Consumers may be saving more and spending less, but big pharma is on a shopping spree. And I'm not talking about the really big deals including Roche buying Genentech, Pfizer buying Wyeth and Merck buying Schering-Plough. I'm talking about the two deals that have been done in less than a week between major drug companies and baby biotechs specializing in oncology. It's what one analyst recently coined the growing "P & A" trend in biopharma. It's not so much about mergers and acquisitions (M & A) as it is about partnerships and acquisitions.
First, Johnson & Johnson ponied up nearly a billion bucks for Cougar Biotech. And it did it before seeing late-stage test results to determine if CGRB's prostate cancer drug extends lives, which is the new gold standard in oncology treatments. That might have raised a few eyebrows. But it's a relatively small gamble for a company as big as JNJ. And one source tells me JNJ may have quickly pulled the trigger because several other companies were courting Cougar. As that person said, "There's a lot of hand-wringing and crying over spilled milk going on." In other words, you snooze, you lose.
Then, today Sanofi-Aventis is hooking up with Exelixisin a deal that could be worth more than a billion dollars over time on two cancer drugs in early-stage clinical trials.
EXEL's CEO, George Scangos, was pretty forthcoming about big pharma's interest. On the conference call, he revealed that almost every other major drug company kicked the tires. Exelixis recently did a similar partnership with Bristol-Myers Squibb. And Scangos said the company is in "additional deal discussions" on other stuff in its drug development pipeline. But he added the company is in the enviable position of sitting on a sizeable pile of cash right now and doesn't need to do another deal. Talk about leverage!
Of course, when there's a confluence of deal activity like this everyone starts wondering who's next? There's always a list of usual suspects in oncology including OSI Pharmaceuticals and Onyx, just to name a couple, but these days it seems that names flying under a lot of investors' radars are getting into the game. It's worth noting that the two most recent deals were both done before the big ASCO (American Society of Clinical Oncology) meeting, which starts tomorrow in Orlando.
That's where biopharma struts its stuff. There's not as much big stuff at ASCO this year as there has been in recent years, but it's apparently enough to get big pharma to open its checkbook.
And it's enough to get our attention. I'll be reporting live from ASCO next Monday and, for the first time (provided I don't get kicked out again), our camera position will be inside the air-conditioned convention hall.
I'm also hoping with Monday's deadline looming that a General Motors bankruptcy filing doesn't blow out our coverage.
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