Performing Mergers and acquisitions are like using blades with two sharp edges. A proper use of the tool would bring the combined company a better future. Nevertheless, being careless and sloppy in using the tool could cause us our ‘lives’. A study stated that over 60% of all merged companies ended up with lower share prices and values within their corporations compare to before the merger. Combining two or more different companies are not simply matters of math and accounting calculation. Fragile issues needed attention to ensure that the merger results value creation instead of value destruction.
Financial benefits are often overvalued and become deceiving for managers, in many case of M&A. A study indicated that the largest problems within M&A are strategic and cultural issues. Employees and middle level managers tend to be left out in many merger plans, causing decreasing morale and performance. A good M&A undertaking is the ones involving consideration of every aspect of corporate existence. Corporate market position, strategy, culture and traditions, are important aspects needed to be considered.
Within this study, I am discussing the merger of Biogen Inc. and IDEC Pharmaceuticals in June 2003 to from the third largest biotech corporation in the world, Biogen IDEC Inc. It was known to be the largest M&A undertaking in the Biotech industry since Amgen agreed to buy Immunex for $ 10 billion in December 2001. The elaboration would include discussion of prior-merger condition of both companies, the rationale of the merger, how the merger was performed and what the merger has resulted so far. II. Biogen Prior to Merger II. 1 History & Background
The company, Biogen NV, was established when a group of the most accomplished biologists in the world gathers to discuss formation of a new pharmaceutical company. The meeting was held in 1978, in Geneva, Switzerland. Two years after the company was founded, one of Biogen’s founders, Walter Gilbert Ph. D receives the Nobel Prize for one of his researches in sequencing nucleotides (‘History’, 2005). In 1983, the company was registered as a NASDAQ traded firm under the symbol BGEN. Biogen’s first originally developed product enters the market in 1986. The product was for treatment of hairy cell leukemia.
In 1989, the company launches Engerix –B (a vaccine for Hepatitis B) in the United States. One of Biogen’s trademark product, AVONEX was approved by the FDA and EMEA for sales and marketing in the United States and Europe in 1996. Another famous product of Biogen, the AMEVIVE (for treatment of severe chronic plaque psoriasis) and its specialized manufacturing facility was approved by the FDA later in 2003 (‘History’, 2005). II. 2 Products As a pharmaceutical company, most of the company’s operations are concerning research and development of their medical products.
Their leading products are the AVONEX and AMEVIVE. AVONEX is designed to treat Multiple Sclerosis (MS) patients. It is the market leader and is being prescribed to treat over 100,000 patients worldwide. However, that constitutes only 35% of people with MS. There is considerable room for growth for the product. The drug has also been approved to be distributed in Europe’s market. Despite the entry of new competition into the US market, AVONEX remains the leader of prescribed treatment for MS worldwide. Its closest competitor sells no more than half the size of AVONEX sale in 2002 (‘Biogen Annual Report’, 2002).
AMEVIVE on the other hand, is a fusion protein whose mechanism of action is appropriate for treating a range of autoimmune disorders. Researchers of the company believed that AMEVIVE provide prolonged disease remission with and improved safety profile proven by current therapies. Twenty-four percents of patients treated with AMEVIVE cleared disease after a course of therapy. It has no vital side effects such as increased risk of infection or malignancy and systemic organ toxicity. One of the vital ‘features’ of the drug is the absence of ‘rebound effect’.
In other words, diseases treated by AMEVIVE does not comes back to be more severe, as often occurred with other form of treatments. Thus, AMEVIVE can potentially provide long term improvement in life for patients, along with meaningful disease control (‘Biogen Annual Report’, 2000). Another developed product of Biogen is the ANTEGREN. It is a humanized monoclonal antibody founded in the 1990’s by scientist at Elan Corporation . It is a drug for Multiple Sclerosis and Crohn’s disease. The company is working together with Elan Corporation to further develop the product.
In the year 2002, the product is within its third phase awaiting for approval for commercialization. Besides the core products mentioned above, Biogen displayed significant development in several other products. They are: • ADENTRI for Congesive Heart failure; in 2002, the product was on phase II of the development • LFA-1 for Psoriasis; in 2002, the product was also on phase II of its development • Interferon Beta Gene Delivery for cancer indications, in 2002, the product was at its first stage of development • Lymphotoxin Beta Receptor Inhibitor for Autoimmune Diseases, in 2002, the product was at it first stage of development
• VLA-1mAb for Inflammation and Fibrosis • V:LA-4 Inhibitor for Inflammatory disease and LTBR mAB for Solid Tumors, both products was in pre-clinical study on 2002. (‘Biogen Annual Report’, 2002) II. 3 Market Position The company is one of the greatest ‘curing cancer’ pharmaceutical companies in the world. Its blockbuster product, the AVONEX, resulted in average $1 billion of sales/year since 2001. Its newcomer, the AMEVIVE is also displaying significant importance as drugs for treating worldwide patients suffering from autoimmune diseases.
The corporation owns superior biological products that allow it to make broad plans for future productions. Its product line is trusted by medical facilities due to its satisfactory prior performance presented by the AVONEX. Nevertheless, sales of the drug seemed to lack growth in 2002. There are those who believe that the company will soon have to rely on new products to deliver them revenues. The company has been stated to be the pioneers in leading edge research in immunology and neurobiology.
It is also a pharmaceutical company with global sales and marketing capabilities. The company has established biologics manufacturing facilities and able to maintain strong financial position until 2002. II. 3. 1 Strategy The company plans to increase its revenue by continue investing in AVONEX. For example, in 2002, the company managed to make AVONEX the only MS therapy eligible for Medicare reimbursement. The European Medicines Agency has also approved AVONEX for use in treatment of patients with high risk of developing clinically definite Multiple Sclerosis.
While ANTEGREN is in its final phases of development, marketing efforts for AMEVIVE begins to display result. In 2002, the company was optimist that AMEVIVE will reach its modest target of obtaining 5% of the market, resulting $ 500 million by the end of 2005 (‘Biogen Annual Report’, 2002). Beside Product development, management of Biogen is sharpening the companys focus by dividing research and development into several disease tackling segments. Management realized that the next greatest challenge for the company is to change from a single product to a multiple product company.
The segments are: neurology with AVONEX and ANTEGREN; dermatology, with AMEVIVE and LFA-1; and rheumatology with AMEVIVE, ANTEGREN and other pipeline products (‘Biogen Annual Report’, 2002). These three areas were chosen and developed because Biogen believed to have developed considerable competitive strengths in all of them. By further focusing in those three areas, management believes that they are increasing corporate competitive advantage. II. 3. 2 Technology The company owns various manufacturing facility, most of then located in United States.
Nevertheless, to support management’s growth target, in 2002, Biogen opened two new world-class facilities in North Carolina. One of them is a $ 173 million large scale manufacturing plant (LSM) and the other is a150, 000 square foot laboratory and office building. The LSM has 120,000 liters of bioreactor capacity and was awarded by a California-based Fluor Corporation as the winner of the Project Excellence Award (‘Biogen Annual Report’, 2002). The high tech facility allows Biogen to produce multiple products within their pipeline. It is a facility with one of the largest biologic manufacturing capacity in the world.