Pills and Co.'s Proposed Acquisition of Star Genomics

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1. Identify potential sources of synergy in the proposed acquisition of Star Genomics. Identify a set of problems that the acquisition may create. How can Pills & Co. address them? From the strategic viewpoint, does it appear to be a sensible acquisition for Pills & Co.?

Pills & Co is a pharmaceutical company that has over 100 years of history, over 57,000 employees and annual sales of $28 billion in 2010. Pills & Co concentration has been broad, researching a wide array of diseases. They have recently realigned their focus to the top 10 “priority diseases”. Star Genomics is a biotech company with less than 10 years of history. They have less than 50 employees, require public support and grants for funding and have yet to show a profit. They are specifically focused on “one” of the top ten concentrations the Pills & Co is now focused: Allergies. The allergy market boasts $25 billion in sales annual and is rapidly growing. Pills & Co is faced with a downturn in sales in the near future due to a loss of patent protection on current products in years 2011-2014. Additional, there is a lack of promising compounds in the pipeline. Pills & Co is a traditional pharmaceutical company and relies on chemistry-based approach to generating new medicines. One possible synergy to acquiring Star Genomics will be the fact that Star Genomics works at the molecular level. By working with the DNA directly, biotech companies have the opportunity to backward engineer a cure or a compound that will affect the disease. This will reduce the time it takes a compound to be screened. This allows a compound to be evaluated in a fraction of the time. In a race to be first to market and increase time distance between “me too” drugs, this could reduce operating cost and increase compounds in pipeline. Star Genomics does have a couple products already in the pipeline that could potential be “short term winners”. This could help...
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