Briefing Report
Executive summary
RocheBristol is a company located in Switzerland with many branches over 57 countries. RocheBristol is one of the renowned world leaders with close to 9% of the global market, widely known for both its pharmaceutical products for treatment of diseases. The company has over 50,000 employees, approximately 40 drugs manufacturing sites in 57 countries. The Company makes close to four billion packs of medicine and health care products yearly, spending $10 million on research and development of pharmaceutical products. The company has progressed in its success, in 2013; there was an increase turnover in 2012 from 12.2% to 16.7%, proving to be a very productive year for the company. Roche and Bristol companies settled down for merge, with to increase its production. Another reason for the merge is the expiry of patent of Roche, for the production of an oncology drug. The expiry of the patent has a high likelihood of reducing innovators to the company by a merging close to 80%. Hence merging the research laboratories and product pipeline would end up in added knowledge through which potential drugs blockbuster could surface.
Mergers: RocheBristol
Introduction
The Roche Company operates under two segments selling products in some 180 countries. The company manufactures prescription drugs, including cancer therapies, muscular therapy and Tamiflu used in the prevention and treatment of influenza. The company has a diagnostic lab for monitoring and testing of different drugs, genetic tests as well as running point of test diagnostics for the healthcare providers. The pharmaceutical division accounts for over 75% of the total company’s revenues, with the largest contributions from oncology drugs. The largest market of for the company is in the United States and the European countries. Roche Company is rated as one of the top 10 pharmaceutical companies, having grown its revenues and profits in the past decade. The company reported a net income growth of 13% to over 10 billion in 2013.
BMS Company works on discovering, development, manufacture and sell of pharmaceutical products globally. The company synthesizes drugs and small molecules in various therapeutic areas such as anti-retroviral and oncology products; the company also develops products for clinical trials, with some of its products at phase III, for the treatment of hepatitis C infection. The two companies merged in order to expand their pharmaceutical product offerings and stave off revenue losses from the patent examiner. Their merger resulted in an organization with a global marketing presence. However, the merger between Bristol and Roche produced short-term savings but limited long-term growth of the company.
Findings
Contexts and issues
Early 2013, Roche and Bristol revealed their intention for the merger of their $ 45 billion and shareholders, approved by 97% of the majority shareholders. The shareholders had the expectations that the merger would result in an international market share of 4.3% with an annual sale of $2.3million. From the Merger, Stanly Watson was appointed the CEO of the RocheBristol under the novel corporate governance structure, which was hypothetically a horizontal merger. CEO’s of both companies agree that the merger will improve the two groups, increasing their ability to generate sustainable long-term growth. The growth is expected to increase long-term growth enhancing the investor value within an increasingly competitive environment. Furthermore, the deal has the potential of increasing substantial operational cost savings. The drug companies needed the marketing muscle to sell their medicines to their clients.
According to the economic theory, when individuals seek personal changes in the pursuit of higher goals, they have to use particular mindset on how they succeeded in acquiring new skills. Although it is argued that all the mergers are because of the Merger wave, the majority of the merger activities is because of the economic environments. In this case, RocheBristol merger was part of the pharmaceutical merger wave, keeping in view of the economic environment, and the future prospective. Growing the market potential forced most of the pharmaceutical firms to look for partners because the merger trend in the industry had the potentials of affecting the future costs.
The present state
Currently, the companies enjoy an increase in the market proportion for the sale of their pharmaceutical products. The sales from the products have increased significantly from an annual sale of $29.4 million in 2012, to $30.9 million in 2013. The merger between the two companies, also known as the marriage of convenience, moved the company to better positions of new pipeline to the development of new drugs to the market. After two and half years, cost saving the company amounted to $9.8 million in cost reduction, taking RocheBristol to trading profit margins of close to 16%. The shareholders were pleased with the merger insinuating that the merger resulted to share price movements. The short-term stock price increase is a good reflection of the management quality ultimately voting for the merging scheme. The merger has created several promotion vacancies for the employees. The economic theories predict that mergers and acquisitions can benefit the workers in many ways. The transaction constitutes a mechanism for the stimulation of addition in the human capital, hence promoting skills upgrade of the workers.
Future Directions
The company intends to invest more on the potential markets and diversify its products to many other locations. The company widened its products in drug markets and acquisitions. In the diagnostic segment, the company intends to lead in gene sequencing by 2014. With the increasing profits, the company intends to focus on the genetic engineering of new oncology drugs, which has the potential of increasing the profits of the company. The enormous capital expenditure on research and development of genetic medicine has long-term uncertain returns. The industry believes that an only large firm has the ability to put that into practice. In addition, mergers and acquisitions can have detrimental effects on employee performance in future, if not handled effectively. Therefore, the company intends to ensure that all the employees synchronize the cultures of the two organizations for a harmonious workforce.
- Conclusion and Recommendation
The merger was fair and reasonable to both parties, as the merge is in the best interest of all the companies’ shareholders. The pharmaceutical merger between the two companies resulted in the upgrading of skills and implementation of new technologies. The RocheBristol has put in place strategic priorities in diversification of the global business, hence delivering more products of value to the company. RocheBristol is committed to playing a leading part in the improvement of healthcare and pharmaceutical products globally. The company makes a contribution in three key areas of supply of Anti-retroviral, sale of other pharmaceutical products and the manufacture of vaccines. The company is also the leading company in research, participating in community partnerships supporting better health care. The company is working to participate in conjunctions with the stakeholders and governments, with the international organizations to broaden access while ensuring rational and affordable safe and effective use of HIV related drugs. It is advisable for the senior management to anticipate their decisions and look at the different way through which their decisions can affect the employees of a company.
