Monday, June 15, 1998
'Would you tell me, please, which way I ought to go from here?'
'That depends a good deal on where you want to get to,' said the Cat.
'I don't care much where -' said Alice.
'Then it doesn't matter which way you go,' said the Cat.
'- so long as I get somewhere,' Alice added as an explanation.
'Oh, you're sure to do that,' said the Cat, 'if you only walk long enough.'
- Alice's Adventures in Wonderland, Lewis Carroll
Big Thinkers II
In February, we wrote a piece called "Big Thinkers" in response
to the proposed (and now defunct) Glaxo/SmithKline Beecham merger. The proposed
merger - which was described as driven by the need to combine research programs
in the age of genomics - brought with it the image of an R&D colossus, and
raised the question of whether bigger truly is better in the post-genomics era.
We concluded that while overall size counts to some extent, in fact the size
and quality of key sub-groups within a life science enterprise may be the fundamental
determinant of R&D productivity (see BioCentury, Feb. 9).
The latest proposed mega-deal between American Home Products
and Monsanto makes an even grander set of claims, which we began to explore
last week (see BioCentury, June 8). This deal is described as creating
a fully integrated life sciences company, which we have dubbed a "Filsco," with
synergies from agbio to agrochemicals to drugs to nutriceuticals.
Like the "Fibco" (fully integrated biopharmaceutical company)
and the "Fiddco" (fully integrated drug discovery company) before it, Filsco
evokes a grand scheme that more often than not fails to reflect reality.
In this case, we think the proposed AHP-Monsanto deal is simply
an exercise in conglomerate building, perhaps satisfying the universal need
for CEOs to answer the call for a strategic vision, and providing the investor
relations apparatchiks with a rationale for Wall Street. But the seamless web
of life sciences should prove to be elusive in the corporate setting.
The key argument against the idea is that it's not possible
to create a single value-added chain based on the disparate businesses that
come under the Filsco rubric. Further, there are good reasons to think that
the efficiencies and synergies that could be created by Filscos are limited
and that the arguments for keeping businesses separate may be as powerful as
the pressures to combine.
It is the implications of this latter idea for biotech that
provides the motivation to keep poking at the Filsco idea.