Abbott Laboratories (NYSE: ABT) recently announced that the company will purchase the pharmaceutical arm of Belgium’s Solvay Group for $6.5 billion. This deal expands both the company’s product range and the company’s presence in fast-growing emerging countries, helping defer the effect of patent expiries and compensate for sluggish growth in its traditional markets, such as the United States.

We also have the recent $442 million paid by Johnson & Johnson (NYSE: JNJ) for 18% of Crucell ADR (NASDAQ: CRXL). This will give Johnson & Johnson the development rights on a flu vaccine designed to protect against all future strains of the virus. This deal confirms the company’s move into vaccines, alongside drugs and consumer products.

These deals are further confirmation of the consolidation trend that is occurring right now in the global pharmaceutical industry.

One major factor driving the consolidation trend is the slowdown in sales of pharmaceuticals, particularly in the United States. As recently as 2006, more than half of the growth in the pharmaceutical market came from the United States. However, for all of 2009 global sales of pharmaceuticals are expected to increase only 2.5-3.5 percent. And in the United States – which still accounts for two-fifths of all revenues for pharmaceutical companies – sales are expected to decline by 1-2 percent.

Another major factor driving the consolidation trend is the financial crisis. Earlier this year, Fred Hassan – the head of Schering Plough, which was taken over by Merck & Co. (NYSE: MRK) – argued that the financial crisis accelerated existing cost and pricing pressures.

Three other trends mark the pharmaceutical sector. The first is growing pressure from payers in the United States and elsewhere, with greater scrutiny of pricing. That, combined with drug patent expiries and uncertainty over replacement drugs, is driving talk of more innovative commercial and research models.

A second common factor is geographical expansion. As the US market stagnates, most growth is coming from emerging markets – which includes China, Brazil, South Africa, India and Russia. This requires new thinking about pricing to reach large but poorer pools of patients, often without state or private healthcare coverage.

Finally, there is a shift away from central internal control of the drug development and distribution process towards external alliances and partnerships.

Many pharmaceutical firms have decided to diversify their companies into other areas of the health care field. Diversification lowers overall profit margins, but smoothes cash flow and the uncertainty of developing drugs. This group of pharmaceutical companies includes the likes of GlaxoSmithKline ADR (NYSE: GSK), Pfizer (NYSE: PFE), Sanofi-Aventis ADR (NYSE: SNY), Merck (NYSE: MRK) and Novartis ADR (NYSE: NVS).

The global financial crisis has created a buyers’ market for the large pharmaceutical companies, while many fledgling biotech companies have struggled to extend financing and been forced to seek outright purchasers rather than partners.

Further deals may draw in other companies including Eli Lilly (NYSE: LLY) and AstraZeneca (NYSE: AZN), along with Amgen (NASDAQ: AMGN), Biogen Idec (NASDAQ: BIIB), Bristol-Myers Squibb (NYSE: BMY), Elan ADR (NYSE: ELN) and Johnson & Johnson (NYSE: JNJ).

One thing is for certain – the merger and acquisition activities in the global pharmaceutical sector will not end any time soon as the search for growth continues. And we might add – a very exciting time for investors in the pharmaceutical industry.

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