COMBINATION THERAPY
Mix and match, divide and conquer-the pharmaceutical industry of the last 100 years has seen acquisitions and mergers as a way of life
By LUCIO VICTOR JR., MD
Medical Writer
Photographs
BOANER MEDINA
Many corporate mergers are deemed necessary for the survival of the involved entities. Although mergers do not necessarily mean a joining of forces or a coequal union, they sometimes mean that one of them has to take a subordinate role-often the smaller entity. Other times mergers necessitate a more powerful but defamed corporation to take the name of the business it acquires. At some other times, the merger gives birth to a new entity, with a new name to boot.
One example would be the Swiss consumer products and pharmaceutical giant Novartis. Formed in 1996, Novartis traces its roots to three separate companies based in Basel, Switzerland-Geigy (founded 1758), Ciba (1859), and Sandoz (1886). On their own they did well, but the prospects of doing better by joining forces entered the picture. In 1970 Ciba and Geigy merged. Then in 1996, Sandoz joined Ciba-Geigy. The new company became Novartis, which in 2003 ranked sixth overall with total global sales of US$20.3 billion.
AstraZeneca, ranked seventh in global pharmaceutical sales in 2003, was the pro-duct of the April 1999 merging of Sweden's Astra AB (founded 1913) and the United Kingdom's Zeneca PLC. Zeneca had been the pharmaceutical arm of Imperial Chemical Industries (which also had interests in agrochemicals) before it was spun off in 1993.
Other moderate-sized pharmaceutical firms like Basel-based Roche have made a few acquisitions and mergers, albeit with smaller, local companies along the way. This would include Laboratories Sauter in 1958, Givaudan SA in 1963, Syntex Corp. in 1994, Boehringer Mannheim and DePuy in 1997, Genetech in 1999 and AVLMedical Instruments in 2000.
Meanwhile, Wyeth has made substantial mergers and acquisitions. Originating in 1860 as a small drugstore put up by John Wyeth, the John Wyeth and Brothers Co. later became Wyeth Laboratories which was acquired by American Home Products in 1931 from Harvard University for US$2.9 million. American Home Products was put up by four businessmen after purchasing Deskell Laboratories in California.
American Home Products kept Wyeth as a subsidiary and soon made other acquisitions like Ayerst and McKenna and Harrisson Ltd. in 1943, AH Robbins in 1989, and Lederle Laboratories. In 2002, American Home Products changed its name to Wyeth Pharmaceuticals. This may seem strange to the Philippine market (and also other markets outside the US) since American Home Products is already known in other countries as Wyeth.
American Home Products successfully entered the Philippine market in 1948 as Wyeth and later on entered a joint venture with AT Suaco and Co., a local Philippine pharmaceutical in 1959 forming Wyeth-Suaco, locally. This was later changed simply to Wyeth.
FAMILY AFFAIRS
Many pharmaceutical corporations started out as family businesses. For example, global giant Bristol Myers Squibb traces its roots to a pharmaceutical firm established by Edward Robinson Squibb in New York in 1858. In 1895 the company started to be recognized as ER Squibb and Sons-apparently by the time his children were old enough to help in running the business.
Bristol-Myers, meanwhile, started with William McLaren Bristol and John Ripley Myers's decision to acquire New York's Clinton Pharmaceuticals. The year was 1887, and Clinton was bought for US$5,000. In 1943 it bought another New York-based company, Cheflin Laboratories. This started a chain of acquisitions, which included cosmetics company Clairol, nutrition company Mead Johnson, Zimmer, Drachett and Westwood. In 1989 ER Squibb merged with Bristol-Myers.
In 2000, BMS divested itself of Clairol and Zimmer but acquired DuPont Pharmaceuticals (which had been controlled by the DuPont family since its founding) the following year for US$ 7.8 billion.
ACCUMULATION
Mergers between large and medium-sized transnationals are usually fueled by interest and need. Sometimes, buying companies are interested in a product or a series of products being offered by the corporation being sold. In other cases, mergers between two companies (or more) are sparked by each corporation wanting strength in numbers and stability in unity. Other reasons would be the widening of a product line or improving the quality of products offered by either corporation through the sharing of technology, knowledge base, and resources.
Global number two GlaxoSmithKline was formed when GlaxoWellcome and SmithKline Beecham merged in January 2000. Its long history began in 1830 when John K. Smith opened a drug store in Philadelphia. In 1841, his brother George joined the business to create John K. Smith and Co. In 1865, Mahlon Kline joined the business, leading to the establishment of SmithKline and Co. in 1875.
In 1891, SmithKline and Co. became SmithKline and French, when it acquired the drug-wholesaling firm French Richards and Co.
A year shy of its centennial, SmithKline and French bought Allergan and merged with Beckman Instruments Inc. to form SmithKline Beckman. In 1989, SmithKline Beckman merged with the Beecham Group PLC to become SmithKline Beecham. In 1994, SmithKline Beecham acquired both Sterling Health and Pharmaceutical Services Inc.
Beecham Group PLC was founded by Thomas Beecham in England in 1842. It had made smaller albeit substantial acquisitions during its early years; in fact, it made an unsuccessful bid in 1972 to take over the Glaxo Group.
Meanwhile, Glaxo Wellcome started as Joseph Nathan Co. in New Zealand in 1873; it was only officially registered as Glaxo in 1906. In 1995, the Glaxo group merged with the London-based Burroughs Wellcome Inc. to form Glaxo Wellcome.
THE PFIZER EMPIRE
Not all big corporations have gone through the typical marriage by name changing and hyphenation. A corporation like global leader Pfizer Inc. has managed to retain its powerful name while making substantial acquisitions. Its most recent conquests were Warner Lambert (2000) and Pharmacia (2003), which many considered a business coup.
Pfizer, founded in by Charles Pfizer and Charles Erhart, has grown from a small store to the biggest pharmaceutical corporation in the world, with a 10-percent hold of the global pharmaceutical market.
By the time it merged with Warner-Lambert, Pfizer was fifth and was estimated to be worth US$302 billion.
Warner-Lambert also started as a Philadelphia drugstore in 1856, but it became the William K. Warner and Co. just 10 years later. In 1908, Pfeiffer Chemicals bought William K. Warner and Co. but retained the respected name of Warner.
In 1955, Warner and Co. merged with the Lambert Pharmaceutical Co. The Lambert Pharmaceutical Co., which started with the invention of the antiseptic Listerine, officially became a business outfit in 1880 in St. Louis, Missouri. By 1914, Jordan Lambert's business expanded as it went into consumer products.
In 1976, Warner-Lambert acquired Parke-Davis, another American pharmaceutical founded in 1866 by Harvey Parke and George Davis in Detroit, Michigan. Parke-Davis remained a subsidiary of Warner-Lambert until the merger with Pfizer in 2000.
Before the Pfizer-Pharmacia union in 2003, Pharmacia was a conglomerate of several moderate-sized businesses from different parts of the globe. It started as Carlo Erba Pharm Italia company in 1853. This company survived to the 1990s until it merged with Kabi-Pharmacia in 1993. Kabi-Pharmacia was also a product of the merger between the Swedish firms Pharmacia (established 1911) and Kabi Vitus (1931) in 1990. In 1995, Kabi-Pharmacia forged a union with Upjohn Co., a firm founded in Michigan in 1886. A much larger union took place between Pharmacia and Upjohn, as well as the Searle-Monsanto Group in 2000. Searle Monsanto was the product of the merger of the GD Searle Co. and Monsanto Chemical Works in 1985. The confusing series of "unions" that involved Pharmacia and Upjohn and Searle-Monsanto culminated in 2000 when they became simply known as Pharmacia Inc. The union, however, did not last long, as Pfizer acquired Pharmacia in April 2003.
"TIEBREAKER"
As much as mergers have formed large corporations, breaking with traditions and ties have also played an important role in the history of pharma corporations.
For instance, American pharmaceutical Merck and Co., which until Pfizer's and GSK's ascendancy occupied the top spot, shares common roots with the Merck Group of Germany. Aside from the common name, both companies share a history that goes as far back as 1668 when Friedrich Jacob Merck put up a family pharmacy in Darmstadt, Germany. In 1827, one of the heirs, Heinrich Emmanuel started the E. Merck Co., a chemical-pharmaceutical firm that is the forerunner of today's Merck Group. Later on Heinrich Emmanuel's son, Wilhelm Ludwig, took over the business; when Wilhelm's son George grew up, Wilhelm saw a chance for the family-run business to expand into the US.
In 1891, George Merck left Germany to establish Merck and Co. in New York and expand the parent company E. Merck. However, at the end of World War I George Merck was forced to permanently cut formal ties with the parent company, as he already became an American citizen in 1902.
Merck and Co. grew and entered into important mergers. One was in 1927 with Powers-Weightman-Rosengarten; another was in 1929 with HK Mulford Co. The most important merger was in 1953 with Sharp and Dohme. Merck Sharp & Dohme Philippines is a subsidiary of Merck and Co.
Meanwhile, E. Merck has survived and remains largely family owned, with less than 25 percent owned by private stockholders. At present the company is known as the Merck Group and is into the pharmaceutical, chemical, and laboratory distribution businesses.
GOVERNMENT BACKING
The most recent development in the global pharmaceutical scene is the acquisition of the French-German firm Aventis by another French firm Sanofi-Synthélabo last April. The union effectively made Sanofi-Aventis the world's third largest pharmaceutical group, estimated to rake in at least US$100 billion in global revenue. The merger was supported by the French government, which did not want either Aventis or Sanofi-Synthélabo to end up in the hands of a non-French corporation, or worse merge with a non-French pharmaceutical. This blessing by the French go-vernment derailed plans by Swiss giant Novartis to acquire Aventis.
Headquartered in Strasbourg, France, the Aventis Group was formed in 1999 through the acquisition of the German Hoechst AG (Hoechst Marion Roussel) by the French company Rhone-Poulenc-Rorer. Rhone-Poulenc-Rorer, which traces its roots to 1856, is itself a corporation made up of seven or eight entities that have merged through the years and has within its enclaves vaccine leader Pasteur-Merieux-Connaught. Hoechst on the other hand started in 1880 as a small family-owned dye, chemical, agrochemical, and fertilizer business. In December 1951 Hoechst AG was formally created.
Sanofi-Synthélabo is a turn-of-the-century corporation that started in 1976 with Sanofi, a subsidiary of the French petrochemical giant Elf Aquitaine (which also owns oil company Total). Sanofi later acquired Sterling-Winthrop from the Eastman Kodak Company in 1994 to form Sanofi-Winthrop. Winthrop, a once-powerful player, initially merged with Frederick Stearns Inc., forming Winthrop-Stearns, which was later acquired by the Eastman Kodak Company as Sterling-Winthrop.
Synthélabo began as the pharmaceutical-research arm of cosmetics company L'Oreal. The Sanofi-Winthrop and Synthélabo merger took place in 1999.
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