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Supporting Mergers and Acquisitions in the Pharmaceutical/Biopharmaceutical Industry

mergers and acquisitions

Supporting Mergers and Acquisitions in the Pharmaceutical/Biopharmaceutical Industry

In recent years, we have seen Pharmaceutical company megadeals that saw Takeda acquiring Shire for a total value of $81.7 billion, Bristol-Myers Squibb’s acquisition of Celgene for $74 billion, AbbVie’s $63 billion acquisition of Allergan and the proposed acquisition of Alexion by AstraZeneca for $39 billion. All of these acquisitions continue to have a lasting impact on the leadership and staff at these companies which collectively employ hundreds of thousands of employees worldwide. In addition, there have been a plethora of product transfers between organizations with larger multi-national companies pruning portfolios, adding gene therapy and biotechnology divisions, and consolidating core assets.

Mergers and acquisitions (M&As) in the Pharmaceutical/Biopharmaceutical industry are critical for organizations to implement strategic changes to their business. Whether it be to (a) future proof an organization’s pipeline by accessing innovation, (b) obtain additional manufacturing capacity or (c) to divest non-core assets (products, facilities, etc.), companies continue to grow, modernize and evolve to meet the targets set out in their strategic plans.

When two or more organizations reach the ‘deal’ and it is announced that ‘A’ will take over ‘B’ or that A and B will share in ‘A-B’, or indeed that ‘A’ will sell part of their organization to ‘B’, it is frequently followed by uncertainty and apprehension among internal stakeholders. This changing landscape tests an organization’s ability to communicate the distinct ‘win-win’ elements of the deal. The Kübler-Ross change curve (see fig.1 below) is always worth having in mind during this transitional period of M&A and never fails in tracking the internal stakeholder mindset, albeit with differing levels of severity.

Figure 1. Kübler-Ross Change Curve

The transition from pre-M&A to the post-M&A reality can be both fast and slow. The physical symbols of such transitions such as the company name, logo, and headed paper can be changed in a matter of minutes but the hearts and minds of management and employees can lag significantly further behind. It can take years before a post-M&A steady state is reached (sometimes never!) where full commitment to the change is obtained and all the anticipated ‘win-wins’ are realized.

Some acquired organizations are left to their own devices (pardon the pun medtech sector!) and they are run as true satellites whose contact with the corporate office is limited to communicating the positive financial results. In this scenario, the management team in-situ at the time of the M&A event are trusted to continue as-is and maintain the upward trajectory. Alternatively, and more commonly where there is a dominant merging partner, a strict cut-over timeline is applied for an acquired entity to morph into a fully incorporated affiliate. Typically, these sites implement corporate structures, policies and systems swiftly and assertively.

Where M&A becomes can be interesting is the cultural piece; everyone who has worked in an organization through a merger or acquisition knows that there can be a seismic shift in the objectives of the new organization… not so much what the objectives are but, how the objectives are expected to be met. Post M&A, organizations frequently change structure with new reporting lines, new titles, merged departments, increased/reduced layers of management with revised spans of control. Systems of work can also change where new policies are cascaded into procedures that are followed with varying degrees of success. Supporting systems, software tools and information flows are further material changes that tend to require extensive training and oversight in the early periods post-M&A.

When cultures collide in merging organizations, it has serious ramifications for business and its stakeholders. The industry is littered with mergers and takeovers that did not meet expectations simply because the cultural differences were too difficult to overcome. Naturally, organizations do not admit to failed mergers or acquisitions too often but some of the more interesting ones are referenced below.1 Very often the differences in personal and collective discipline, personified in the leadership differences in the two organizations, is challenging for the organizations to reconcile. Where rigid, structured and conservative management methods meet innovative and unorthodox management can be a recipe for M&A difficulties.2

At PharmaLex, we believe we have a unique understanding of the cultural challenges experienced during Mergers and  Acquisitions. Having merged ourselves in 2017 into PharmaLex, we have insight in how to overcome the challenges of maintaining agility while benefitting from working in a bigger corporate environment, having economies of scale with an increased resource pool. In addition, we have supported numerous Quality and Regulatory functions through these challenging periods through Gap Assessments, Benchmarking Studies, Cultural Assessments, Staff Augmentation, Organisational Optimisation and Leadership Coaching and Mentoring. If you would like our team to assist you or your organization with some of the challenges of changing culture, please connect with us to discuss on +353 1 846 4742 or



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Resilience of Pharma Supply Chains and the Impact of Covid-19 Pandemic

How is the COVID-19 crisis influencing pharma supply chains for the future? Is the global pharma supply chain under sustained threat? And what about Asia and its dominance in the supply chain? These are all valid questions considering recent and current events.

It is generally agreed that COVID-19 marks a point in the understanding of medicine supply risks, but will it fuel efforts to establish local supplies of chemicals and APIs as a “matter of national security”? In the last 12 months, Pharma companies have become acutely aware of their dependency on complex supply chains. As the result, the pandemic has finally convinced all stakeholders to build more resilience into their supply chains going forward.

In the last 10 years or so, lower costs have been a key decider in relocating a significant share of manufacturing capabilities to China and India. We have, therefore, seen a large increase in production volumes in these countries where we know that almost 40% of registered sites for APIs were located in India or China, according to FDA data published in 2019.

The relocation of manufacturing to Asia has a direct impact on supply chain reliability and has led to drug shortages.

Believe it or not, drug shortages are not rare events and don’t just happen when there are worldwide pandemics. The average drug shortage in the US lasts 14 months…some last for years.

Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list. In April 2021, there were 175 drugs on the FDA drug shortages list.

Covid-19 didn’t have the foreseen catastrophic effect. There are several reasons for this:

-The pharma industry had a sufficient inventory buffer (average inventory is about 180 days for the entire industry)

-Drug manufacturing has long lead times, so the effect of 1-2 weeks manufacturing cessation in China would take some time to cycle through the supply chain.

-Supply disruptions of APIs or finished products made in China were not hugely prolonged, otherwise, the effects would have been more severe.

-Regulatory challenges for medicines were largely overcome, where required, by flexibilities introduced by regulators to fast-track regulatory processes. For example,

-Fast-tracking approvals to alternative sources of supply of reagents

-Ensuring availability of GMP certification to manufacture and import

-Remote auditing options

-Labelling and Packaging flexibility

Switching sources of supply (which is not straightforward in the pharmaceutical industry) was not extensively required…

-There was a relatively short period of logistical and distribution challenge. Demand spikes for transportation capacity was placed under enormous strain compounded by (i) surge in international demand for PPE, sanitiser, critical care medicine and medical devices (ii) Disruptions at ports (iii) Decreased capacity on Air Freight (iv) Re-routing of transportation (v) Personnel availability constraints due to lockdowns/quarantine (vi) Increased prices. Routes have already opened, and lockdowns are slowly being phased out.

However, despite all of this, local, regional, shorter supply routes are preferred in the current crisis and the environmental agenda is driving this theme globally.

Even if the manufacture of APIs or fine chemicals was more regionally dispersed or locally based, the raw materials for these manufacturers may not be available in these locations anyway.

It appears that we will have to manage the reality that raw material availability and cost are critical factors in where pharmaceutical manufacturing resides. As a result, increased resilience will need to be factored into our supply chains which will include sourcing, at some level, from Asia and the ROW. Moving production closer to home markets would be costly and would take years to accomplish. The smarter approach is to build resilience into the supply chain. How is this achieved?

The key is to ensure there is a risk management plan in place that focuses on the evaluation of potential issues arising from the loss of a supply chain partner or a region. This requires

-Alternate supply arrangements

-Inventory levels to provide a potential buffer

-Agile Manufacturing

This is infinitely more challenging than it seems. It means that organizations need to precisely know the quantity of each raw material or medicinal product in the supply chain and where it is at any given moment. This leads to hyper-complexity where advanced algorithms (and data analytics/AI) will be required to help design supply chains with greater resilience and risk monitoring capability.

Designing resiliency into the supply chain should incorporate placing inventory at the right points of the supply chain network (i.e., the right inventory commensurate to the risk at that point in the supply chain).

Investment in real-time production monitoring systems and integrated planning and scheduling tools (LEAN tools) could increase the agility of existing manufacturing sites to speed up supply and reduce requirements for additional expensive production equipment.

The pharmaceutical industry will continue to build resilience and secure itself against volatility in supply from Asia…perhaps at a faster pace than before.

Next time… could it be another virus, a mosquito, or a resistant bacterium?

However, we should not lose focus on the immediate supply chain challenge.

Supply chains need to plan now for resilience to navigate the current turbulent market.