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Despite a recent report heralding the ascendancy of the Welsh biotechnology industry, the majority of biotech companies in Britain are in danger of fading away according to a report in London's  Financial Times. According to the Times; “Over the past year the sector has witnessed a string of high-profile drug failures, share prices have plunged and there have been almost no public listings. The sector is shrinking as private biotech companies are bought by cash-rich pharmaceutical companies, most of which are based abroad”.

“The quality of British science has never been in question. Commercial biotech’s perennial problem, say the pundits, is instead a lack of financing, management expertise and commercial savvy. “The UK has always labored under the yoke of not having enough venture capital around and not having the people prepared to take risks” said one analyst.” Nevertheless, the UK is currently  responsible for more than one-third of the European Union’s total drug pipeline.

The British biotechnology industry isn’t alone. Consolidation of the US biotechnology industry has been quietly going on for the past 5-10 years. Many successful American companies have been acquired by major pharmaceutical companies. For example, MedImmune and Millennium Pharmaceuticals were recently purchased by Astra Zeneca and Takeda Pharmaceuticals respectively. That said, I don’t think that what is happening in the UK is unique to the British biotech industry. The bottom line is this; Biotech is a capital-intensive, briskly paced, risky business that is, at most, 35 years old. More companies than not are expected to fail. Pharma, on the other hand, is a conservative and experienced cash-rich industry that is over 100 years old. Therefore, it follows that pharma companies, when possible, will buy successful biotech companies to bolster their thinning pipelines to stabilize their stock prices.

In my opinion, the seminal underpinning and essence of the biotech industry is to harness scientific originality to create innovative l technologies and products. That said, I believe that the biotechnology industry has finally become an integral part of the life sciences ecological food chain (think of biotech as a producer and pharma as a consumer).  I can’t think of many biotechnologies company executives (with the exception of Biogen) that wouldn’t consider acquisition or merger with a major pharmaceutical company as an ideal exit strategy for their stakeholders!

Until next time….

Good Luck and Good Job Hunting!!!!!!

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Millennium employees find themselves in an enviable position that most pharmaceutical and biotechnology employee would die for!  Shortly after Takeda announced that it would buy Cambridge MA-based Millennium Pharmaceuticals for $8.8 billion, it offered many Millennium employees retention bonuses to stay at the company for 12 to 24 months until the acquisition is completed. These bonuses will be in addition to cash that many of Millennium’s 1,000 employees will get by exercising their stock options (Takeda is paying a premium to purchase all of Millennium outstanding shares of stock).

While offering retention bonuses to employees of a company that is going to be acquired is unusual it is not unheard of.  Retaining key employees during an acquisition typically makes the transition a lot smoother.  Further, it signals to extant employees that management values their services and that their continued presence at the company is vital to its success.  Finally, it serves to reduce the stress and uncertainty felt by many employees when a company is sold.

In my opinion, offering Millennium employees retention bonuses is a very bold and smart move by Takeda.  Unlike other pharmaceutical companies who have acquired biotechnology companies for their approved drugs or investigational medicines in their pipelines, this is Takeda’s first foray into the biotechnology business. Put simply, Takeda executives lack the expertise and requisite skill sets necessary to successfully compete in the biotechnology arena.  Encouraging and retaining employees who helped to make Millennium a success is a brilliantly crafted strategy that will permit Takeda to quickly learn how to compete in the biotechnology space in a fiscally-responsible manner.

One of the biggest hurdles to overcome after an acquisition is merging the corporate cultures that existed at the two companies prior to acquisition. One possible solution to this problem is to restructure the acquired company and terminate many or all of its employees. Another solution is to determine (over time) which employees are or aren’t vital to operation of the company. Although this approach is not as draconian as the first option, it requires an inordinate amount time and money to implement. Ask any Pfizer executive about this the utility of this approach (I think that they are still trying to recover from the Warner Lambert and Pharmacia acquisitions that took place in the mid to late 1990s).  

I think the Japanese got this one right.   Maybe we Americans can learn a thing or two from them?

Until next time…

Good Luck and Good Job Hunting!!!!!!!!!!!

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Takeda Pharmaceutical Co., Japan’s largest pharmaceutical manufacturer, announced that it has agreed to buy Cambridge MA-based Millennium Pharmaceuticals for $8.8 billion. Millennium, founded in 1993 by high profile MIT researchers and once heralded as one the most innovative American biotechnology companies, never lived up to analyst’s expectations. That said, the company did develop and win regulatory approval for an anti-cancer drug, Velcade, which is expected to garner additional approval for wider use in oncology later this year.

Velcade, which is used to treat relapsed multiple myeloma after other drugs fail generated more than $800 million last year. Millennium anticipates U.S. approval by June to promote Velcade as an initial therapy to treat these disorders. Millennium markets Velcade in the US and shares revenue with Johnson & Johnson which markets Velcade in 85 other countries. Analysts predict that the Takeda acquisition will help to propel Velcade to blockbuster status.

The Takeda-Millennium deal follows Eisai Co.’s (another Japanese company) agreement in December to buy the U.S.'s MGI Pharma Inc. for $3.9 billion as Japanese companies, aided by a weak dollar against the yen, seek growth abroad. Japanese companies have been hampered by government-ordered price cuts, weak pipelines and a lack of new products  As one financial analyst put it ``There's no doubt the weak dollar against the yen is making U.S. biotech very attractive right now to potential Japanese buyers,''

Takeda’s best seller is the diabetes drug Actos which is slated to lose patent protection in the near future. Acquisition of Millennium provides Takeda with an entrée into the oncology and cardiovascular markets both of which are poised for expansive growth in the next five years. Analysts also believe that the Millennium acquisition will boost Takeda’s drug discovery and development flow. Millennium is conducting human trials with experimental drugs for cancer, heart disease, gastrointestinal disorders and rheumatoid arthritis.

The ongoing acquisition of American biotechnology companies by Japanese pharmaceutical companies reminds me of  the Japanese foray into the US real estate market in the early 1990s. Only time will tell whether the Japanese will be able to hang on to their acquisitions this go around (they weren’t the last time).  Earlier this week, Switzerland's Novartis AG agreed to buy 77 percent of eye-care company Alcon Inc. in a two-step transaction totaling $39 billion. Does anybody else see a troubling trend developing here as a result of the recession that we are in or heading into?

Don’t be surprised to see some “asset reallocation” and downsizing at Millennium. The Japanese are well recognized for increasing efficiency and work output with smaller numbers of employees.

Until next time….

Good Luck and Good Job Hunting (not in Cambridge MA)!!!!!!!!

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