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

By Gareth Macdonald

- Last updated on GMT

Smaller pool of life science tech suppliers makes getting the best price harder says CMO
Smaller pool of life science tech suppliers makes getting the best price harder says CMO

Related tags Merck kgaa Mergers and acquisitions

Life science sector consolidation is a concern for some biomanufacturers, who say mega mergers like Merck KGaA’s $17bn acquisition of Sigma-Aldrich will limit their ability to negotiate on prices.

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 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 marketcustomer 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​.”

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