Thursday, February 17, 2011

Can Pharma See Wisdom in the Sell-Off?

The Street is pushing Big Pharma members to sell off their non-core assets. Why? To keep stockholders happy, of course. Even the media-deprived know that last year was not a stellar year for pharma, finance-wise or any other wise.

The Street people are arguing that some Big Pharma members are worth more dissected than they are whole. If Abbott Labs, for example, were torn asunder and its various pieces sold off, it would make a handsome profit, and its stock price could jump 30%, according to an analyst quoted in Barron’s.

Obviously, that money could be used for what’s needed: R and D.

FiercePharma brings up the point, and it’s a good one, that such dissection would run counter to what pharma members have been trying to do with all these mergers and acquisitions, and that is survive – a sophisticated way of hitting the mattresses, if you will.

Our two cents: We’re with the Street, but not for the same reason. We think it’s time for pharma members to get back to their roots, and that is Research and Development, 24/7. If discovery, trials, regulatory, and so on were the same as they were 30 years ago, it would be one thing, but they are all much tougher today. The amount of focus and concentration needed is exceptional.

Too many divisions cause too many distractions, too many worries.

Barron’s is right: Bigger is not always better. In fact, it can be a real burden.

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