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Author's profile photo Joseph Miles

Merger Mania: Time of Change Continues for Life Sciences Industry

As the Life Sciences industry finished the first decade of the 21st century, the focus was and has been on restructuring the portfolios to reduce costs, grow revenue and transform their business models to align with reduced margins given the end of the blockbuster drug model.  Examples of this trend included:

  • Pfizer divested their animal health and nutritional divisions as they focused their organization the pharmaceutical segment.
  • Abbott Labs spin off their branded pharmaceutical business, now known as Abbvie, that now focused them on the remaining consumer products, generic pharmaceutical and  medical device & equipment divisions.  
  • GlaxoSmithKline spun off a number of consumer divisions as they focused on their higher selling and higher margin brands.

Recently, it appears we are seeing the end of this phase and the start of a new period of mergers & acquisitions that has begun to accelerate at a very rapid pace.   Amgen’s acquisition of Onxy Pharmaceuticals highlighted the increasing value of drug pipelines powered by continued lost revenue from patent expiries and continued challenges of getting new drugs & devices to market but this was merely a signal of things to come.  

In my previous blog, Life Science Paradox: Creating Opportunities During Times of Tremendous Change,  I highlighted how companies needed to transform their organizations to enable globalization, profitable growth, operational excellence and increased employee engagement but the acquisition strategies that have emerged in the last few weeks will accelerate and complicate those efforts.   Pfizer’s $105B+ acquisition of Astrazeneca, GlaxoSmithKline and Novartis’ oncology and
vaccine exchanges combined with a consumer products joint venture  and Valeant’s acquisition of Allergan highlight how organizations are willing to go to any length to ensure the growth, margin and shareholder value of their portfolios and, ultimately, their companies.      

Finally, the coming weeks will continue to see additional activity as companies respond to the new market dynamics and competitive landscape.   An organizations ability to manage the increasingly vast holding companies on a global level will be essential to maintaining profitability and avoid the loss of scale across their global operations.    Driving top line revenue only, without a focus on globalization, profitable growth, operational excellence and employee engagement, will fail to achieve the competitive advantages intended by the global categories, segments and brands created through the acquisitions. 

To learn more about we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Life Sciences Industry.

What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAPlifesciences

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