Pharmaceutical Business Development & Licensing
Ever get the feeling that mergers and acquisitions are eliminating all of the top tier pharmaceutical companies with whom you might seek an alliance? Frustrated with the time and effort it takes to identify and qualify prospective partners internationally, and then find professional bus dev contact people within the target companies? The solution is only a click away in the BiotechProfiles database.
If you are like most business development executives in small to mid-size companies, your first challenge is to identify all companies worldwide that might strategically need your company’s proprietary technology and/or products. Some executives give their primary focus to attending partnering conferences. Not only is this expensive, costing thousands of dollars per meeting, but unfortunately only a limited number of qualified partners actually attend such meetings.
Your rate of success will increase if you proactively identify and approach qualified companies directly. While it’s conceptually simple to compile a prospect list, in practice the challenge is to develop a prioritized list of prospects containing only those companies that are a good strategic fit with your technology and have the financial capacity to undertake a deal. To most if not all biotech companies, cash is king. Therefore the most critical qualifying factor is financial – which companies have the financial capacity to enter into a deal and pay at least part of the consideration in cash? BiotechProfiles solved this problem for you by compiling a database of all companies globally who have greater than $200 million in revenue and/or 500 employees, thresholds that typically make companies net acquirers rather than sellers of technology and who have strong balance sheets. This allows you to deprioritize the thousands of companies that fail to meet this threshold. And to make it easy to find companies who are a potential strategic fit, you can apply filters to the database to select prospects based on business franchise (e.g. vaccines), therapeutic franchise (e.g. pain), and geography. The following paragraphs highlight some of the findings from the database.
Revenue is a key metric that most people use to rank companies and develop a target prospect list. In total, there are nearly 250 companies worldwide that meet our inclusion thresholds and could be attractive strategic partners or acquirers. What is even more surprising to many executives, however, is that there are 92 pharmaceutical companies worldwide with annual revenues exceeding $1 billion, and another 47 with revenues over $500 million. Even given the pace of M&A activity, this would seem to contradict the belief that the industry is becoming excessively concentrated in the hands of a few companies.
Not surprisingly, given the history of the industry, Europe and North America have the highest concentrations of major pharmaceutical companies with 85 and 73, respectively. Japan and India are gaining ground, with 27 and 17 respectively.
Of the companies with over $1 billion in sales, there is also a reasonably broad geographic distribution. 39 are in Europe, 30 are in North America, and 18 are in Japan, with the rest spread globally. The ability to select partners based on geography becomes very important in one’s business development process if one’s goal is to form a regional alliance with a partner to allow retention of commercial rights in one’s home territory.
It is strategically and operationally imperative that all companies specialize on a limited number of therapeutic areas to establish technology, IP and market leadership. This metric is more important to the business development executive than a company’s sales magnitude, as it would be a waste of time to try to initiate discussions with a company that doesn’t share a need for your technology. The BiotechProfiles database tracks 26 different franchise areas, allowing database users to filter the overall database to find those who specialize in compatible fields.
Pharmaceutical company rankings typically include only those companies that are publicly traded and are required to disclose their financial information. While focusing on the public universe might be sufficient for some purposes, this is a serious omission for business development executives. In the BiotechProfiles database, there are currently 72 private companies, or roughly 30% of the total companies profiled. Furthermore, 20 of these companies have revenues in excess of $1 billion, primarily located in the USA and Europe. It is critical that these companies be included on any comprehensive prospect list.
When seeking partners, inclusion of an equity investment is usually considered a positive factor. While any company can consider taking an equity stake, there are 16 pharmaceutical companies that have established a formal venture capital fund to promote their strategic interests. These VC funds might consider making an investment at an earlier stage than their parent company if the funds help advance a company’s technology to a more mature partnering stage. Or they may coordinate their investment with the parent to help complete a transaction. In any case, knowing which companies have the greatest flexibility in their deal structures enhances the prospects of actually completing a deal.
[Data as of December 2009]