The long tail of pharma: Glaxo, J&J, Sanofi-Aventis eye biotech firm Genzyme

Big Pharma firms such as GlaxoSmithKline and Johnson & Johnson are eyeing biotech outfit Genzyme, which makes drugs for niche diseases. Is the age of the blockbuster drug over?
Written by Andrew Nusca, Contributor

Much like the music industry, some have said that the age of the patented blockbuster drug is over for the pharmaceutical industry.

The new trend? A "long tail" of niche, profitable drugs for segments of the broader market.

France's Sanofi-Aventis, Britain's GlaxoSmithKline and America's Johnson & Johnson are all eyeing struggling biotechnology outfit Genzyme, according to a Wall Street Journal report.

Based in Cambridge, Mass., Genzyme makes drugs for rare, inherited disorders, such as for lysosomal storage disorders, Gaucher's disease, Fabry disease and Pompe disease. But the company has been beset with manufacturing issues that have unsettled the company's footing.

Without recent large acquisitions, Big Pharma is sitting on quite a bit of cash and short-term investments. (To the tune of $10.8 billion for Glaxo and $18 billion for J&J.) That's important, because Genzyme's market capitalization is around $16.7 billion -- in other words, big.

(What about Pfizer or Novartis? Both are working through acquisitions of their own: Pfizer took over Wyeth in 2009 for $68 billion, and Novartis is slowly acquiring eye-care company Alcon.)

But it's unclear that the market is favorable enough for such a high-profile buy.

According to the Journal report, the move makes the most sense for Glaxo, which already has a unit focused on rare diseases. (J&J hasn't moved too far into this space just yet.)

But the authors fail to discuss how well a fit Genzyme might be for Sanofi, which makes drugs such as Plavix for atherothrombosis, Ambien for insomnia, Allegra for allergic rhinitis and Actonel for osteoporosis.

The company's latest annual report indicated that sustainable growth and diversification in the biotechnology part of its portfolio were pillars of its strategy.

But it also made more than 30 acquisitions and partnership agreements in 2009 -- among them U.S.-based cancer specialist BiPar Sciences and eye specialist Fovea Pharmaceuticals -- and may not have the appetite for the big buy that is Genzyme.

(The company is scheduled to announce earnings for the second quarter of 2010 on July 29.)

Still, the trend is clear: in the baseball game of the pharma industry, there will be less home runs and lots more singles and doubles. (The key term here: therapy.)

Is Big Pharma ready to put its money where its mouth is?

This post was originally published on Smartplanet.com

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