With the potential Pfizer deal to buy Allergan for $160bn taking the total cumulative value for mergers and acquisitions to more than $600bn for 2015, it’s been an unprecedented couple of years for consolidation in the healthcare industry. Even mid-sized deals such as AbbVie buying Pharmacyclics for $21 billion in March to strengthen its cancer portfolio or Valeant Pharmaceuticals acquiring gastrointestinal drugmaker Salix Pharmaceuticals for more than $10 billion show that the majority of drugmakers continue to bolster their assets, and size is no guarantee of safety and stability..
On the other side of the coin, drug companies have also been divesting assets, most notably Novartis and GSK finalizing a $20 billion asset swap in March, and Actavis/Allergan selling its generics drugs business to Israel’s Teva Pharmaceutical Industries Ltd for $40.5 billion.
Some of this frantic deal-making has been driven by external forces, such as historically low interest rates. Mergers also offer potential cost savings and improvements in negotiating power (Pfizer anticipates the Allergan deal will deliver more than $2 billion in operational synergies over the first three years after closing). Another motive is the oft-talked about “inversion”, a tax strategy in which a business based in a country with higher corporate-tax rates merges with one based in a low-tax jurisdiction, so as to shift the combined group’s domicile to the target firm’s home country. Despite the US administration’s opposition to such deals, it seems corporates are not being put off.
Fantastic times therefore to work in M&A, Corporate Finance, Business Development and Alliance Management & Integration, and these functions and roles all have burgeoning career opportunities for talented individuals. I have been fortunate enough to work on a variety of senior roles for large and mid-sized Pharmaceutical and Biotech clients in these areas recently and it’s an energetic and exciting world at the moment.
But, taking a step back, what about the career prospects for other executives in these businesses? How does the constant environmental upheaval of restructure, merger and even relocation affect employee engagement, productivity, satisfaction and their own views on their career? Take the example of a senior commercial executive working for Axcan, a small pharma company in the GI space, acquired by Aptalis (having previously been sold to TPG), then sold to Forest which was bought by Actavis, rebranded as Allergan, with half the original business being sold to Teva in 2016. Quite a rollercoaster ride and potentially very disruptive to a person’s career motivations and aspirations.
Jobs for life has evaporated in most industries but until relatively recently, pharmaceuticals still felt a comparatively safe environment, underpinned by its heavily regulated and naturally conservative nature. Does the new era require a rethink both in terms of the individuals that are hired into the roles and how opportunities are presented to them? For example, do even the larger organisations require more entrepreneurial executives, whether in R&D or more Commercial roles? Or alternatively, will the new short term landscape lead to a desire for more short term rewards? While the most senior executives often enjoy pay-outs or payoffs as a result of mergers and acquisitions, those further along the value chain may want larger pieces of the pie as an insurance policy against the next seismic event.
Given the requirements from clients, as well as requests from executives for forms of additional guarantees or incentives, it feels that we are entering a new paradigm, but are not as yet in the risk taking, short term world of finance and banking just yet. Companies are looking for Talent that can deal with considerable ambiguity, shorter timelines and experience managing increased pressure to maximise value, whether from the development of a compound, or in the commercialisation and life cycle management of a drug. Experience dealing with last-minute changes, both at role and indeed corporate level are often not bullet points on a job specification, more details that are evidenced in competency based assessments as part of the recruitment process. The desire from senior executives in pharmaceuticals to work for a more “entrepreneurial organisation” comes up repeatedly but the ability to make the change to more dynamic roles and companies from the previous relative security of Big Pharma is one that can be successfully made by a much smaller percentage of people.
As the environment continues to accelerate, the skillsets and mind-sets of executives needs to change, but companies need to evolve how they motivate and engage with their employees. When a senior executive suggests they would never work for a particular large pharmaceutical corporate because they “operate like a bank”, it is clear that the ethos behind the pharmaceutical industry, cutting edge treatments to improve human health, needs focus to remain at the forefront. This will involve considerable efforts from senior line management and HR to re-engineer the work culture and environment such that excellent drug and device developments and sales can continue, while motivating executives in an increasingly fast-paced and at times more risky atmosphere. As the industry continues to change, attitudes to risk, reward and work itself will need to be addressed.
David Bell is an internationally experienced Life Sciences Consultant with a track record of client delivery with early stage through to large global multinational clients. He has worked across a diverse global client base including biotech, pharmaceutical, diagnostics, medical devices, CRO and manufacturing companies. David began his Life Sciences career with various sales, marketing and operational roles within both GSK and AZ.