The Challenge of Holistic Value Creation With Pharma M&A

The Challenge of Holistic Value Creation With Pharma M&A

Two mega deals, right at the dawn of 2019 gave a flying start to Merger & Acquisition (M&A) activities, in search of inorganic growth, by some large pharma companies. The two biggest ones are Bristol-Myers Squibb’s (BMS) USD 74 billion buyout of Celgene, and AbbVie’s USD 63 billion purchase of Allergan, as announced on January 03, 2019 and June 25, 2019, respectively. However, overall in the second quarter of 2019, there were, reportedly, only 22 deals – ‘the smallest quarterly deal count for at least a decade.’

As a strategic option for greater value creation to drive growth, M&A is being actively considered over a long period of time. The key focus of such value creation for the company remains primarily on enriching the pipeline of New Chemical or Molecular Entities (NCE/NME) for revenue synergy, besides cost synergy. This is understandable. But, for various reasons, alongside, a key question also comes up for debate – is the core purpose of such value creation to drive companies’ growth, primarily with more number new drugs, sustainable? The query assumes greater relevance in the evolving new paradigm. This is because, a basic shift is taking place in the core organizational purpose of value creation.

Thus, it appears, the nature of value creation through M&A would also matter as much. Can it still remain a drug company’s financial health centric, any longer? Should the M&A initiatives also not take under their wings, the value-offerings expected by patients from a drug company – beyond innovative pills? Would a holistic value creation through M&A would now be the name of the game? If so, how?  The discussion of my today’s article will revolve around these questions. Let me initiate the deliberation by recapitulating the key motivation behind M&A initiatives of the drug industry.

A key motivation behind the M&A initiatives in the drug industry:

While recapitulating one of the key motivations behind pharma M&As, let me refer to some interesting and recent studies, such as, the 2019 paper of McKinsey titled, ‘What’s behind the pharmaceutical sector’s M&A push.’ It also acknowledges, the use of M&A to bolster drug innovation is unlikely to change any time soon.

That many drug companies actively pursue the M&A option as a game changer for inorganic growth, is vindicated by the recent big deals, as quoted above. Since early 2000 and before, the companies that made the biggest deals to create new value synergies with, have been paying heavy deal premium to enrich their new product pipelines. Quite often it includes several new and emerging classes of drugs, as acquisition targets.

This also gets corroborated in the Press Release of the 2019 BMS deal, which says: ‘The transaction will create a leading focused specialty biopharma company well positioned to address the needs of patients with cancer, inflammatory and immunologic disease and cardiovascular disease through high-value innovative medicines and leading scientific capabilities.’

Lesser yield of traditional pharma M&A than the broader market:

This was emphasized in the June 06, 2019 article, published in The Washington Post, titled ‘Big Pharma Has to Bet Big on M&A. Investors Don’t.’ The analysis found, the returns from the big pharma deals ‘don’t look as good compared to the broader market’, although for very patient investors many of these have resulted in longer-term gains. To illustrate this point, the paper pointed out: ‘Of the eight biopharma deals worth more than USD 40 billion that closed in the last 20 years, only one delivered better returns than the S&P 500 five years after it closed.’

Naming Merck & Co..’s USD 47 billion acquisition of Schering-Plough Corp. in 2009, the researcher justified: ‘That deal is arguably something of an accidental winner. Long-term success didn’t come from any of the products that Merck targeted in the merger; instead, an afterthought of an antibody that was initially set to be sold off became Keytruda, a cancer drug that’s projected to generate USD 15 billion in sales in 2021.’

Innovative product launches no longer a holistic value-creation for patients: 

Thus, unlike yesteryears, enriching new and innovative product pipeline through M&A won’t serve the key purpose of value-creation for patients to treat deadly diseases in a holistic way. The primary reason for the same was articulated in the Deloitte Paper titled, ‘Disruptive M&A: Are you ready to define your future?’ The article emphasized: ‘The confluence of technological change, shifting customer preferences, and convergence across sectors is redesigning how products and services are developed, delivered, and consumed.’

Thus, mere acquisitions of innovative product portfolios, intended to provide better treatment choices for patients, may not meet the holistic needs of consumers’ while going through the disease treatment process. In depth understanding of such preferences with all associated nuances, is absolutely essential in today’s complex business scenario. Which is why, it calls for avant-garde type or ‘disruptive M&As’, that can help alter the business growth trajectories, making the disrupted company disrupt the competitive space, being game changers of the industry.

Calls for avant-garde type or disruptive pharma M&As:

Today, it’s crucial for any drug company to create a unique treatment experience for patients. This is emerging as a pivotal factor for the success of a brand.

Even most innovative products will need to be…continue reading…

Deadly Climate Change Impact On Human Health: How Prepared Is India?

Deadly Climate Change Impact On Human Health: How Prepared Is India?

It’s not uncommon to find many people, including heads of countries, expressing their serious apprehensions in public, about the scary impact of climate change. Just the last year, on November 26, 2018, BBC News captured one of such incidences with the astonishing headline: “Trump on climate change report: I don’t believe it.” The findings of this report have underscored, ‘unchecked global warming would wreak havoc on the US economy.’

Similarly, a few years ago, on September 05, 2014,CNN News 18 quoted Prime Minister Narendra Modi as saying: “Climate has not changed. We have changed. Our habits have changed,’ while answering to a question on climate change. Regardless of the outcome of any split-hair analysis of the rationale behind such statements from the world leaders, such public discourse could trivialize the possible catastrophic impact of climate change on the planet earth.

Be that as it may, that climate change is taking place, carrying all its ill-effects, is real now, without any ambiguity. There is also widespread consensus among the members of the United Nations that ‘the Earth is warming at a rate unprecedented during post hunter-gatherer human existence.’

It is worth noting that way back in 2001, the ‘Third Assessment Report of the Intergovernmental Panel on Climate Change’, further recorded: “There is new and stronger evidence that most of the warming observed over the last 50 years is likely to be attributable to human activities”, most importantly the release of greenhouse gases from fossil fuels.

Several ‘International Agreements’, including the Paris Agreement on Climate Change - all supported by hard scientific data, have called for immediate, quantifiable measures in each country to address the ‘wide-ranging environmental threats, such as ozone depletion and long-range transboundary air pollution.’ Against this backdrop, in this article, I shall focus on the dreadful effect of climate change in the proliferation of a wide-variety of ailments, especially infectious diseases, within a few decades. While doing so, let me first have a quick recap on what is ‘Climate Change’, in a simple language.

Climate Change – a quick recap:

According to the United Nations, ‘Climate Change is the defining issue of our time and we are at a defining moment. From shifting weather patterns that threaten food production, to rising sea levels that increase the risk of catastrophic flooding, the impacts of climate change are global in scope and unprecedented in scale. Without drastic action today, adapting to these impacts in the future will be more difficult and costly.’

It’s important to note, although, the planet Earth’s climate is constantly changing over geological time, the current period of warming is occurring more rapidly than many past events. Scientists are concerned that the natural fluctuation or variance, is being overtaken by a rapid human-induced warming, as they emit more greenhouse gases. As these gases get trapped in the atmosphere, more heat is retained that has serious implications for the stability of the planet’s climate, even impacting human health with grave consequences. The World Health Organization (W.H.O) has also warned that the health of millions could be threatened by increases in malaria, waterborne disease and malnutrition.

Its impact human health:

The direct and indirect impact of climate change on human health is profound. Before I go into the specifics, let me indicate some of the direct ones, as captured by the Center for Health and the Global Environment (CHanGE), University of Washington. This is sans any charts and maps, unlike the usual practice:

• Increasing temperatures are causing poor air quality that can affect the heart and worsen cardiovascular disease.

• Increasing exposure to pollen, molds, and air pollution, all of which can worsen allergies and other lung diseases, such as asthma. 
  …continue reading…

Self-made Barriers To Business Transparency Impacting Drug Access

Self-made Barriers To Business Transparency Impacting Drug Access

A recently published book on pharma industry tried to expose the deceit behind many generic-drug manufacturing—and the consequent risks to global health. This publication is described as an ‘explosive narrative investigation of the generic drug boom that reveals fraud and life-threatening dangers on a global scale.’ However, I reckon, this is just a part of the story, and its huge adverse impact on public health flows generally from the following facts:

• Greater use of generic drugs is hailed as one of the most important public-health developments of the twenty-first century.
• Today, almost 90 percent of global pharma market, in volume terms, is comprised of generics.
• These are mostly manufactured in China and India.
• The drug regulators continuously assure patients and doctors that generic drugs are identical to their brand-name counterparts, just less expensive.

No question, such deceit, blatant fraud and data manipulation – seriously affecting drug quality of generic medicines, shake the very purpose of making affordable drugs accessible to many. But, simultaneously, lack of transparency – right across the various functions of a pharma business, is also making a host of modern life-saving drugs unaffordable and inaccessible to even more patients. Although, both are despicable acts, but the latter one is not discussed as much.

Thus, in this article, I shall dwell on the second one – how attempts for pharma business ‘transparency’ for expanded drug access to patients, getting repeatedly foiled, especially in light of what happened on May 28, 2019, in the 72nd World Health Assembly (WHA).

Does pharma want low business transparency to continue?

Despite so many encouraging initiatives being taken in the pharma industry over a period of time, gross lack of transparency in its business continues, since long, despite this is being a raging issue. The obvious question, therefore, remains: Does pharma want low business transparency to continue? Thus, to give a perspective to this pertinent point, I shall quote two important observations, appeared in ‘MIMS Today’ – the first one on April 17, 2017, and the other came a year before that, on November 20, 2016, as follows:

• “A market cannot function when purchasers have limited information and, in the case of prescription drugs, pricing is a black box. Prices for drugs are clearly rising at rates that far exceed inflation and the level of any rebates or discounts offered by manufacturers,” experts opined. They further said, to hold the industry accountable, Access to Medicine Foundation (AMF)’ regularly compiles an index to rank the progress made by each large drug maker in the area of business transparency. Curiously, they concluded, ‘the number and quality of evaluations for the effectiveness of these programs are lacking.’

• “Lack of transparency of drug makers was also identified. Their policy positions, political contributions, marketing activities and memberships in associations and the associated financial support provided and board seats held were all analyzed. And only then, the ‘AMF’ reached a consensus that transparency remains low in all areas. The analysts further added, ‘there is a lack of transparency and rigor in monitoring and evaluating the access-to-medicines initiatives as well as the link between prices and development costs. Thus, ‘greater transparency from manufacturers to disclose R&D costs for drugs and evaluation of the initiatives’ is imperative.

Despite key policy makers’ favoring transparency, it remains elusive:

To illustrate this point, let me draw a recent example from the United States.

Alex M. Azar II, who is currently the Secretary of Health and Human Services of the United States, also served as president of Eli Lilly USA. LLC from 2012 to 2017 supports the need of business transparency in the pharma industry. Last year, he also emphasized:

“Putting patients in charge of this information is a key priority.…continue reading…

Pharma ‘Chatbots’: For Better Stakeholder Engagement

Pharma ‘Chatbots’: For Better Stakeholder Engagement

The critical value of meaningful interaction and engagement with individual customers – responding to their specific needs, is fast drawing attention of many businesses, for sustainable performance excellence. The same is happening in the pharma industry, as well. Creative use of this process leveraging modern technological support systems, would also provide a unique scope of cutting-edge brand service differentiation, in well researched areas.

That, it is a very important focus area for the pharma players, is no-brainer. Nonetheless, what really matters most is the novelty in strategizing such interactions and engagements, especially with patients and doctors. I also wrote about it in my article, titled ‘Indian Pharma To Stay Ahead of Technology Curve,’ published in this blog on May 22, 2017. Over two years ago, I clearly indicated there that application of AI via digital tools, called ‘Chatbots’ – the shorter form of ‘Chat Robot’, is one of the ways that pharma may wish to explore this area.

Illustrating this point in that article, I mentioned that on March 05, 2017, a leading bank in India announced the launch of an AI-driven Chatbot named Eva, coined from the words Electronic Virtual Assistant (EVA), to add more value to their services for greater customer satisfaction. ‘According to reports, Eva is India’s first AI driven banking Chatbot that can answer millions of customer queries on its own, across multiple channels, immediately.’

In this article, I shall dwell on this interesting area, with a primary focus on pharma sales and marketing, and assess the progress made in this space, thus far, by several drug companies, including some Indian players. Let me start by recapitulating the basic function and purpose of ‘Chatbots’ in pharma.

Pharma ‘Chatbots’ – the function and purpose:

Simply speaking, pharma ‘Chatbots’ are also AI-powered, fully automated virtual assistants. Its basic function is to mimic one-to-one human conversation on particular areas, as desired by the user. Likewise, its basic purpose is to genuinely help and assist the customers who are in search of right answers to specific disease related questions, in a one-to-one conversational format, having a higher source-credibility.

In that process, ‘Chatbots’ can effectively satisfy the patients and doctors by providing them the required information, immediately. In tandem, pharma companies also reap a rich harvest, by developing not just a trust-based healthy relationship with them, but also in building a robust corporate brand – creating a long-term goodwill that competition would possibly envy.  

Effective customer satisfaction is an area that can’t be ignored:

In the digital age, a new type of general need is all pervasive, with its demand shooting north. This is the need to satisfy a voracious appetite among a large section of the population for all types of information, with effortless and prompt availability of the required details – as and when these come to one’s mind.…continue reading…

Visible, The Green Shoots of Digital Transformation in Pharma

Visible, The Green Shoots of Digital Transformation in Pharma

Currently, one gets a mixed feeling about the progress of digital transformation in the pharma industry. This is despite various reports confirming that a number of major initiatives in this field have been taken, especially by Big Pharma, globally. Moreover, these are primarily driven by the company CEOs, as it should be, and adequately backed by heavy investments.

Another recent trend can’t also be wished away, as corporate C-suites find a new breed of leadership – Chief Digital Officers (CDO) as occupants. It has already happened in several top pharma companies. Alongside, one can spot in this milieu, a plethora of private ‘digital trainers’ – wearing interesting titles and offering courses of many types, especially for pharma line managers.

On the flip side, many experts feel that ‘digital transformation of business’ is currently more a buzz in the drug industry than reality. These are, apparently, piecemeal attempts of converting analogue formats to digital, in a number of functional areas to improve operational efficiency of the same process.

Thus, it’s time to go for a reality-check at the ground zero, to ascertain the overall progress of the industry in this area, at least, in the last five years. While doing so, in this article, I shall try to hear the views of the top company CDOs on the nature of the challenge, alongside examine some credible research findings. Let me begin this discussion by looking at where exactly does the pharma industry stand today in this space, as compared to other industries.

A fact-check:

That many players in the drug industry, continue to have no clear digital vision and strategy, was established in the ‘Harvey Nash/KPMG CIO Survey 2018.’ This survey is claimed to be the largest on IT leadership in the world, with almost 4,000 participants across 84 countries, representing over USD 300 bn of IT budget spend.

The report provides a snapshot of the pharma industry in several areas, particularly where the industry’s responses differed significantly from those across other industries. …continue reading…

Disruptive Impact of AI on Pharma Sales And Marketing

Disruptive Impact of AI on Pharma Sales And Marketing

Artificial Intelligence (AI) that refers to the ability of machines to perform cognitive tasks like thinking, perceiving, learning, problem solving and decision making, is poised to disrupt our world. Initially conceived as a technology that could mimic human intelligence, AI has evolved in ways that far exceed its original conception. This was articulated in the June 2018 Discussion Paper, titled ‘National Strategy for Artificial Intelligence’ of NITI Aayog, India.

The paper further highlights: With intelligent machines enabling high-level cognitive processes like thinking, perceiving, learning, problem solving and decision making, coupled with advances in data collection and aggregation, analytics and computer processing power, AI’s capability has dramatically expanded. So is its game-changing utility in a growing number of fields to enhance productivity – dramatically.

I also expressed this need in my article, “Indian Pharma To Stay Ahead of The Technology Curve,” published in this Blog on May 22, 2017. Nevertheless, despite galloping progress of AI, a kind of ‘Ostrich Syndrome’ still prevails in some sections of the industry. This attitude, if continues, may catch many drug companies off-guard, with serious repercussions on business. In this article, I shall focus on the possible impact of AI on pharma business, specifically on pharma sales and marketing, instead of being prescriptive in my deliberation.

A disruptive impact on pharma value-chain:

Currently, only a few drug companies have embraced AI-driven technologies to transform pharma value-chain elements, across functional areas of the organization. However, in the next few years, effective adaptation of AI, in the true sense, will be the key success factors for any player – nurturing a burning desire to succeed, consistently. This was, again, an important conclusion of the 2019 FICCI Report titled, ‘Use of Artificial Intelligence and Advanced Analytics in pharmaceuticals.’

While explaining its rationale, the report emphasizes – catalyzed by an exciting range of new, disruptive technologies a paradigm shift is taking place, challenging the status quo with the traditional pharma business model. AI is in the process of disrupting this status quo, especially in the following two areas:

• Increasing stakeholder pressure to reduce costs and demonstrate greater value of drugs,
• Evolving swing from treatment to prevention, and patient-centric treatments.

Prompts a critical need to re-imagine the future:

These inevitable shifts prompt a critical need to re-imagine the future, for each drug manufacturer. However, the good news is, some of them, predominantly the global ones, have started making sizeable investments on AI. On a deeper scrutiny, the FICCI paper finds that applications of AI are mostly taking place in the new drug discovery and the supply chain area.

Besides individual company initiatives in the R&D area, important collaborative arrangements on AI with academia, have also been announced, such as, ‘Machine Learning for Pharmaceutical Discovery and Synthesis Consortium (MLPDS). This is a collaboration between the pharma/ biotech industries and the departments of Chemical Engineering, Chemistry, and Computer Science at the Massachusetts Institute of Technology (MIT).…continue reading…

Changing – The Key Differentiator To Boost Pharma Market Share

Changing – The Key Differentiator To Boost Pharma Market Share

Health problems, affecting populations of any country, are many. So are the issues related to the delivery of effective health care solution, that most patients would consider satisfying and meaningful. From this perspective, prevention, treatment and effectively managing any disease is basically a problem-solving situation, for all, as we see around.

Interestingly, an ailment, per se, may not necessarily be the only problem that needs to be solved by a doctor, hospital or a pharma company with its drugs. Other associated factors, playing a key role in the process of patients’ search for a meaningful solution – could often post to be tougher barriers in finding the solution. Therefore, patients’ problem during any disease treatment process, is much more than the disease or availability of required drugs.

Consequently, it is very important for all, especially the pharma marketers, to properly understand what these specific influencing factors are, for each patient-groups or types, if not each patient. Obviously, it would call for generation of relevant data to precisely define the problem, or a set of problems, as the patients feel and envisage. Conversely, these problems should not be defined by the company, based mostly on gut feel, just as it’s so difficult to fathom how another person would feel in a distressing situation. Thus, the need to chart a strategic roadmap to provide a solution to those problems will arise only thereafter.

In pharma context, there are several critical elements in this problem-solving process. However, in this article, I shall focus only on two areas. As these could provide a cutting edge, if used in creative ways by drug manufacturers in arresting patients’ and other stakeholders’ attention on this crucial process.

Three critical elements to the problem-solving process:

Among several others, I reckon, the following three elements would play critical roles in the problem-solving process that is specific to the pharma industry:

• The mindset to follow the problem-solving approach with all sincerity.
• Communicate the problem-solving process in a creative way to patients and others.
• Walk the talk, earning patients’ delight and enhancing the corporate reputation.

Since, the third element, although very important, is involved with the strategic roadmap of the organization, let me discuss here the first two elements to justify the need for this stratagem.

The key differentiators are changing:

A clear shift is underway that will influence what drug will be prescribed and the treatment process that individual patients would prefer.

Not so long ago, and to a large extent even today, one of the key differentiators to sell high price patented products used to be the narrative of ‘billions of dollars’ of investments that go behind time-intensive and high-risk R&D. Nevertheless, this age-old recital now finds lesser and lesser number of takers, largely within patient groups.…continue reading…