BMS & AstraZeneca - Merger in the wind?

It is almost impossible to avoid wondering if the recently announced deal between BMS and AZ will ultimately create the forces necessary for them to merge. AZ need something in primary care to help fill the gap that will be left by Crestor, as well as giving their Crestor reps something else to discuss with physicians. BMS need marketing muscle in the primary care world in order to compete effectively as a late entrant (against Merck and Novartis).

Neither company can describe their R&D productivity in glowing terms - which may ultimately be the weak element in any potential merger. Their product lines have a good fit, but neither has demonstrated the ability to produce a consistent flow of new products. Also they both have numerous oncology agreements that might cause some difficulties for a merger. Does saxagliptin represent so much potential that it could drive a merger? I doubt it; it's probably not quite going to be enough on its own but it would be interesting to see if these two flailing giants of the industry could see this as a starting point towards much closer ties. BMS have some history in this in the USA (both Plavix and Erbitux are in-licensed and over 50% of total comapny sales are from in-licensed compounds or IP) and saxagliptin will add to this (licensed IP coming from OSI). AZ have been more "stand-alone" in their strategy - but that has certainly been driven by the success of Crestor! In addition, if a way could be found to merge these two oncology portfolios ther result would be a real power-house.

In the end I think the saxagliptin deal is good for both companies in their primary care operations, but I don't think it will be enough on its own to drive a full merger. On the other hand, should either of them suffer further late-stage set backs the situation would change again - and it is still fairly clear that the industry is over segmented at the top end.