commission, but will still require its regulatory approval.
Pharmaceutical takeovers are always complex and labour-intensive, lawyers pointed out, and in addition, rival pharmaceutical companies are expected to ask their law firms to monitor developments and deal with the questionnaires sent by the Commission to market participants – or even to stoke concerns so as to increase the extent of divestments.
Key players in the discussions are likely to be Bertrand Louveaux, lead antitrust partner at Slaughter and May, and Romina Polley and Patrick Bock, partners at Cleary Gottlieb Steen & Hamilton, who are representing GSK, and Thomas Janssens of Freshfields and Christopher Bellamy of Linklaters, who are representing Novartis. Pfizer has in the past been represented by Ian Forrester of White and Case, while Francis Murphy of Jones Day has looked after AstraZeneca.
Whether or not the deals go through – some are still at an exploratory stage – they have re-ignited regulatory business after a quiet 12 months for merger lawyers.
The last wave of large-scale merger reviews in the pharmaceutical sector took place almost five years ago, when Merck bought Schering Plough for $41bn (€30bn) and Pfizer bought Wyeth for $68bn (€49bn).
Thomas Tindemans of Hill & Knowlton said the plans would raise broader communication issues. “The companies will need to demonstrate what the public interest is,” he said. Already reservations have been expressed by consumer and patient representatives.
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François Meunier, director-general of Europe’s leading cancer research organisation, warned that “when pharma mergers centralize drug pipelines and portfolios, it is critical that new, even bigger silos [should] not be created, but on the contrary that they could stimulate and open up to new partnerships”.
Helle Aagaard of Medecins sans Frontières saw risks in “fewer producers and increased concentration”.
Michel Goldman, head of the EU’s public-private partnership, the Innovative Medicines Initiative, said the concentration would be “good for patients awaiting new cancer products, with benefits too for HIV sufferers from new strengths in GSK’s work on vaccines”. Bergström described the nature of the GSK-Novartis deal, with its selective swap of assets, as an interesting departure from the classic takeover. “I expect to see more deals like this in the future”, he said.
Andrew Witty, GSK’s chief executive, said the deal was part of his plan for “targeted” mergers, and industry insiders have remarked on the elegance of the approach.
The new round of pharma reorganisation is going ahead in the absence of an overall EU industrial strategy: a long-promised Commission communication on competitiveness in the pharmaceutical industry, under the sponsorship of the now-absent enterprise commissioner, Antonio Tajani, has never appeared.