The post-merger integration of biotechs by a pharmaceutical firm

Abstract

Pharmaceutical industry remains one of the largest sectors for M&A. Pharmaceutical companies are active in M&A, searching for new sources of competitive advantage and growth. In the last few years, the focus of big pharmaceutical companies has shifted from the so-called mega-mergers, to targeting acquisitions of smaller companies that support their research and development (“R&D”) activities. Often these are biotechnological companies, that derive drugs not from chemicals, but from extraction or manipulation of living organisms. In this context, UCB has acquired several spin-offs emerging from innovative ecosystems over the past years. To create value, these biotechnological companies must be nurtured and integrated through a post-merger integration process (“PMI”). To guide this process, UCB created a Post-Merger Integration playbook. It captures the industry’s best practices along with UCB’s own learnings from some recent acquisitions, distilled into an overview of the key steps and considerations for delivering a successful program. However, this playbook does not consider some of the research specificities that are inherent to research-driven entities like biotech. The goal of the project is to identify the recurrent issues and capture them into guidelines or adjusted processes, to ensure that research-based acquisitions will be integrated smoothly in the future. To identify these recurrent issues, a thorough case study was made of three research-based acquisitions made by UCB: Element Genomics, Ra Pharmaceuticals and Handl Therapeutics. To develop these case studies, 40 interviews were conducted with employees both from UCB and the acquired entities. With the information gained from these interviews, a narration as well as an analysis of the integration of the three past acquisitions was made. From this analysis, patterns of acquisition motives were identified. The theory regarding integration models was developed and transposed to the case study, with variations. Finally, a grouping of cultural and organizational challenges was presented and a set of specific recommendations for future integrations was developed.