The weeks immediately preceding this year's meetings saw a rash of major acquisition announcements in Europe. Three major transactions were announced: the acquisition of Schwarz Pharma (Monheim, Germany) by UCB (Brussels, Belgium), Nycomed's (Roskilde, Denmark) acquisition of Altana Pharma AG (Konstanz, Germany), and Merck KGaA's (Darmstadt, Germany) acquisition of Serono (Geneva, Switzerland). These deals follow by several months the acquisition of Schering AG by Bayer. All four transactions reflect the realization by both buyers and sellers that mid-size regional players have little chance for success in an industry increasingly dominated by large global players.
The efforts by Nycomed and Bayer only threaten to exacerbate the oversupply situation in the European market, where dedicated global CMOs (defined as those with FDA compliance), regional CMOs (including those spun off from pharmaceutical companies), and branded and generic-pharmaceutical companies are all competing for business. Competition is intensifying as the Western European CMOs and generics houses lose more business to manufacturers in Eastern Europe and Asia. Major dedicated CMOs such as Nextpharma (Gottingen, Germany), Haupt (Berlin, Germany), and Vetter (Ravensburg, Germany) are increasingly looking to the North American market for future growth.
A shake-out is badly needed in European contract manufacturing business, but labor laws and the regional nature of much of the buying behavior make this seem unlikely. Efforts by major pharmaceutical companies to consolidate their supply bases may provide an impetus for supplier consolidation, but the process promises to be painful.
If you can't beat them . . .
Two major pharmaceutical manufacturers announced new ventures that seek to leverage the cost advantages of Asian suppliers.