Mega deals like Merck-Sigma cut biopharma bargaining power says leading CMO

The news earlier this week that German Merck intends to buy Sigma-Aldrich on Monday marked just the latest big money deal in the life sciences space.

In the past 12 months alone, Thermo Fisher has acquired Life Technologies for $13.6bn​ and sold part of its Hyclone business to GE Healthcare for $1bn​. Pall, meanwhile, bought ATMI’s bioreactor business​ for a more modest $185m.  

Add to that GE Healthcare’s $250m purchase of PAA in 2011​, Lonza’s collaboration with Sartorius Stedim​ and the latter’s $33m takeover of supplier TAP Biosystems​ and the biopharma industry’s pool of tech and materials suppliers starts to look quite a bit smaller than it did previously.

This consolidation has not gone unnoticed by the biomanufacturing sector with one leading biologics contract manufacturing organisation (CMO) telling BioPharma-Reporter.com that such deals “reduce options for supply and ability to negotiate prices​.”

The CMO also told us as “larger manufacturers begin to have a monopoly on the market​ customer service can be impacted as acquisitions take time to fit into larger corporations,”​ citing Merck KGaA’s Millipore takeover as an example of a deal that triggered a lengthy integration process.

Expanded offering​

While consolidation in general may be a concern for biopharmas, the Merck KGaA Sigma-Aldrich deal does hold some positives according to the CMO.

The firm predicted that the merger would help it consolidate its supply chain and that Merck would provide a greater diversity of products and complete systems, explaining that: “This will give Merck a far better upstream offering​” and adding that “their downstream offering is already one of the better offerings on the market​.”

This echoed a point made by Merck KGaA spokesman Gangolf Schrimpf who told us: “Sigma's position in the [media] segment is extremely complementary to our offers to customers. So for us and the clients it makes sense as we can now offer the full value chain for biopharmaceutical production​.”