The latest insights on M&A activity in the life sciences commercial vendors

As part of our LINX bio-pharma vendor review, Zensights is pleased to share an update on merger activity to help our clients understand the market activity that may impact their supplier relationships.

Key M&A highlights in Q3 2023:

  • Overall activity in the supplier market continues to be low. Merger activity in the third quarter of 2023 remained significantly below historical averages. Of the firms we monitor for our clients, there were four mergers in the quarter versus five in Q2 2023. These two recent quarters are much lower than the historical trend of roughly 10 per quarter, with ten in Q1 2022, nine in Q4 2022, and eleven in Q3 2022. This reduction is consistent with broader M&A activity across the economy.
  • Clients are demanding increased support for key business decisions using data. A recurring theme in the messaging by acquirers and targets about the M&A activity is that suppliers bundle capability (data, consulting, technology) to help their clients navigate complex decision-making. Suppliers are responding to challenges from their clients and providing more comprehensive and therapy-class-specific solutions to client commercial challenges. Clients increasingly demand that suppliers integrate disparate solutions rather than leave it to the clients to do it themselves
  • Customer responses post-merger can be summed up as generally satisfied with ongoing capability, increasing costs from larger organizations, and limited capability expansion. Zensights is now monitoring client experiences after M&A events sourced from those clients who have experienced the changes. The LINX collection process explores with current clients how client relationships evolve after firms are acquired. Data has been collected for the past few quarters for acquisitions made in the past two years, and we are beginning to see results for our clients. In this newsletter, we present initial aggregate information, but individual supplier information is available to Zensights clients through Linx and other offerings.
    • M&A can increase client likelihood to recommend. 23% of the respondents were MORE likely to recommend the supplier after the acquisition, and 17% were less likely. For the remainder, they reported no change.
    • Interestingly, service is generally maintained and often goes up. 30% of the respondents said that service went UP after the acquisition, with 20% reporting decreases. The remaining reported no changes. “We have a good experience and recently hired one of their team.” Another noted, “a change in key personnel negatively affected capability.”
    • While clients had a generally positive or neutral perception of service changes, the quality of the vendor outputs was more mixed. 23% of respondents said quality went up after the acquisition, and an equal percentage said quality went down. The remainder reported no change.
    • Not surprisingly, costs tend to creep up. 43% of responses reported that costs went up, while a similar % said they stayed the same. Interestingly, 13% reported that costs went down. One respondent mentioned, “extremely expensive now, lost that personal touch.” Another said the focus now is “revenue and cost control.”
    • Surprisingly, most clients did not experience broader capability. Only 20% reported being offered an expanded capability following the merger. One respondent mentioned positively that “…it was more than just a talking point; [new capability] made it to the market, and we saw action.” Another noted, “They appear to be struggling to integrate.”

As noted in our Q2 report, we continue to see suppliers adapting ostensibly to help clients navigate ever-more-complex commercial landscapes by expanding their offerings to address broader sets of client challenges, but clients don’t yet commonly report these expanded offerings are helping them. Strategically it does seem to follow this will help the clients, but the market now is in a period of transition not yet delivering the intended value. We will continue to monitor the market and see what the clients report in future updates.

2023 Q3 Activity

In the third quarter of 2023, M&A activity reduced significantly, with four deals by three different acquirers announced in the firms we monitor for our clients. The following deals were identified:

1. Phreesia acquired Medifind (July 2023)

Phreesia, a life sciences and healthcare software as a service firm, is acquiring MediFind, a data science health tech company, to facilitate faster matchmaking between patients and a variety of services. Phreesia, which sells applications to automate and manage patient intake, will integrate MediFind’s machine learning and AI tech to help connect patients with leading experts, trials, health systems and healthcare technologies through “advanced analytics.”

2. Velocity Clinical Research acquired MedPharmics. (September 2023)

Velocity Clinical Research acquired U.S.-based MedPharmics bringing the number of clinical trial sites the CRO has to 40, which span 19 U.S. states and Europe. MedPharmics boasts eight sites that expand Velocity’s reach in the Southeast and Southwest U.S. and give access to diverse groups that include Native Americans and African Americans that have become part of the CRO industry’s push to include in trials.

3. (and 4). The Bloc acquired Thenewway and X-Ray (September 2023)

The Bloc acquired Thenewway, an Italian health communications agency, and X-Ray, a Swiss full-service health creative agency. The Bloc, which is undergoing an expansion effort, stated in a press release that the goal of the Euro plays is to provide premier communications capabilities to clients across global, regional, and local markets. The company added that it intends to introduce proprietary offerings and implement a revised sales and business strategy.