Three Reasons Why Pharmaceutical Companies Need Specialty Management Consulting Firms

The pharmaceutical industry is undergoing a tremendous deal of change. Companies such as Pfizer and Lilly are facing substantial product patent expirations. Plus, company pipelines are insufficient to replace the revenues lost to patent Management Consulting Travel expirations. Lastly, EU-based and US-based companies and US are shifting their organizations towards higher-growth markets in China, India, and other Emerging Markets, creating internal organizational turmoil in their home markets.
As many companies realize, it is decreasingly feasible to simply “research” your way out of these problems. Part of the solution to these challenges is developing and executing what we broadly refer to as a Business Development and Licensing strategy (BD&L). This strategy would include any and all options for seeking and financing external partnerships, licenses, mergers, and/or acquisitions.
Of course all multinational pharmaceutical and biotechnology companies have an BD&L group, usually led by a member of the senior management team. Larger firms will have a team of a dozen or more executives, How To Succeed In Consulting directors, and managers responsible for sourcing, analyzing, and recommending business development opportunities. Even smaller firms will have one or two individuals formally charged with the BD&L process.
So why should pharmaceutical companies, even large ones with large BD&L teams, use consulting firms to assist them? We believe there are three reasons why this is the case:
Development of an Overarching Framework – Many pharmaceutical and biotechnology companies should be applauded for having a strategic and focused BD&L framework. Many companies know exactly what they are looking for, i.e., asset type, stage of development, geography, deal structure, and so forth. A framework, even a simple one, makes it easier for the search team to identify and quickly eliminate opportunities that do not fit. This then enables the team to focus more time on those opportunities which might be a good fit. This results in better due diligence and faster deal making.
Unfortunately, there are many firms which do not take a framework-driven approach. Many searches are haphazard, where companies look for anything with a certain revenue potential, or anything that can be sold by their existing sales and marketing infrastructure. In our experience, any approach which aims to simply provide the sales organization with products to sell is unsustainable in the long run.
Savvy BD&L executives can leverage consultancies to help them develop this overarching framework, identifying the key variables which are important to the company, its management, and its shareholders. Pharmaceutical management consultants can bring an objective perspective to an exercise which, if done properly, results in a roadmap that the BD&L team can then use to plan and execute a BD&L tactical plan.
Broaden Skill Set – We have noticed that many smaller BD&L teams have strengths and skills in some areas, but not others. For example, some companies have BD&L teams led by scientists or clinicians or attorneys who lack the experience to quantitatively and financially assess opportunities. Using a consultancy can provide unbiased, rigorous quantitative analysis and financial modeling.
Extend Geographic Breadth and Depth – The traditional model for US and EU companies was to license drugs from Japanese companies, because many innovative Japanese companies lacked the global presence to develop and market their innovations outside their home country.
Today, this is no longer the case. Many Japanese companies, such as Takeda and Eisai, have successfully established a research and commercial presence in the US and EU. Companies like this no longer need Western pharmaceutical companies to commercialize their internally-developed innovations. So Western pharmaceutical companies are now traveling to and meeting with companies in China, India, and Eastern Europe…anywhere where a new innovation or opportunity may exist. For larger, global BD&L teams this is less of an issue. IN fact, the largest companies typically have regionally focused BD&L executives who focus on identifying opportunities from their local markets for their local or even global markets. But what of the smaller companies which may lack this geographic infrastructure?
This is precisely where consultants, especially boutique, highly focused consultancies, can play a critical role in sourcing and identifying opportunities that fit the strategic and financial objectives of the company. A consulting firm can act as a de facto seeker and “shopper” of opportunity. Consultants can be utilized to focus on particular geographic areas for specific ideas. Examples may include:
> Specialty and generic companies generating $100 MM in Central and South America
> Market expansion in Central and Eastern European countries such as Austria, Czech Republic, and Poland
> The acquisition of pharmaceutical companies in India
> Access to patented drug delivery technologies
A small team can leverage consultants to immediately expand their collective reach, thereby identifying unique opportunities which would otherwise never be identified. Importantly, many of these opportunities outside the US/EU will never appear on web sites which publish BD&L opportunities. Oftentimes the possibility of a transaction is not considered until the party is actually approached with an indication of interest. A good consultant can play a key role in opening these doors which were heretofore closed.
It is understandable that many senior executives may have a mistrust or a bias against using management consultants. This is especially true in an area like business development where there is no guarantee of a viable transaction in a short period of time. However, in these rapidly changing times, pharmaceutical executives should consider expanding the scope of their reach by leveraging pharmaceutical business development management consultants. The best consultants will find ways to make the process efficient, inexpensive, and productive for all parties involved.

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