Schering-Plough woke everyone up with a large surprise bid for Organon, the long-suffering pharmaceutical arm of Akzo Nobel. Many people are spinning this as a good deal for everyone involved, and that may be. But then again, people always seem to say that about mergers and buyouts, and they're not always right, are they?
Organon has strengths in endocrinology and CNS, two areas where Schering-Plough has never had much of a presence (despite a number of shots on goal in the latter one). The problem is, even the companies that have had success in CNS have had to take a lot of shots, because it's that kind of field. No one really understands antipsychotic and antidepressant drugs, for example, and thinking that you do has been a recipe for trouble. The biggest prospect in Organon's portfolio is asenapine, an antipsychotic, which Schering-Plough seems to have their eye on. But that's a drug that Pfizer walked away from last year, citing "a commercial analysis of the compound". It was my impression that that commercial analysis took place after Pfizer got a look at some of the clinical data, though, and I see that I'm not alone in thinking that way (nor alone in my worries about betting big money on drugs in this area).
There's also the question of how much Schering-Plough is paying. When Bayer bought up German Schering (no relation!), they paid around eight times earnings (and that was already more than they wanted to spend, thanks to Merck-Darmstadt). Schering-Plough is paying around 14 times earnings for Organon. As pointed out here, Akzo Nobel was hoping to raise 9 billion by spinning Organon off, and estimates were that an outside buyer might be willing to go as high as 10. Schering-Plough offered 14.5, which news seems to have been greeting by incredulous delight over in Holland, as well it might. Words like "phenomenal" have been used.
There's no word yet (that I've seen) on what will happen to various sites and divisions of the two companies after the buyout goes through. You'd have to assume that there will be some real cuts - that's the only way to make that price work out - and I'd guess that it'll be more on the Organon side. Most of the press coverage has been about how Schering-Plough is picking up all these late-stage drugs, with nothing about the earlier research at all. (Of course, my assumptions about where a drug company will make cuts in research has already been shown to be imperfect, so keep that in mind. . .)
Well, Fred Hassan is a dealmaker, no doubt about it. And it's true that you have to take risks to make it in the drug industry. As (disclosure!) someone who still holds a reasonable amount of Schering-Plough stock, I hope this one works out for him. It'll be interesting to watch.