Eli Lilly spurns trend of mega-mergers

Release Date: 2009-03-29

The chief executive of Eli Lilly has ruled out a link with Bristol Myers Squibb as he criticised the current round of 'mega-mergers' and the consolidation trend in the sector.

The chief executive of Eli Lilly has criticised the current round of “mega-mergers” in the pharmaceuticals industry and ruled out his own company’s participation, in spite of pressure for further consolidation in the sector.

John Lechleiter explicitly ruled out a combination with Bristol-Myers Squibb, one company to which Eli Lilly has been linked, and told the Financial Times that he would focus instead on work to boost his company’s internal development of experimental medicines alongside selective smaller-scale deals.

He said: “I think we are seeing deals that are really driven more by weakness than what I would describe as strong strategic combinations ... That will improve short-term problems but fail to answer the long-term question of research productivity.”

Industry analysts have argued that Eli Lilly is a candidate to participate in the current intensifying round of restructuring, following large-scale takeovers finalised in recent weeks of Wyeth by Pfizer, Schering-Plough by Merck and Genentech by Roche.

The consolidation has been triggered by patent expiries and pricing pressures, setbacks in innovation to develop a new generation of drugs, and the threat of further restructuring caused by US healthcare reform.

But Mr Lechleiter said he believed Eli Lilly already had the necessary critical mass.

He said: “Most of what I have read about large mergers is that they are very disruptive to research and development”.

In one recent internal Eli Lilly blog posting seen by the FT, Mr Lechleiter wrote to his staff: “The biggest problem I have with these large combinations is that they don’t answer or even address the question.”

In another, he wrote: ”Call me a stubborn Midwesterner, but I/we continue to believe that these megadeals never made any sense to begin with and don’t make sense now ... We are flat out not interested in being part of a big combination.”

Eli Lilly is more protected from hostile takeover than most of its rivals, with a significant stake held by descendants of its founding family and institutions based in its headquarters in Indianapolis, as well as a series of statutes that restrict an unauthorised bid.

Mr Lechleiter, who took over as chief executive a year ago after a long career at the company, said he had focused on accelerating decision- making at Eli Lilly, citing a rapid agreement to launch a successful counterbid for ImClone last year in response to an offer from Bristol-Myers Squibb.

He expressed his desire to expand “the space where drugs, devices and diagnostics intersect” as he reinforced Eli Lilly’s focus on medicines that offered greater effectiveness for patients and strong value for money to healthcare systems.

He said Eli Lilly would not expand into generic drugs but would develop “bio-betters” protected by patents that improved on existing biological drugs, and would also look at reformulations of medicines that enhance patients’ willingness to take their medicines as prescribed.

Type:	NORMAL
Url:	http://www.ft.com/cms/s/0/837bde44-1c73-11de-977c-00144feabdc0.html?ftcamp=rss