BCAB - CFO foresees mega-mergers

More pharmaceutical industry mega-mergers are on the way, despite world equity and bond market problems, Hugh Collum, chief financial officer of SmithKline Beecham, told delegates at the BCAB conference last week.

In an address on managing global companies in turbulent markets, Collum said: ‘Even if our merger with Glaxo had gone though, the combined company would have had under 10% of the global market. There will be more deals, probably very big ones.’

He added, however, that the bigger deals would become more difficult to achieve.

‘In the first place, the numbers involved will be very large, which always makes it difficult to come to a deal. And in the difficult conditions of the world’s equity and bond markets, which will probably last for some time, raising finance will not be easy.’

He said consolidation would be partly driven forward by major players buying up smaller ones, but the need of even the biggest players to share new products’ huge development costs would cause a drive towards mergers.

Collum, who leaves SKB in December to join biotechnology company Chiroscience as chairman, also told delegates that investors were over-reacting to the current economic turbulence.

‘Some people have fallen for the idea that it’s doom all around us, when it’s really just gloom. I accept that it’s hard to sell pharmaceuticals into Russia today – or at least get paid for them – but it’s much more difficult to believe that a huge country like Russia is just going to slide off the edge of the universe.’