Two Global Prescription Drug Companies Join Forces
Joining Forces Gives Global Prescription Drug Companies a Lock on the Market
The time was right for mega-mergers in the pharmaceutical industry when two major drug manufacturers announced their intention to join forces to form a leading global prescription drug company. The combined company would not only benefit from stronger R&D but also double its pipeline of prospective blockbuster drugs in late stage development—helpful for restocking the corporate medicine chest when patents expired. The big question: Could the combined companies truly deliver on their ambitious multibillion-dollar cost-saving targets?
The team responsible for the merger knew that achieving rapid savings would be critical to winning over the financial community, which was taking a wait-and-see approach. They brought in A.T. Kearney to assess synergy opportunities in the supply chain and procurement areas in the pre-close phase, facilitate data sharing between the two companies, and help reduce costs in procurement, R&D, and direct materials after the deal closed.
Bringing us in at the pre-close phase was critical: It allowed us to discover synergies early and achieve results sooner. By setting the rules of engagement, we were able to interact with both companies separately before Day 1, outline the integration steps, and identify savings initiatives. On Day 1, when all data-sharing restrictions were removed, the savings started rolling in.
We set up global cross-functional teams, pulling in members from across both organizations, including staff from central functions, business franchises, and different operations sites. We had 20 such teams, all working on integration strategies and identifying short- to medium-term supply chain synergy.
Diligent data gathering and thorough analysis are always required in a merger, but never more so than when procurement is decentralized. In this case, the direct materials spend was spread across 60 acquired sites, and the team needed to conduct a thorough analysis of the supplier base in areas such as active pharmaceutical ingredients, intermediate products, chemicals, packaging, and contract manufacturers. Tight, central coordination was paramount in getting this right.
Impact and Advantage
The foundation laid during the pre-close phase translated quickly into actual synergy opportunities. Within six months after the close, the company surpassed its first-year synergy targets by 70 percent. Procurement leaders agreed that sharing best practices was fundamental to achieving these savings and that the new company was well-positioned for long-term success.
Europe, Middle East, and Africa