Right ingredients for a successful M&A Essay Example | Topics and Well Written Essays - 2250 words

Right ingredients for a successful M&A - Essay ExampleFactors such as shifting market dynamics from US to Emerging Markets, rising healthc be demand due to ageing population, regulatory and government changes due to economic milieu and palpable expiration of blockbuster medicates and the failure of R&D have led companies to restructure, grow inorganically and contain costs. Rationale behind M&A in Pharma There are a number of reasons behind which organizations merge or aquire each other, the most(prenominal) presiding one is accelerating growth. Pharma industry has rough unique growth drivers that lead the companies to grow inorganically rather in the conventional way. The key drivers of M&A growth in the pharmaceutical industries are 1. R&D Productivity The pharmaceutical industry is research-intensive industry, with an average R&D to sales ratio as high as 18%, compared to 4% for US manufacturing industry overall (Pharmaceutical Researchers and Manufacturers of America, 2011). The R&D process is expensive costing $1.3bn in average (Grabowski, 2007) time-consuming (12-15 years) and exceedingly risky in their outcomes. Hence, by joining the research expertise of the two companies, M&As can profoundly improve the research performance of the firms involved. 2. strain growth An important invest criterion in pharma firms is evaluating companys drug pipeline. Inspite of the exorbitant R&D spend, drug pipelines of companies are quite barren, especially the late? spirit level pipelines. Hence it is imperative for the Pharma companies to look outside in order to fill their pipelines. 3. Search for Blockbusters Blockbusters, defined as brands with annual sales in superfluity of $1 billion, continue to drive growth. Pharma companies constantly search for blockbuster drug molecules such as Eli Lilys Prozac or Pfizers atorvastatin to boast their... Right ingredients for a successful M&AThere are a number of reasons behind which organizations merge or aquire each o ther, the most presiding one is accelerating growth. Pharma industry has some unique growth drivers that lead the companies to grow inorganically rather in the conventional way. The key drivers of M&A growth in the pharmaceutical industries are R&D Productivity The pharmaceutical industry is research-intensive industry, with an average R&D to sales ratio as high as 18%, compared to 4% for US manufacturing industry overall.The R&D process is expensive costing $1.3bn in average time-consuming and highly risky in their outcomes. Hence, by joining the research expertise of the two companies, M&As can profoundly improve the research performance of the firms involved. Pipeline growth An important investing criterion in pharma firms is evaluating companys drug pipeline. In spite of the exorbitant R&D spend, drug pipelines of companies are quite barren, especially the latestage pipelines. Hence it is imperative for the Pharma companies to look outside in order to fill their pipelines. Block busters, defined as brands with annual sales in excess of $1 billion, continue to drive growth. Pharma companies constantly search for blockbuster drug molecules such as Eli Lilys Prozac or Pfizers Lipitor to boast their top lines. The period for which the patented drug can be masrketed is effectively 4-5 years after which the patent owning company loses its exclusivity to market and sell the drug.