Last week, there were reports in the Financial Times and elsewhere of talks between AstraZeneca (AZ) and Bristol Myers Squibb (BMS) over the possibility of a merger deal. This week, continued reporting suggests that – while there had been discussions – the plan was quashed by shareholder objections.
It’s been a little while since there has been talk of a merger on this sort of scale in the pharmaceutical industry – estimates put the combined market value of AZ and BMS at over £300 billion. There have been some deals in the tens of billions of dollars range – notably Pfizer’s $43 billion (£36 billion) acquisition of cancer biotech Seagen in 2023, and BMS buying cancer and inflammation specialist Celgene in 2019 for $74 billion. But these have generally been focused on specific drug or technology pipelines, rather than mergers between big firms, covering multiple research areas.
I’d like to think that this is, in part, a recognition that megamergers are incredibly difficult to execute successfully. While they can be financially beneficial to shareholders in the short-to-medium term (and the bankers and consultants that advise on the deals), their long-term impact on research and development is rarely positive. Over a decade ago, former president of global research at Pfizer John LaMattina laid out his arguments as to why such megamergers cause huge and lasting disruption to R&D, distracting from long-running projects and reducing the diversity of research programmes. Those arguments are no less relevant today.
As an undergraduate, I spent a summer working in one of GlaxoSmithKline’s (now GSK) medicinal chemistry labs. This was a couple of years after the merger between GlaxoWellcome and SmithKline Beecham in 2000. Speaking casually to colleagues revealed, as might be expected, both positive and negative views on aspects of the merger.
One cause of significant day-to-day friction was a stubborn incompatibility between the two companies’ software systems – one was built around a Microsoft platform, the other around Lotus Notes. It sounds insignificant, and I suspect that the difficulties of integrating these systems was not high up the list of considerations for executives making the deal. But the headaches, wasted time and frustration that this – and the innumerable other aspects of integrating two large, established companies with their own cultures and ways of working – caused the research teams was real, even if it didn’t show up on corporate measures of productivity.
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