Mergers and Acquisitions Dynamics in the Biotechnology Industry

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This article aims to provide an explanation of the driving forces of consolidation involving genomics-based biotechnology and small pharma companies with large pharma. The factors that lead firms to choose acquisitions over alliances have set forth the foundation for a new form of governance of technological change. The synergies resulting from internally coherent and mutually supportive resources along the drug discovery value chain totally justifies much of the mergers and acquisitions (M&A) activity. As such, M&A can help firms become more competitive through the reconfiguration of their resources, skills and capabilities in the face of changing business environments. There is clearly an awareness that finding a gene or protein target does not automatically lead to a new therapeutic drug. As such, many of the genomics companies have gone through a reality check and realised that they do not have the necessary expertise, intellectual property and resources for securing their long-term survival. Consequently, acquisitions have multiplied over the last years, mainly fuelled by such requirements as managing product portfolios, accessing critical capabilities, entering new markets, building critical mass, accelerating research and development, and reducing costs.