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Roche Seeks ‘Targeted Acquisitions,’ Not Abbott-Sized Deal

Roche Holding AG will maintain a strategy of “targeted acquisitions” and isn’t seeking a mega-merger, Chief Executive Officer Severin Schwan said in comments that may rule out a bid for Abbott Laboratories’ prescription-drug spinoff.

“We’ve focused on smaller, bolt-on acquisitions,” Schwan said in an interview today in Frankfurt when asked whether an acquisition of a portion of Abbott’s business is attractive. “That’s how I see us continuing in our M&A strategy. We are not interested in mega-mergers. We are interested in very targeted acquisitions which complement our technologies and portfolios.”

Abbott said on Oct. 19 it would split into two companies, one selling medical products and a prescription-drug unit fueled by Humira, an anti-inflammatory with $6.5 billion in annual sales. Dependence on Humira may reduce Abbott’s attractiveness as the drug may face competition next year from a new Pfizer Inc. medicine, Jack Scannell, a London-based analyst for Sanford C. Bernstein Co., wrote in a report today.

“With the long-term future of Humira likely tailing off, we are hard-pressed to see the U.S. and European major drug companies we cover wanting to snatch up Humira and the other $10 billion worth of Abbott products,” Scannell wrote.

Abbott’s prescription-drug business may be worth $45 billion, said Jeffrey Holford, a London-based analyst for Jefferies Group Inc. Roche, Merck & Co. and Bayer AG are potential buyers, Holford said Oct. 19. Merck and Bayer declined to comment yesterday.

Out of Fashion

Merck and Roche have therapies similar to Humira that probably would prevent them from bidding, Scannell said, nor do Abbott’s late-stage experimental medicines have certain enough prospects to provide a rationale for a bid. Big mergers between drug companies also seem to be out of fashion, in part because they have hurt research productivity, the analyst said.

Consolidation is ahead for the drug industry, however, Schwan said today. He divided companies into three camps: generic-drug makers, which need to be big to compete on economies of scale; truly innovative companies, with some smaller players still able to compete; and companies which succeed at neither one or the other.

“Those people will not survive,” Schwan said. “With only marginal innovation, in today’s world, with today’s cost pressure, this is just not a recipe for survival. Those players will just disappear. Either they go bankrupt or they will be bought up or consolidate.”

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