Pharma Strategy Blog

The recent financial crisis and market meltdown that led to a credit crunch will have impacted many start-ups and baby biotechs, many of whom will have a year or less of cash to survive.

This creates new opportunities for buyouts from larger pharma companies with cash in their pockets looking for good deals – Pfizer, Novartis, Roche and GSK are all known to have reserves as do medium sized biotechnology companies such as Celgene.  Baby biotechs with good products and data will not have a problem finding a suitor but it in the current depressed market they may be forced to consider this option earlier than anticipated and for a lesser price.  Such is life.

The first example of this trend is GSK, who announced the successful completion by its wholly-owned subsidiary Gemstone Acquisition
Corporation for shares of common stock of Genelabs Technologies, Inc.
(Nasdaq: GNLB). The tender offer expired at 12:00 midnight, New York City time, on Tuesday, January 6, 2009.  Genelabs is a biotechnology company focusing on infectious diseases such as hepatitis C and antiviral treatments, therapy areas which fit in well with GSK's portfolio.  In November, Genelabs reported revenues of $0.3 million and a net loss of $4.9
million, or $0.11 per share, for the third quarter of 2008. This
compares to revenues of $4.6 million and a net loss of $0.1 million, or
$0.00 per share, for the third quarter of 2007.

Overall, judging by the requests we are getting to analyse portfolios and evaluate oncology opportunities, I can see more of these kind of deals emerging in 2009 as small biotech fight for survival.  Given the challenges big pharma is facing with major patent expiries over the next 2 years and dwindling pipelines, this could well be a marriage in heaven for some, but there will be some pain with increased layoffs and 'cutting the fat' as pharma tries to get lean and mean will preserving profit margins.  Savvy people in business development and licensing should still, howver, be able to get excellent value for their companies in the current market.