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October 28, 2009
You Mean You Don't Have to Buy Them?
Johnson & Johnson's CEO has given an interview to the Financial Times explaining his company's strategy with acquisitions. And right now, that strategy is. . .not to make acquisitions. They see partnerships as making a lot more sense:
“The cost of developing compounds has become so high and become so risky that we are looking to share the risks and opportunities and find more and more partnerships.”
J&J has been putting this into practice recently, taking equity stakes in several different companies. In the case of Elan and Crucell, interestingly, the company has agreed to standstill provisions, in order to make it clear that they're not just on the first step to an outright acquisition any time soon. It's interesting that this would be coming from Johnson & Johnson, since in many cases they've been one of the less destructive acquirers in the business already. (Well, with some exceptions, like when they took over Scios).
The temptation to compare this policy with Pfizer's is almost overwhelming, but the two companies are in very different positions. For one thing, J&J has their medical devices and diagnostics businesses, which are both profitable and run on different rhythms than their pharma side. Even more importantly, they also aren't locked into a grow-or-die situation, needing larger and larger infusions of revenue to meet the expenses which get larger every time they go out and buy those revenue streams, which mean that they need to go buy some more and then. . .
The article says that J&J has no deals under consideration right now, but that this style of deal-making is definitely how the company plans to operate. There's definitely enough risk to be spread around - I just hope that there's enough reward for everyone, too.
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