New pharmaceutical mergers on the way
Pfizer and Merck, two of the three largest pharma companies look to be hurting bad, as their blockbuster arthritis medicines are falling hard. Merck's Vioxx is already off the market, while Pfizer's sales of similar drugs Celebrex and Bextra are way down. Worse yet, lawsuits are looming from heart-attack victims who may have died using the drugs. Furthermore, the companies have few big drugs in the pipeline to take their place.
So what's a big drug company to do? According to a Wall Street Journal article ("Big Pharma, Flush With Cash, is looking Acquisitive", 2/16/2005), those companies along with #2 GlaxoSmithKline may try to grow themselves out of problems. These companies have plenty of cash and, according to the article, "their favored targets could be smaller companies with successful drugs in sought-after therapeutic areas."
Ripe for acquisition are mid-size companies like Bristol-Myers-Squibb, Schering-Plough, and Wyeth, all of which have better drugs in development. Merck already co-markets several drugs with Schering-Plough and that del is seen as very likely. AstraZeneca, which has a very low stock price, might be another target.
Smaller companies that might be snapped up include biotech firms Millennium Pharmaceuticals, Allergan, and Cephalos, all with some hot new drugs. One analyst quoted thinks it makes sense for big companies to buy small biotech firmss rather than licensing their products
As the WSJ article puts it, "Drug makers have been struggling for several years to come up with enough new products to keep their revenue growing. Many have sought to complement their internal research by licensing products from smaller biotechnology companies. Such licensing deals will remain hot, but with so many big companies chasing the same deals, licensing is becoming increasingly expensive."
Other attractive companies are generic drug makers like Mylan Laboratories and Hexal AG.
As major patents run out and as big pharmaceutical companies seem to stifle innovation in spite of their best efforts. The danger is that the new firms, once brought into the fold, will stop innovating, so in few years the biggest companies will have to buy more.
8:47:44 PM 
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