In pharmaceutical industry mergers and acquisitions (M&A), the most notable deals often involve large drugmakers acquiring small or mid-sized companies with promising drug candidates. Recent significant transactions, such asPfizer's $43 billion acquisition of Seagen, and Bristol Myers Squibb's$14 billion acquisition of Karuna Therapeutics, are key components of the innovation landscape.

Efficiently integrating these companies is a formidable task. Behind the scenes, software developers and clinical data experts can play a role in making the transition less cumbersome, especially duringperiods of tighter regulatory environmentand stricter policy demands on M&A.

"At the end of the day, data is the most valuable asset for companies in our field," said Raj Indupuri, CEO of clinical software company eClinical Solutions. "When a company is acquired, the acquirer gets not only your intellectual property, but also the data."

Indupuri, a 2021 PharmaVoice 100 honoree, said the importance of well-organized data should not be underestimated, whether from a value or regulatory perspective.

"There are so many inefficiencies, and we firmly believe it won't be one company that solves all the problems across the value chain—it must be a profitable combination of different solutions."

— Raj Indupuri, CEO of eClinical Solutions

In Indupuri's view, as the post-pandemic downturn in the biotech sector gradually fades, trends in the pharmaceutical industry point toward more consolidation. Here, we spoke with the CEO about where these trends are heading, the role of new technologies in M&A, and the challenges facing the deal environment.

This interview has been edited for brevity and clarity.

Trends in biopharma M&A

PharmaVoice: What trends are you seeing in biopharma M&A?

Raj Indupuri:Over the past three years, there was ample access to capital in healthcare—many emerging biotech companies, and even those in the tech space, could easily raise funds. At the same time, innovation was flourishing across various areas. However, R&D has also become more complex. It takes about $2.5 billion to develop a successful drug, and the return on investment dropped from about 15% in 2020 to 3%. Today, access to capital is no longer as easy. Therefore, companies are seeking acquisition opportunities to bring therapies or drugs to patients.

From the perspective of large companies, facing regulatory pressure, the Inflation Reduction Act, and patent litigation, they are striving to protect revenue while also looking for innovative companies.

M&A prospects in the technology space

PharmaVoice: On the technology side of the industry, what areas do you see seeing more M&A?

The life sciences technology space has become very fragmented over the past few years. We founded eClinical in 2012, and many young companies have emerged with new ideas because the entire R&D problem is quite complex. There are so many inefficiencies, and we firmly believe it won't be one company that solves all the problems across the value chain—it must be a profitable combination of different solutions.

Based on this philosophy, with advances in cloud and AI, many companies have emerged, but it's a tough industry, and gaining market share and sustaining growth is not easy. Due to all the regulatory compliance requirements, building a scalable model is difficult, and it takes a certain scale to establish a foothold in this industry. But in the past few years, there has been an intense focus on efficiency, especially cost, and companies want to work with fewer CROs rather than investing in numerous fragmented solutions. These trends are driving consolidation, and we believe it will become more frequent as the technology landscape evolves in 2024. This also makes it easier for the industry to work with a few vendors that can deliver results faster.

Differentiation in AI and machine learning

PharmaVoice: AI and machine learning companies are proliferating. How does a company stand out?

Even in the past few months, the changes have been remarkable. Let me give an example. Internally, we have a data science team working on a new case where clinical scientists ask questions and get answers through deep conversational analysis. The concept isn't new, but it's very difficult to solve. Just in recent weeks, I've been fascinated and amazed by the incredible speed at which we produced a conversational prototype. This wasn't possible early last year.

The key is data. Standalone companies with small models can't survive, which again leads to consolidation. So it's changing a lot, and it comes down to your ability to solve multiple use cases and be a significant part of the value chain, rather than trying to solve very specific or narrow problems.

Navigating deals under regulatory scrutiny

PharmaVoice: Regulatory scrutiny of deals is stricter today. How does the industry continue to facilitate deals in this environment?

It depends on the scale—if you acquire a small company, there's less scrutiny; obviously, if you acquire a large or mid-sized company, scrutiny increases. This places more responsibility on both the acquirer and the target to prove you won't stifle competition, harm innovation, or drive up costs. The bar has certainly been raised over the past few years, and it's not limited to our field—we've seen it in the broader tech sector as well. But at the end of the day, bringing companies together offers many benefits, and the outlook is bright.

Other challenges in the current M&A environment

PharmaVoice: What other challenges does M&A face in the current environment?

On the technology side, when companies like ours focus on M&A, it's both an opportunity and a challenge. In our field, we segment into three parts: the top 50, the mid-market, and emerging markets. In biopharma, suppose we work hard to win a client, but they get acquired by a large company—we risk losing that client. That has implications for companies like ours. On the opportunity side, you might get a chance to get into a large company that wasn't previously a client. That's where we need to work to ensure we don't lose revenue by expanding our offerings—from licenses to infrastructure, to data or analytics needs. If integration isn't done well, you'll struggle to maximize the expected return on investment.

In the past six months, in some of the largest deals, we've been fortunate that our products were used on both sides. In terms of data integration, that makes things much easier.

Editor's note: Nominations for the 2024 PharmaVoice 100 are now open. If you know an outstanding leader in the life sciences, let us know through ournomination formby May 5.