A New “Made in USA”

Sanofi-Aventis has finally procured its ticket to the biotech ball in the United States, but it is entering into an already-saturated market with very little space remaining. What’s more, the group has had to empty its wallet to purchase Genzyme, a “big SME [small and medium enterprises]”, with a little over 10,000-strong workforce and $4 billion in revenue. The purchase of Genzyme, which is 10 times smaller than Sanofi-Aventis, will cost the French company more than $20 billion, five times its revenue. Only in the sales of internet companies does one see such an amazing ratio.

There are two reasons for this: The target company is worth the expense, due to the excellence of its research and its rarity, and there are virtually no large biotechnology companies left in the market to purchase. They have all fallen into the category of “big pharmaceutical” through a series of mergers or acquisitions, with the exception of Amgen — the only company in the sector to become a giant all on its own.

Ultimately, it is not those who innovate who are the winners in this battle for market share; this is the paradox of the modern pharmaceutical industry. Large laboratories have failed to innovate due to a combination of dense organizational structure, health authorities’ requirements, and patients’ fear. Behind them are their drug discoveries, and in front are those who create generic copies. None of which would ensure a significant technological breakthrough within. It has come from American universities with biotechnology, fundamentally different from the chemistry of pharmacists.

However, unlike the information technology sector, the American Revolution finally falls into the hands of those in power. The explanation is simple: higher development costs, accompanied by the costs of testing and marketing drugs; costs have become so high that they constitute an insurmountable barrier to new entrants and even lead major laboratories to merge to ensure growth. Does this mean a defeat for U.S. industrial policy, which has poured hundreds of billions of dollars into research to see the jewel in their crown bought by the French, Swiss or British? Sanofi has the answer — a colossal purchase price and the promise of a much larger development on the site at Boston that would never be seen in France. Over three quarters of the world’s medical research now will move to American universities. However, the relocation of Intellectual Capital is not so easily done; nor is a culture of entrepreneurship.