M&A dead? Not for big pharmaceutical companies

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON (Reuters) - Mergers and acquisitions may be off the agenda in most sectors but a growing number of big drug companies see the credit crunch as a buying opportunity.

Britain's GlaxoSmithKline Plc (GSK.L), the world's second-largest drugmaker, said on Wednesday it was curbing share buybacks to give it more firepower for acquisitions in biotech, consumer healthcare and emerging markets.

It is not alone. Pfizer Inc (PFE.N), the global leader, is also talking up acquisition prospects, along with other top drug companies.

Given the sector's low leverage and relatively stable cashflow, the credit crunch could be a boon for drugmakers -- particularly when it comes to picking up cash-strapped biotech companies, some of which have already tipped into bankruptcy.

Market analysis group Datamonitor said in a report earlier this month the average net debt as a proportion of capital employed for the top 20 drug firms was just 6 percent, while the same firms on average each had access to $7.5 billion in cash.

Here is how some leading drug company executives have responded to the opportunity in recent weeks:

GLAXOSMITHKLINE (October 22)

- Chief Executive Andrew Witty said his group would not make significant share repurchases in 2009 because recent financial turmoil was expected to create more investment opportunities.