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Case Study - Leading a Pharma Company Through Due Diligence
Two biopharmaceutical firms were considering a merger. For one potential partner, we undertook a due diligence effort to assess the attractiveness, business opportunity, and fit with the other company.

Approach
Our team approached the assignment from a strategic point of view, questioning how the venture related to the client's overall vision and goals. We strove to answer questions such as: 1) whether the client's revenue growth would be stronger alone or with the partner, 2) what potential synergies would enhance the client's competitive position, and 3) what were the implications for the R&D portfolio?

Norbridge examined the contributions that would be made by each company across the value chain. Elements included management and staff, R & D portfolio, sales and marketing, and manufacturing. We developed detailed profiles of each partner's major drugs, including the clinical status, potential market size, and technical risks. With this information, we were then able to perform a comprehensive review of the two companies' businesses by therapeutic area and also devise various scenarios as to how the merged organization might exploit synergies.

A second component of the assessment involved a growth forecast and the creation of a 10-year financial sales forecast for the potential partner's top 10 major drugs. Upon completing this analysis, we built a combined growth outlook model for the proposed new company on a worldwide and regional level. The final component was a rationalization analysis to look for potential savings throughout the value chain. This analysis incorporated an assessment of degree, timing, and cost to achieve.

Value Added
Upon concluding the analyses, Norbridge determined that the fit between the two companies was a potentially favorable one. While we did point the client to several red flags, we also identified many benefits. Benefits included: risk diversification in the near and long term, marketing and sales synergies, shared learning experiences, and improved brand name recognition resulting from a larger geographic reach. We recommended that the client engage its investment bankers to continue with the valuation process, and in the meantime, explore a number of specific R&D, manufacturing, and management issues before reaching a lasting decision.

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