Pfizer’s pending $68-billion merger with Wyeth has raised the question on possible suitors in another merger among the pharmaceutical majors. A recent article in the New York Times gained the input of Wall Street analysts, who speculate that Merck, Sanofi-Aventis, and Johnson & Johnson may be next in line to seek acquisitions among their Big Pharma brethen or in select biotechnology companies.

Although analysts differ on the partners in possible Big Pharma marriages, there are common reasons for companies to take the plunge, most notably generic-drug incursion on key products, weak pipelines, cash-ready positions for such a deal, and/or an interest to strengthen their biopharmaceutical product portfolios.

Another factor that may come into play in a choice for a partner is whether a company already has a collaboration with a possible acquisition target. Analysts are divided over whether Merck, for example, would seek another traditional pharmaceutical company such as Schering-Plough (Merck and Schering-Plough had partnered in anti-cholesterol drugs), or seek a smaller acquisition in biotechnology with Gilead Sciences. Some also see Johnson & Johnson as a possible suitor for Schering-Plough as well.

Some point to Bristol-Myers Squibb, who faces near-term patent expiry on one of its top-selling drugs, “Plavix” (clopidogrel bisulfate) as a possible takeover candidate for companies for which it has prior or current collaborations such as Sanofi Aventis, AstraZeneca, and Merck.

But there is no consensus among analysts that any of these companies will be willing to take on large-scale acquisitions, but instead they may look to smaller companies. One such company is the Dutch company Crucell, a vaccine and biologics production technology provider, which was in discussions with Wyeth as a possible acquisition target prior to Pfizer’s announcement that it was acquiring Wyeth.

Although speculation on who may partner with whom makes for lively debate, it raises perhaps a more fundamental question: to merge or not to merge? One side of the debate would argue that increasing critical mass, market share, and resources to fund escalating costs for research and development is an imperative for the large pharmaceutical companies. Others, however, would raise a broader point—the dubious success rate of mergers and acquisitions (M&A). In examining M&A over a 15-year period between 1986–2001, researchers from Bain and Company found that 70% of large deals fail to create meaningful shareholder value (D. Harding and Sam Rovit, Mastering the Merger: Four Critical Decisions that Make or Break the Deal, Harvard Business School Publishing, Boston, 2004).

It would be too simplistic to cull from either perspective that seeking growth by acquisition is either all good or all bad, but perhaps some basic takeaways is that bigger is not always better and achieving true integration and synergies in a merger is a formidable task. For drug companies, specifically, these caveats are particularly challenging as they try to balance size while retaining an environment that encourages innovation, something unfortunately in short supply these days as measured by recent approvals of new molecular entities.