According to pharmaceutical deal makers, the recent round of industry M&A is far from over. In the past year, drug makers' thirst for innovation combined with small companies' dwindling operating capital to drive merger and acquisition activity. At the high end of the scale, consolidation among industry leaders created some of the richest pharmaceutical mergers in history. 2010 promises to continue the cycle of acquisition as companies seek ways to bolster their pipelines and portfolios. "Smaller acquisitions are what we expect to see going forward," said Jason Richardson, president of Cutting Edge Information. "The blockbuster deals of the past year mean that some larger companies will be integrating operations while buyers look for small, strategic deals that bulk up pipelines." In fact, lack of capital and restricted access to credit will push smaller companies toward buyers. "The majority of deals last year involved smaller companies under distress, and we see that trend continuing into next year," Richardson said. Merck CEO Richard Clark was quoted by The Wall Street Journal on the heels of closing the Schering-Plough merger as saying that another blockbuster deal is off the table -- but a smaller biotech acquisition is not out of the question. Bristol-Myers Squibb is likely to continue with smaller acquisitions, in keeping with the company's "string of pearls" strategy that focuses on small, high-value purchases. The acquisition of Medarex for $2.4 billion was just such a deal, as BMS added ipilimumab, a drug in development for various types of cancer, along with other important assets. The company's CFO, Jean-Marc Huet, told the Credit Suisse healthcare conference: "We actually believe that a lot of opportunities today, we either didn't identify 12 months ago, or weren't there 12 months ago." BMS will have the cash to pursue those opportunities. According to Huet, BMS should have gross cash of $10 billion on hand at the end of the year. "Over the next two years, companies will be searching for 'pearls' of their own," added Richardson. "With patents expiring, all eyes will be on the smaller companies with promising drugs in development."