Cephalon, considered one of the most exciting biotech companies in the world, changed hands last Monday. Israeli Teva (also listed on the Nasdaq) offered $8 billion, beating rival Valeant's hostile offer by more than two billion. As a result of this tug of war, the stock of Cephalon (the name "brain" derives from its vocation in neurovegetative pathologies) went from 58 to 80 dollars in one month. It's the best an investor could hope for.
The big pharmaceutical industry, the so-called Big Pharma, has long since lost the magic touch. Numerous blockbusters (as in the jargon are called drugs capable of billing at least a billion dollars a year) have patents nearing expiry, and last year only 21 molecules made it through the painstaking approval process, which can take ten years and cost a billion dollars. In America, the world's number one market, the industry faces the unknowns of pending healthcare reform. And, as a result, the stock market performance of the sector over the past decade has been just the specter of that of the previous decade. The value on Wall Street of the number one Pfizer, just to give an example, grew by 1.270% in the decade 1991-2000 and halved in the following one.
While Big Pharma responds by cutting costs and raising dividends to try to attract investors, research - fatally - slows down. And so, the only way to quickly increase the number of drugs in the portfolio, perhaps already approved or close to being approved, is to gobble up the leaner companies that have ridden the biotechnological revolution better. Like Cephalon. Or like Genzyme, bought last year by the French Sanofi Aventis for the modest sum of 20 billion dollars. Eleven M&A deals have been announced since February, according to Evaluate Pharma, a pharmaceutical industry analyst firm. The market expects more.
If once pharmaceuticals were considered by investors as safe securities for the long term, today the perspective has changed: they play on their volatility. Since the beginning of the year, the stock market performance of the big players hasn't gone so badly: again on Wall Street (where non-American pharmaceutical companies list the so-called ADRs) Sanofi earned 23%, Pfizer 20, Glaxo 11 and Astra Zeneca l 8 percent (with Merck and Novartis virtually zero). But it's all thanks to an industry rally that has been propelling everyone upwards since mid-March. Perhaps also thanks to the dividend policy. Pfizer, led by new CEO Ian Read, just announced its 290th consecutive quarterly dividend.
That the scenario is evolving can be understood from a simple fact: the two best-selling drugs in the world such as Lipitor (an anti-cholesterol remedy by Pfizer which had a turnover of 10.7 billion in 2010) and Plavix (an anticoagulant by Sanofi, 9, $43 billion) are not represented in the top ten as of 2014, based on analyst forecasts. Their time is up. In their place, Roche's anticancer drug Avastin (which was in eighth position last year, with 6.22 billion in revenues) and Abbott's Humira are expected to rise. Other upstarts follow, such as Enbrel (arthritis, by Pfizer and Amgen, the biotech giant), Crestor (cholesterol, AstraZeneca) and Remicade (arthritis, J&J and Merck). If anything, from the forecasts on the top ten for the next three years, the name of Roche stands out, which in addition to Avastin, should benefit from the sales of two other anticancer blockbusters: Rituxan (which is already
