Merger of Large Firms Within Oligopolies

Group Project Unit 5

Kevin Ferra, Brian McCann, Floria Dias and Stephen Fardig

(Submitted by Stephen Fardig)

ECON220-1203B-03 Microeconomics

Abstract

This paper is intended to inform the reader of mergers and show the pros and cons about each. Mergers of large firms within oligopolies could inherently lead to the misfortune of a company turning into a monopoly. In this article you will see examples of just that by using Johnson & Johnson and the merge with Synthes, Inc. Both companies with a different business plan however striving to a reach the same goal.

Merger of Large Firms within Oligopolies

Mergers of Large Firms within Oligopolies Johnson & Johnson a health and pharmaceutical company, headquartered in New Brunswick, New Jersey had proposed to acquire Synthes, Inc., a medical device company headquartered in Solothurn, Switzerland and West Chester, PA, a top manufacturer of skeletal treatment systems, for wrist fractures. The proposal to acquire Synthes was proposed at $21.3 Billion. Synthes has gross sales around the world of $3.9 billion in 2011.

The Johnson & Johnson Company has their own product,DVR, for treating fractured wrists, this process is known according to the FTC as a "rival volar distal radius plating system. (FTC Puts Conditions on Johnson & Johnson's Proposed Acquisition of Synthes, Inc.)

The Federal Trade Commission (FTC) had put a temporary block, while reviewing the application for acquisition. The FTC after review ordered Johnson & Johnson to sell their DVR System to a qualified buyer in ten (10) days o the acquisition of Synthes. (FTC Puts Conditions on Johnson & Johnson's Proposed Acquisition of Synthes, Inc.) Biomet has offered to buy DVR from Johnson & Johnson. The offer was accepted by Johnson & Johnson, and the FTC will have a mediator oversee the Biomet purchase. (FTC Puts Conditions on Johnson & Johnson's Proposed Acquisition of Synthes, Inc.)

From the firm's point of view: We at J&J teaming up with Biomet,

inc .Synt, will have a terrific partnership which will become the backbone in the surgical treatment of serious wrist fractures as well as extremely beneficial to the U.S. consumers. Orchestrating an alliance between J&J and Biomet will also lead to a partnership with the consumers and the hospitals. By doing so it will aid with the arrangement of keeping prices for the DVR low, by making the device more easily accessible to the consumer. Consolidating this merger will also be beneficial towards maintaining quality control, and keep the choice of choosing various different products and services at a high priority for the consumer.

Johnson & Johnson and Synthes are direct competitors, however together will make up more than70% of the market for the wrist fracture treatment systems, according to the FTC. Together they will help preserve and guarantee that by using their product they will make sure the price will remain at a conservative price point that will be more accessible to the consumers. They also ensure that the quality of the product will not be undermined and will achieve the quality set forth into the future.

A list of firms in the industry:

Genentech, Inc.-founded in 1976 Genentech is a biotechnology that has been around for over 30 years, by utilizing human genetics to obtain information and manufacture and commercialize medicines to treat patients with severe life threatening diseases

by use of DNA. (gene, 2012).

Genzyme Corporation- was founded in 1981 in Boston Massachusetts, they have been known for their outstanding performance in diagnosing and developing cures in rare genetic diseases ("Genzyme Corporation, 2012).

Merck Serono S.A. - has been focusing on the groundbreaking technology in the specialty areas in the therapeutic field of oncology, neurodegenerative diseases, fertility and endocrinology, along with rheumatology as an emerging area of expertise. (Merck serono s.a.,2012).

Amgen Inc. - Amgen is an innovative biotechnology company which diagnosis, develops and manufactures in human therapeutics. Since 1980, The Company has been a leader in new technology of pharmaceuticals by manufacturing them for the safe practice to be distributed to the patients for the fight against cancer, kidney disease, rheumatoid arthritis, bone disease,

and other serious illnesses.(Amgen inc.,2012)

Biomet, inc was incorporated in 1977 in Indiana; its primary purpose is to design, manufacture, and market products in four major product groups, such as reconstructive devices, fixation products, and spinal products. The United States and Europe is Biomet's primary geographic marketing territories. Some of their devices consist of Reconstructive devices include knee, hip, and extremity joint replacement systems, as well as dental reconstructive implants, bone cements and accessories, and the knowledge and necessary tools required to implant there devices properly into the patients (biomet inc.,2002).

Johnson and Johnson started back in 1884 it is the world's 6th largest consumer health care company, the world's largest and most diverse medical devices and diagnostics company. The world's fifth largest biologics company they have more than 250 companies in 60 countries and employ over 125,000 employees. They have everything from medical devices & Diagnostics these include orthopedics, Implants, Joint replacements, Sports Medicine, Cardiovascular disease, Coronary Artery Disease, Peripheral Vascular and obstructive disease, Neurovascular Surgery, Arrhythmias, Diabetes care, self-measured blood Glucose Monitors, Insulin Delivery Devices, Diagnostics, Vision care, General Surgery, Bariatric Surgery for obesity, Urologic Surgery, hernia (Johnson & Johnson,2012).

Description of the Product: "According to a FTC Complaint (Docket No. C-4363) volar distal radius plating system" means a plating system used to treat fractures of the distal portion of the radius bone that is implanted from the bottom of the wrist. "DVR" means the DVR Anatomic Volar Plating System, the volar distal radius plating system owned Johnson and Johnson.

Production Methods: "The distal radius is the most common fracture site of the human skeleton, and until recently, 1 it has been a difficult area to treat with internal fixation. This difficulty resulted from the inability of conventional bone screws