Pfizer (NYSE: PFE) closedits acquisition of Wyeth earlier this month and the EU signed off on Merck 's (NYSE: MRK) acquisition of Schering-Plough (NYSE: SGP) last week. The monster acquisitions will give Pfizer and Merck some serious heft.

It's the opportunity cost of acquiring the companies that I'm worried about.

For those who don't remember from their high school economics class, opportunity cost is the thing that a buyer gives up in exchange for a purchase. In this case, it's other acquisitions or partnerships that were passed up as the companies focused on their large integrations.

Names, please
I'm hesitant to play the who-will-be-acquired-next game simply because I don't think being an acquisition target is reason enough to be an investment thesis. There are plenty of exampleswhere that strategy has failed.

While we might not know who will be picked up next, it is clear that pharma has had a healthy appetite for smaller acquisitions and partnerships since Pfizer and Merck announced their engagements in the first half of the year. I imagine there'll be plenty more.

Acquirer

Target

Acquisition/Partnership

Johnson & Johnson (NYSE: JNJ)

Cougar Biotechnology

Acquisition

Bristol-Myers Squibb (NYSE: BMY)

Medarex

Acquisition

Abbott Labs (NYSE: ABT)

Solvay's pharmaceuticals business

Acquisition

Johnson & Johnson

Crucell

Partnership

Sure, Pfizer and Merck might not have been interested in any of those deals even if they hadn't made the large acquisitions. However, excluding its venture capital arm, Pfizer hasn't done any drug deals since announcing the Wyeth acquisition, compared with four deals over the same timeframe in 2008. It seems that the depleted cash reserves and diverted focus have slowed things down a bit.

The biggest war chest wins
So if Pfizer and Merck aren't going to scoop up the promising smaller drugmakers, who will? There are still plenty of drug companies with lots of cash on their books.

Company

Market Cap
(in Billions)

Cash and Short-Term Investments
(in Billions)

Fraction of Market Cap in Cash and Short-Term Investments

Bristol-Myers Squibb

$43

$8.1

19%

Eli Lilly

$39

$3.5

9%

GlaxoSmithKline

$106

$9.3

9%

AstraZeneca

$67 Continued...