A few hours after I had written this post about the Pfizer/Esperion spin-off signaling a changing of the times in big pharma, I see I this story about Bristol-Myers Squibb divesting ConvaTec to some private equity groups (Nordic Capital VII and Avista Capital Partners) for $4.1 billion dollars. This press release jogged my memory and I remembered reading about BMS divesting its medical imaging division for 500 something million, also to Avista sometime in late December. While neither deal is applicable to my “entering a new R&D phase” projection I put forth in the aforementioned post, the move does still signify the big players’ willingness to concentrate on what they do best.
Now, I don’t follow non-biopharma industries real closely so you can correct me if I’m wrong, but doesn’t this seem to be the anti-GE strategy (i.e.; divesting non-synergistic business units)? I’m not sure what this means. Maybe pharma is choosing potential growth rate over mitigating risk by diversification for a potential larger return? Or, contrary to my thesis, big pharma may just be trading a failed (or stagnant) asset for one with a brighter future by buying the next hot commodity. With licensing deals for in-demand, phase 2 compounds increasingly in the 100-200m upfront, $1b biodollar every dime helps (even if you have 11 figures of cash in the bank.
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Eben is a highly caffeinated business development associate at a small, cash sensitive pharmaceutical company somewhere in Massachusetts. He enjoys cliche-less banter, compartmentalization, non-equilibrium thermodynamics and NPV analysis. Agree or disagree with what he's posted? He encourages comments.
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May 6, 2008 at 8:37 am
[...] a previous post, I speculated on reasons for shedding of non-core pharmaceutical assets by BMS. Don’t read [...]