Pharma M&As: Can Focus Cut Through the Clutter?

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A Bain research study on shareholder value draws conclusions about pharma leaders.

According to a recent Bain Research Study, the pharma companies that delivered most value to their shareholders have been the ones that lead a single category. The last several years have been marked by significant merger and acquisition activity. Recent mergers in the US, dominated by “inversions” and often driven by the desire to reduce taxes, sometimes seemed a bit random, as companies merged with partners with whom they seemed to have little in common.

Studying those companies that have consistently delivered the greatest value to shareholders over the past 20 years, “New Paths to Value Creation in Pharma,” by Nils Benhnke, partner in Bain’s San Francisco office, and his colleagues in New York and Boston, draws some simple conclusions that might be useful for any company in any industry to consider. At a time when big pharma companies are starting to resemble each other, the report suggests that those companies have built leadership in a single category and targeted acquisitions to match core strengths. The study points to Roche in oncology, Novo Nordisk in diabetes, Biogen Idec in neurology, Celgene in oncology, and Gilead in HIV and AIDS, extended by Hepatitis C. At the paper’s conclusions, the authors ask the following simple questions of pharma leaders:

• What are the core categories in which you can maintain or develop a leadership position?
• How will you win in these categories?

• What is your repeatable business model? Does it set you up for success for the future?

• What moves can you make to preempt emerging competition in your core business?
• What M&A moves are necessary to build and defend category leadership positions?


Click here to read the report.