Challenges for the Newly Merged Pharma Companies

The consolidation in the pharmaceutical industry continues. It is interesting that last year at this time I was teaching a Pharmaceutical Marketing MBA class and said that consolidation was predictable. Most of the students, all mid-level at pharma companies in various disciplines outside of marketing, pushed back that this would not happen. I think it was more of a wish on their part rather than good market observation.

Anyway, the consolidation has been going on and will continue. We likely are moving to what the Boston Consulting Group called the "Market of Three". That is, as an industry matures, consolidation occurs until there are three major broad players, with a group of niche players.

There are huge opportunities awaiting these newly formed companies to enhanced their perceived value with stakeholders. When a company says they will be the "new ..., they are in fact framing expectations for stakeholders that something will be different. That is, there will be new attributes, associations and experiences that were there previously. From a brand and reputation perspective, this is a double-edged sword. On the one-hand, these companies can get out of the starting gate with new positioning, brand and reputation initiatives designed to prove that they are in-fact new. Or, they can simply hope that new means that they will be accretive at some point in their financial performance, which I would argue is insufficient to prove their newness.

I would hope that these companies are looking at how they created value before, individually, and how they will be creating value going forward; that they reidentify for themselves and for others their strategic group with which they compete; that they engage in organizational change efforts to bring the new cultures into alignment (60-70% of mergers fail due to culture clashes); and that they look for ways to enhance their reputation with there key stakeholders.

It will be interesting to see how many of these companies do anything more than simply try to tell people that they are new.