Kenneth Frazier, CEO of Merck (MSD outside the US), has said the company is looking to develop its pipeline through partnerships and acquisitions – and that the future for pharma is companies working together.

Speaking to an investor group at a Goldman Sachs event in New York, Frazier argued that the use of combination therapies to treat conditions such as hepatitis C made partnership necessary.

“The future of the industry is going to be more partnerships,” he said. “Unquestionably, you should expect more deal activity and more product-driven business development.”

Merck intended to develop its pipeline by acquiring drugs developed by specialist companies, he noted: “My goal is to augment the pipeline. The way to augment is to find those assets that we can acquire. Typically, for Merck, the sweet spot has been [to acquire] earlier rather than later.”

An example of Merck’s acquisition strategy is its purchase of specialist drug company Inspire Pharmaceuticals in 2010; while an example of its partnership strategy is its collaboration with Roche to market Merck’s hepatitis C drug Victrelis in 2011.

Frazier’s comments echo the recent statement by Roche CEO Severin Schwan that the company was ready to make acquisitions – including potential billion-dollar deals – in order to exploit the commercial opportunities opening up in stratified medicine.

Roche CEO Severin Schwan has opened the door to future billion dollar acquisitions as part of the company’s latest strategy.

Schwan said in an interview with Bloomberg that the company is ready to “seize” the right opportunity should it arise as the company focuses on medicines alongside diagnostic tools that show which patients will benefit from certain drugs.

“We see the synergies between pharma and diagnostics coming to life,” said the Chief Executive.

The CEO pointed towards Roche’s 2008 $3.4 billion purchase of US diagnostic company Ventana Medical Systems as an example of the size of deal the company would be open to but also admitted smaller deals may be possible. “I could also see mid-sized acquisitions as we had in the past,” he said. However, Schwan said that the Ventana deal “would certainly be a size, if the right opportunity was to come up, that we would look at.”

Three of the four announced acquisitions last year were aimed at boosting Roche’s diagnostics unit – which accounts for around a fifth of the Swiss-based company’s sales. Roche recently completed an €11 million cash deal, plus an additional €2 million in potential milestone payments, for the platelet-testing company Verum Diagnostica.

Alongside the Verum deal, Roche acquired mtm laboratories AG for €130 million, plus €60 million in milestones. It also bought PVT Probenverteiltechnik GmbH and its US distribution arm PVT Lab Systems LLC, in March 2011 for €65 million, plus a possible €20 million in milestones.

Despite the future plans, Schwan expects 2012 to be a tough year with growth coming from emerging markets in Asia and Latin America. “There is no doubt that the market environment will remain challenging,” he said. “What I would expect for 2012 is the continued challenging environment and a shift from the developed to the developing markets in terms of market growth.”

Sanofi is expected to overthrow Pfizer’s nine-year reign as the world’s biggest drug maker, according to new research.

The French pharmaceutical company is expected to retain the top spot until at least 2016, with Pfizer falling to third place behind Novartis due to the loss of Lipitor’s US patent protection, according to EvaluatePharma (see figure one).

The report says that Sanofi’s numerous acquisitions over the last decade have contributed largely to the company’s success, gaining $20 billion after it bought out Genzyme.

Sanofi’s mergers over the last decade have contributed a great deal to its current position, starting with its $30 billion deal with Synthélabo in 1999.

It is expected that the company will retain its top position until at least 2016, mainly thanks to sales of enzyme replacement therapies through its acquisition of Genzyme.

Also, the company’s addition of Cerezyme and Myozyme blockbuster drugs will help fill the gap left by Lovenox, Taxotere, and Plavix, which loses US patent protection in 2012.

Pfizer’s $68 billion buyout of Wyeth in 2009 helped fill the gap left by Lipitor, but it will be difficult to replace the drug’s global sales figure of $13.4 billion seen in 2008, which set the record as the biggest selling medicine.

Following its loss of US patent protection in November 2011, Lipitor sales are estimated to shrink to $2 billion by 2016.

However, pipeline products such as rheumatoid arthritis (RA) pills tofacitinib and Eliquis are expected to boost Pfizer’s drug sales after 2016, which will help retain the company’s position in the top-five pharmaceutical companies.

Merck’s four-year outlook is seen as bleak despite its takeover of Schering-Plough for $41 billion in 2009, with only 1% annual sales growth predicted, conceding to European companies GlaxoSmithKline and Roche to overtake the company.

EvaluatePharma predicts that Johnson & Johnson’s recent pipeline successes will benefit the company in the coming years, despite its drugs arm being substantially smaller than the five biggest pharma companies.

It is thought that Novartis will be Sanofi’s closest competition over the next few years, with strong sales growth from Gilenya and Tasigna due to Diovan’s loss of patent protection next year.

Figure 1:

Takeda Pharmaceutical has called a halt on big deals following its recent $13.7 billion buyout of Nycomed.

Takeda’s President, Yasuchika Hasegawa, has said that the company will hold back on big mergers and acquisitions to “focus on integration for the next year or two”, adding that Japanese companies have been typically poor at integrating foreign acquisitions in the past.

Hasegawa said that domestic deals are even harder to get right, and told the Wall Street Journal that “it’s not worth it”.

He commented that acquisitions outside Japan tend to work better when companies are looking to fill in gaps, such as Takeda’s plans to develop products and pipeline projects to make up for loss of patent protection on its leading drug, Actos.