According to the Financial Times, global healthcare companies’ heated interest for mergers and acquisitions (M&A) shows no sign of abating. Thus far in 2016, M&As have more than doubled to $56 billion compared to the previous year. Overall, M&A activity in the healthcare sector hit a record $724bn in 2015, up 66 percent from $436bn in 2014, representing roughly a fifth of all transactions.
Evidently, in an increasingly competitive pharmaceutical market, companies continue to seek growth opportunities to consolidate its pipeline, and expand global market access as their patent licences expire. Currently, pharma giants are currently in a bidding war to acquire mid-size pharma and biotech companies. While M&As have become a necessity in order for companies to thrive and prosper, there is a lot to consider for the merger to be successful.
Amidst the ongoing M&A, clinical supply professionals often look on with concern over how to deal with potential impact it could have on the supply chain. Planning and managing clinical trials is an extremely complex task due to its unpredictability. Each company has its own unique clinical supply chain models. As Jody Vilensky, formerly of Cubist Pharmaceuticals, once recalled in interview with the Financial Times, after the company was acquired by Merck, coordinating A with B was not as smooth as it might seem. According to her, “We had one vendor in common with Merck, of about 60 we work with at Cubist.”
While there are many factors to acknowledge when two companies merge, here are tips to consider that should help you avoid critical disruptions to your clinical supply chain:
Plan early from the business development stage
The challenges with clinical supply chain after a merger are not solely due to different supply chain matrices. Instead, it is mainly because many companies fail to plan for the aftershocks of a merger. Integrating the clinical supply chain between both companies is advised from the business development stage of the merger.
Many express that chaos occurs because coordinating the clinical supply chain is not the main priority. Planning clinical supply chain models to review the current profile and analyse how two companies can work the best to provide synergies should be discussed from an early stage. To do that successfully, it is important to evaluate each company’s capacity to incorporate clinical supplies. Bigger companies would have more ability and resources to coordinate supply chain compared to smaller organisations. A critical analysis on the whereabouts of clinical trials and the quality of the clinical supply chain can be significant factors to discussing the M&A terms as well. A well-organised supply chain with high quality standards could be one of the deal winning elements for mid-size pharmas and biotechs.
Investigate and re-assess vendors’ capability
Reviewing the existing vendors if they will be able to meet the increased volume is as important as auditing the new partner itself. Their capability to achieve the new expectations and requirements should be investigated from every quality perspective. Often, there is a conflict when it comes to quality standards as every company has its own standard, and it can differ substantially from one another. Setting key performance indicators (KPIs) both internally and externally is highly advised to meet quality expectations.
Determine clinical supply chain model for all
While both companies will be managed under one roof, it is essential to organise the supply chain with a shared vision. In order to meet the new goals, the company has to examine and determine the best metrics, and here are some options to consider: 1) coordinate to company A’s practice, 2) inheriting company B’s supply chain model, or 3) create new supply chain designs.
Incorporating supply chain models is definitely critical to plan for long-term success. Yet, there should be sufficient time allocated to developing a new supply line for one merged company to prevent supply chain disruptions and secure the benefits of merger.
Time is indeed gold, especially in clinical trials. Everyone is racing to become the first one in line to launch drugs, obtain market access and serve public health. That is in fact the main reason for mergers in the industry. A smooth clinical supply chain is the key to speed up clinical trials, thus to become the pioneer for a new vaccine. In this game where time is the key, recognising the significance of coordinating clinical supply chain could be the answer.