The pharma industry rang in 2019 with a bang, as Bristol-Myers Squibb announced plans to acquire oncology powerhouse Celgene for $74 billion.
Days later, Lilly made a move to revive its pipeline through an $8 billion deal to acquire Loxo Oncology.
The smaller deals continued into the summer, culminating in two potentially transformative deals: AbbVie’s $63 billion bid for Allergan and Pfizer’s plan to combine its off-patent unit Upjohn with Mylan in a deal valued at $20 billion.
|This article is featured in O'Dwyer's Oct. '19 Healthcare & Medical PR Magazine.|
What’s driving this surge in deals? The pressure is on pharmaceutical and biotech companies from all sides: investors expect growth and returns, while payors, regulators and legislators are demanding a decrease in cost and the broader public is clamoring for new, affordable therapies that can improve and save lives.
At the same time, many pharmaceutical companies are facing significant patent cliffs in upcoming years.
By placing bets on acquisitions and other collaborations, pharmaceutical companies are hoping to deliver value to stakeholders and ensure their long-term success.
Upwards of 15 percent of deals are terminated, but those that make it to close must recast the definition of success, working diligently and deliberately to deliver on the promises of the deal. This involves assessing the impact of the deal on every stakeholder group—investors, employees, legislators, regulators, payors, patients and physicians—and leveraging communications to ensure the benefits, potential challenges and value are well understood.
Key communications considerations for company leadership that will help improve the likelihood of a successful deal leading up to and after close include:
Establish a vision for the combined organization. Beyond the due diligence that happens behind the scenes leading up to and during the deal process, the acquiring company must be able to articulate the value proposition for the combined organization while highlighting the unique strengths of each entity and accurately communicating the benefit of merging the two from the outset.
This “best of both” mindset will allow investors, among others, to understand and accept the rationale for the deal.
Integrate the cultures while embracing the history and values of each company. In the current landscape, deals have taken on many different shapes. In some instances, we’re seeing large pharmaceutical companies combine—as in the case of Pfizer/Upjohn and Mylan—while in the case of the Loxo Oncology acquisition, a small biotech was taken over by a global pharma player.
The values of companies with longstanding histories be different than those of a start-up organization. But it’s in the best interest of the acquiring company’s leadership team to embrace and champion the values from both to help ensure that employees remain engaged and invested in the company’s near- and longer-term success.
The goal is to minimize near-term attrition while positioning the company as an employer of choice moving forward.
Communicate consistently to ensure business continuity. While the transaction and integration process can take months, it’s of the utmost importance to establish an open line of communication with key stakeholders for the duration of the transaction to avoid uncertainty and ensure business continuity.
And while it may not be possible to answer every question, companies must have a mechanism in place to gather feedback—particularly from employees. Information should be easily accessible for all stakeholders—on the company intranet, through an integration management office, on a deal microsite, etc.
Deals don’t happen in a vacuum—healthcare is a tightly woven, interrelated industry. In the lead-up to what will undoubtedly be a hotly-contested presidential election in the U.S., we can expect that pharmaceutical and biotech companies will be a target for virtually every candidate and that drug pricing will stay in the spotlight. Stakeholders must have a good understanding of the rationale for a deal—particularly the investment community—but it’s also important for the transaction to be put in the proper context, given the current price-sensitive environment. That means demonstrating a commitment to delivering value while lowering costs.
If the first nine months of 2019 were any indication, we can expect to see additional deals over the next few months and into 2020. Consolidation across the healthcare industry shows no sign of slowing, so it’s incumbent upon organizations to embed communications as they plan for and execute transactions.
John Capodanno is a Senior Managing Director in the Strategic Communications segment at FTI Consulting. He’s a leader in the Life Sciences and Healthcare Group in the U.S. The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates or its other professionals.