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How can pharma companies adapt to the current M&A environment?

Claire Colville Assistant Vice President, Genpact Pharmalink
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February 23, 2017 - Mergers and acquisitions have dominated the pharmaceutical industry over the last few years. These have been triggered by the decline in R&D productivity. Long gone are the days of big pharma and blockbuster medicines, with generics and patent expiration, there is now a paradigm shift from huge research facilities to more entrepreneurial, and innovative bio-science research cluster units.

Companies are taking a strategic, rational approach to focus their areas of business. We no longer see mega-mergers like Astra and Zeneca, GlaxoWellcome and SmithKIine Beecham, but we still see significant volume of mergers, acquisitions, and divestments as an ongoing feature of the industry.

Figure 1: Pharma Industry M&A 1995-2015

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Large pharmaceutical companies are now becoming focused and lean: splits, like Abbott and AbbVie, or more recently Baxter and Baxalta, allow each company to focus and build on its strengths. Companies are divesting non–core assets, generating revenue to invest in innovative research or strengthen their core pipeline. Portfolio deals and asset swaps, such as Sanofi and Boehringer Ingelheim or Monsanto and Bayer focusing their business areas, are becoming common.

Figure 2: Pharma & life sciences deal volume and value

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M&A deals are placing a huge administrative burden on industry generally and regulatory affairs specifically

Mergers and acquisitions and strategic portfolio divestments are likely going to continue for the foreseeable future. Our clients are setting themselves up for growth, but are these deals having a huge impact on the day to day running of the business?

Clients are at tolerance levels. Each deal is run in a different way, due diligence can be difficult whether buying or selling, and full integration into the new company is a long and time-consuming administrative process. Many companies have reported not knowing if these deals are in fact performing to plan.

How can these deals be managed in a more effective and transparent way?

Mergers, acquisitions and divestments as a managed service

Running mergers, acquisitions and divestments support as a managed service allows companies to ramp-up and down flexibly, but special attention needs to be provided to transitioning licenses in, or seamlessly moving managed 'tail-products' out to ensure structured and high-performing support at reasonable cost structures. Here at Genpact Pharmalink, we have looked at the current environment, listened to our clients, and used our extensive domain knowledge in this area to develop mergers and acquisitions as a managed service. We see that adding value to our clients means conducting their deals and providing compliance and maintenance services for the integrated product portfolio, thereby allowing the client to focus on their strategic innovative research. The managed service is compiled of an agile, fast-paced playbook of repeatable processes, ensuring fast integration of fully compliant products, followed by plans for strategical growth, and retrospective analysis of deal performance.

The managed services consist of:

  • Deal managers: An integral part of our process, this is a strong project manager with deep domain expertise in M&A and strategic planning. Deal managers provide strong feedback mechanisms to the client and advise on deal performance
  • Scalable, flexible resource team: We believe that agile, fast-paced integration requires cost-effective, scalable resources. By leveraging our global footprint, we provide that local expertise
  • Standardized reportable regulatory processes: Our proprietary digitally enabled Smart Enterprise Processes (SEPSM) is used to define robust, standardized regulatory processes that leverage industry best-practice, minimizing waste and rework for maximum efficiency
  • Strategic planning and execution of integration of acquisition portfolios: Using our extensive expertise in mergers and acquisitions our team works in close proximity with all multi-functional teams to ensure that all activities associated with acquisitions such as source transfers are conducted with minimal disruption to supply chains
  • Fully auditable compliance reviews and remediation: Upon acquisition all data is collected, collated, and fully remediated to compliance standards
  • Full life cycle maintenance of product portfolio: Keep the products up to date and compliant by providing full life cycle services, variation, renewal, and publishing activities
  • Strategic expansion and growth of products: Using market and data analytics to provide a strategic growth plan for newly acquired products based on areas of value, such as line extensions or entering new geographies
  • Retrospective analysis of deal and product performance: With potential advice for divestment of non-performing or non-value-added products

Figure 3: Project life cycle of M&A activity

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Conclusions
With lean, structured, and focused as the new sustainable growth model, we may no longer see the mega-mergers of the past; nonetheless, mergers, acquisitions, and divestments remain a prevalent fact of life within the pharmaceutical industry. We at Genpact Pharmalink believe it is essential to act quickly, efficiently, flexibly, and consistently, providing a full managed service for mergers and acquisitions and divestments, fully supported with technology-enabled processes and reporting, to ensure full process transparency at all times.

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