Mergers and acquisitions (M&A) are mainstays in the pharmaceutical industry as they allow companies to expand portfolios, optimize operations, and foster innovation. However, these deals can be incredibly complex and even the most minor mistakes are extremely costly. They require careful planning and execution to deliver long-term value. Scientific due diligence (which basically means gathering the right data, analyzing it well, and interpreting it properly). That’s why you’ll often see a top pharma market research company involved in this tedious process. Here, we’re going to explain the key steps involved in making successful M&As in pharma.
How Scientific Due Diligence Helps in Making the Right Mergers & Acquisitions Calls
Having precise valuations helps you negotiate but ensuring a successful merger or acquisition goes beyond studying balance sheets and financial performance. You need to perform complete scientific due diligence which involves assessing the critical foundations of manufacturing processes, quality maintenance systems, and regulatory compliance management. Here’s how scientific due diligence helps in making the right M&A calls:
Scientific and Technical Validity of Products
In the pharmaceutical and biotechnology industries, the success of a merger or acquisition hinges on the strength and potential of the products involved. Scientific due diligence involves a detailed review of the target company’s product portfolio, including drug candidates, formulations, and technologies. This step allows acquirers to assess whether the products are scientifically viable, based on current research, clinical trials, and scientific validation.
- Key Questions to Ask: Are the product’s mechanisms of action well-established? Have the clinical trials shown promising results? Are there any scientific or technical challenges that could hinder further development?
Scientific due diligence helps avoid investing in products that may not have scientific backing or that are at risk of failing in later stages of development.
Strength of the Research and Development (R&D) Pipeline
A strong R&D pipeline is often the main value proposition in pharmaceutical or biotech M&As. Scientific due diligence enables acquirers to assess the potential of the target company’s R&D activities. By evaluating the ongoing research, pre-clinical, and clinical programs, as well as intellectual property (IP) assets like patents, acquirers can gauge the long-term prospects of the company’s research efforts.
- Key Aspects to Review: The stage of clinical development, IP portfolio, patent protection status, R&D capabilities, and potential bottlenecks in research or regulatory approval.
Assessing these factors ensures that the acquirer is not only acquiring existing products but also gaining access to valuable future technologies.
Market Readiness and Scientific Trends
Market trends and the evolving landscape of scientific research also play a critical role in the success of M&A decisions. Scientific due diligence helps acquirers assess the target company’s alignment with current and future scientific trends.
- Emerging Scientific Areas: Is the company invested in emerging fields, such as gene editing, AI in drug development, or biologics?
- Market Potential: Does the company’s research address unmet medical needs or emerging health concerns?
By understanding how well the company is positioned within the broader scientific ecosystem, acquirers can determine if the target company’s research is ready to capitalize on future opportunities.
Potential Synergies and Integration Challenges
Finally, scientific due diligence helps identify potential synergies between the two companies. Do the research and development efforts of the two companies complement each other? Are there opportunities to leverage existing technologies, IP, or expertise to accelerate growth post-merger? However, it also helps uncover potential challenges, such as technological incompatibilities, duplicative R&D efforts, or differing scientific cultures. Identifying these issues early helps the acquiring company prepare for integration and manage risks proactively.
All of this takes too much time and resources but companies, especially small and medium-sized businesses (SMBs) and startups often don’t have sufficient time amid waves of M&As in the industry. So, having a good pharma market research firm by your side can simplify things. They can go through the daunting, time-consuming part to help your organization uncover key insights and make informed decisions aligned with long-term strategic objectives.
8 Most Crucial Areas to Assess For Effective M&A Strategies
Before proceeding with the next M&A, you must evaluate the following eight areas as they’re the most crucial in maximizing the chances of your move’s success:
Good Manufacturing Practice Compliance
Good Manufacturing Practice (GMP) shortcomings are very common during inspections but often neglected in the assessment period. Businesses need to focus on two key areas if they don’t want to acquire or merge with a non-GMP-compliant company:
(i) Standard of the Facilities: Check if they meet current expectations or if investment will be required to bring them up to current standards.
(ii) Pharmaceutical Quality System: Check if it’s operational and effective.
You should review documents like minutes of management reviews and quality metrics to quickly assess a company’s approach to quality and compliance. This is really helpful in evaluating the company’s compatibility with the potential purchaser.
Data Review & Cultural Integration
A careful review of the currency of the information supporting product marketing authorizations is crucial. Companies must study the data supporting the submission like validation data, up-to-date stability data, and nitrosamine assessments. Moreover, the infrastructures and cultures of companies have to be studied deeply to ensure compatibility when they merge—authenticating author Simon Sinek’s statement (mergers are like marriages).
Workforce Capabilities
Having a sophisticated and skilled workforce is essential during M&As but the pharma industry has always faced challenges in attracting and retaining the right talent. You need to get the talent assessed by Key Opinion Leaders (KOL) when investment or acquisition decisions are being made. KOL research will help you have the right team working within the company and it makes a massive difference in being able to counter post-merger or acquisition challenges.
Regulatory Compliance and Legal Risks
M&As in the pharmaceutical industry require strict adherence to regulatory requirements. A thorough analysis of the company’s regulatory compliance, including ongoing investigations or past issues with authorities like the FDA or EMA, can uncover hidden risks. Ensure that the company is compliant with all relevant regulations, including those around clinical trials, product approvals, and manufacturing. Additionally, reviewing any legal disputes, pending litigation, or intellectual property (IP) issues is crucial. Legal risks can delay or derail the merger, so it’s important to perform a thorough audit of the company’s legal standing.
Financial Health and Debt Assessment
Financial stability is an obvious yet crucial factor in M&A decisions. Beyond looking at revenue streams and profit margins, you should assess the company’s debt levels and financial liabilities. Understanding a company’s current financial health, including debt obligations, tax status, and overall financial structure, will help avoid unpleasant surprises after the merger. Look for any off-balance-sheet liabilities or irregularities in financial reporting. These could affect the company’s ability to pay off debts or deliver expected returns post-merger.
Market Position and Competitive Landscape
A deep understanding of the company’s position in the market and its competitive landscape is essential for assessing future growth opportunities. Analyze market share, key competitors, and emerging market trends. This will help determine whether the acquisition or merger will provide a competitive advantage or position the company well for future success. A pharma market research company can assist with in-depth analysis of the competitive landscape, identifying strategic opportunities, and potential risks based on current market dynamics.
Product Portfolio and Innovation Potential
Evaluate the target company’s product portfolio and its pipeline of products in development. A robust product pipeline can significantly impact the long-term success of an M&A. Similarly, assess the company’s innovation potential, including research and development (R&D) capabilities, intellectual property portfolio, and the likelihood of future breakthroughs. By leveraging the expertise of a pharma market research firm, businesses can gain a detailed understanding of the target company’s product and technology strengths, ensuring that the merged entity will have access to a valuable portfolio for sustained growth.
Customer Base and Market Access
Finally, assess the company’s customer base and its ability to penetrate new markets. Evaluate the loyalty of existing customers, market share in key regions, and growth potential in untapped areas. A strong customer base and access to new markets can significantly enhance the value of the merger, so companies should analyze these areas to ensure that they are acquiring an entity with solid prospects.
Final Word
Mergers and acquisitions can be complicated when you’re making blind decisions. Instead, you should make data-backed, informed calls after doing the right due diligence. Engaging a pharma market research firm can be a wise alternative to save time and resources, and prevent mishaps. They can offer actionable data to help turn M&A opportunities into transformative growth. If you are looking for a pharma market research company with an impeccable track record of conducting medical market research, look no further than Unimrkt Healthcare. Throughout the years, we have consistently applied scientifically validated methodologies for research in the health industry, ensuring the delivery of actionable data through meticulous targeting of respondents. To learn more about how we can help you with your market research endeavors, call +91-124-424-5210, +91-9870-377-557, or email sales@unimrkthealth.com. You may also fill out our contact form, and our team of experts will assist you as soon as possible.
