Buyers are paying premiums for specialized strategy consulting businesses that provide impactful product commercialization solutions for life sciences companies
Based on our in-depth discussions with global buyers and the recent flurry of M&A activity, acquisition demand for life sciences strategy consultancies is exceptionally high. Recent landmark acquisitions by both strategic and financial buyers were struck at premium valuation levels – and as the supply of high-quality acquisition targets continues to dwindle, valuation levels of independent consultancies of scale could rise even further.
One area within life sciences strategy consulting in which buyers are particularly keen to augment their capabilities through acquisition is market access. Equiteq experienced this demand first-hand throughout the sale process of our client Insight Strategy Advisors, a leading market access consultancy recently acquired by Precision Value & Health.
What is market access and why has market access data analytics become such a valued strategic capability?
Market access describes the continuum of activities surrounding the securing of access, coverage, and reimbursement of medicines at prices that balance the need for patient availability and manufacturer profitability. This process has become exceedingly complex, particularly in the face of rising healthcare costs and greater third-party payer influence in the US. Life sciences strategy consulting firms work with pharmaceutical, biotechnology, and medical device companies to help navigate these complexities and maximize product value. This entails developing tailored commercialization strategies grounded in analytics and spanning many fields of expertise. Areas of specialization include specific therapeutic areas, payer value chain analysis, pricing and contracting strategy, gross margin optimization, value proposition development, distribution channel optimization, health economics and outcomes research (HEOR), and real-world evidence analysis.
Market access analytics solutions are becoming more potent through the application of advanced analytics algorithms. Machine learning has accelerated the capture of relevant data for statistical modeling and catalyzed the development of predictive models that analyze payer contracting strategies. These innovations enable consultants to work more efficiently, providing a competitive edge in delivering differentiated and value-added client solutions. These tools also offer attractive and scalable standalone commercial product opportunities for the business, which can be of considerable value to investors.
What are the industry drivers of growth in this space?
There are a variety of favorable industry dynamics at play that bode well for the life sciences consulting sector. These tailwinds are fueling demand for the expertise of specialized consultancies who are well-positioned at the intersection of strategy, science, and analytics:
- Rising spending in complex specialty medicine – According to recent data from the report ‘Medicine Use and Spending in the US’, the speciality share of net medication spending across institutional and retail settings grew from 24.7% in 2008 to 46.5% in 2017. There is healthy growth in medicine spending expected over the next five years, particularly with respect to specialty pharmaceuticals that present added complexities and costs for businesses to distribute and administer.
- Shift to value-based care models – In the US the shift from fee-for- service to value-based care models is accelerating. Life sciences companies are being forced to rethink their value demonstration models as payers become laser-focused on improved patient outcomes and lower costs.
- Trend of outsourcing non-core functions – Life sciences companies depend on the insights of market access consultancies to infuse necessary perspective on market access opportunities and challenges. Increasing market access complexity is outpacing organizational strategy evolution across life sciences companies resulting in greater outsourcing of high-value functions such as HEOR, payer contracting strategy development, and stakeholder engagement across new care delivery models.
- Strong growth in emerging markets – While the traditional developed markets of North America, Western Europe, and Japan have long been the focus of global pharmaceutical companies, the strategic relevance of “pharmerging” markets is rapidly increasing. These developing countries are experiencing tremendous growth in pharmaceutical usage driven by a combination of factors, including rapid population growth, rising life expectancy, increasing healthcare expenditures, and the intensifying burden of chronic diseases.
Widespread acquisition interest from strategic and financial buyers
As illustrated in the table below, there has been a plethora of life sciences strategy consulting acquisitions by both strategic and financial buyers over the past 18 months, highlighting the growth prospects and overall attractiveness of the sector. Diversified pharma services firms are bolstering their strategic portfolio and product commercialization capabilities to create a single, global offering that fulfills client strategy and execution needs throughout the product lifecycle. Large management consulting firms are adding breadth, depth, and scale to existing life sciences practices. And private equity firms are funding sizable platforms with proven management teams to capitalize on the strong industry fundamentals and growth potential. Furthermore, other large professional services and marketing communication firms with healthcare expertise regard life sciences consulting and data analytics services as key components to future success and important competitive differentiators.
*Date of announcement undisclosed.
We continue to see substantial global appetite to acquire high-quality consulting capabilities focused on serving life sciences businesses. If you are interested in capitalizing on this exceptional demand or would like to discuss your strategic options for growth, please get in touch.
Equiteq has executed seven healthcare consulting transactions and over 15 strategic advisory engagements in the sector. More than 30 of our bankers and consultants have specific healthcare and/or life sciences advisory and/or M&A deal experience.
This review precedes the upcoming launch of our inaugural Healthcare & Life Sciences Consulting M&A report. For more information sign up to Equiteq Edge, our content platform to help owners of knowledge-intensive services firms prepare for sale and sell their business.
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