Chomp Chomp
7/24/08
It’s hard enough to compile all of the information needed for our various S&P 500 analyses here at Brilliont and a complete look at the S&P 500 is regularly interrupted when companies buy each other. (An example is Teva Pharmaceuticals buying Barr Pharmaceuticals) With so much money being made in pharmaceuticals, and the pending generics that result when the patents run out, an article in the Economist explores the reasons for so many mergers in this industry.
It seems that when companies are jockeying for greater market share in an already over saturated industry, mergers are inevitable. In generic pharmaceuticals, as in airlines or fast food, prices can only go so low before mergers seem logical for expansion and survival. I do not feel that setting a goal of $20 billion in revenues by 2012 (double current revenues) by Teva Pharmaceuticals is necessarily a smart move, since synergies between merging companies may be forgone in order to reach such a lofty goal. Oftentimes companies may expand through M&A instead of organically because it seems easier to do for short term goals to be met. From the surface, it seems that the pharmaceutical companies are growing in the most logical way in a saturated market. But with new generics being formed, such as the “biosimilars” mentioned in the article, are there new markets being opened?
-Amit
akooner@brilliont.com
Tags: Barr Pharmaceuticals, Economist, S&P 500, Teva Pharmaceuticals
