(2011) investigated that the biggest challenge facing the pharmaceutical
industry is an unprecedented number of pharmaceutical product portfolios and
their patent expiration between 2006 and 2016. It is suggested that due to rise
of generic competitions, the industry by 2016 is expected to lose 18% of total
sales which equal to a rough estimate of $137 billion (Jardines, 2011).
big pharmaceutical companies had announced initiatives such as mergers and
acquisitions (M&A) between both generic and branded companies to decrease the
costs and eventually increase the revenues. Staton (2015) has stated that
M&A can have its negative drawbacks as seen with the Merck & Co. and
Schering-Plough merger in 2009, where in order to merge with the company, Merck
& Co. had to cut jobs to create cash to make the merger possible. Clark
(2016) has understood that the benefits of M&A would allow Merck & Co.
to create opportunities to commercialise their products through promoting to
primary care physicians and well as using the technology gained through M&A
to communicate in a more targeted, cost-effective strategy.
some pharmaceutical companies may focus more on product diversification such as
biologics which in general have little generic competition in the US market,
various research shows that there is a common consensus that the pharmaceutical
industry is prepared to lose a large amount of revenue to generic competition
during the patent cliff (Lines M., 2012), despite strategic moves in the forms
of product diversification and M&A. This can be evidently seen with figure
8, with Merck & Co. demonstrating product differentiation to be of value to
patients and physicians (Clark., 2016), they still made a loss in revenue due
to losing product exclusivity.
M&A proving to have a significant impact on pharmaceutical companies,
however many business activities involving M&A are also to have been found
unsuccessful. By an estimate, Marks & Mirvis (2001) and Tetenbaum (1999)
found that failure in M&A pharmaceutical companies reach between 60-80%.
M&A can integrate certain resources for pharmaceutical companies to achieve
advantages over other companies in terms of generating company revenue. Capron,
Dussauge and Mitchell (1998) analysed how performance effects the R&D,
manufacturing, management, and marketing of product portfolios. These authors
have also claimed that amongst the various resources utilised that contribute to
the companies, performance, resources such as marketing, promotion, branding
and sales forces, are significant.