promo_men talking

The recent flurry of acquisitions and reshuffling of assets between Pfizer, Novartis, GlaxoSmithKline and Valeant Pharmaceuticals, underscores a growing move toward specialization among larger pharmaceutical companies. 

promo_men talkingThis past April, Novartis agreed to acquire Glaxo's oncology business; to sell Glaxo its vaccines line; and to sell Eli Lilly its animal health business – all multi-billion-dollar deals. And in May, German drug maker Bayer agreed to acquire Merck's consumer care segment for $14.2 billion, which will make Bayer one of the largest providers of over the counter drugs in the world. 

These deals are spurred by a ‘be first or get out of the way’ business strategy that is becoming increasingly prevalent across the industry, Lilly’s chief executive officer John Lechleiter said in a telephone interview in April. 

In Lilly’s case, the company wants to become a leader in veterinary medicines – while Novartis has other priorities. "It's more important to be in that top tier of global companies," Lechleiter said in the interview. "While we haven't been unnoticed in the space, now we are clearly a major player." After the deal closes, Lilly will be the second-biggest animal-health company behind Zoetis. 

Adopting tech trends 

Such acquisition strategies are common in many tech industries as a quick way for major players to acquire the infrastructure, assets and credibility they need to become instant leaders in a specialized marketplace. But it’s a tough move for biopharma. 

For decades, many companies have gained leadership status by offering a little bit of everything, expanding their global footprint ever further with every acquisition. But that model doesn’t always produce value. The overhead involved in developing and commercializing a vast portfolio of unrelated drugs on a global scale has become untenable. To succeed today, these companies need to hone their assets while deemphasizing non-core aspects of their operations, including sales, clinical trials, and commercialization strategies. 

By outsourcing these non-core business processes to providers who specialize in those capabilities, biopharma companies can achieve a lean and more cost-effective business model. That allows them to focus on what they do best – develop leading-edge treatments that change people’s lives.

Topics in this blog post: Biopharma, Healthcare, Patient Outcomes, R&D, Triple Aim