Keys to Success - Pharmaceutical Executive


Keys to Success
An overview of recent industry deals reveals 10 principles for developing and maintaining strategic partnerships.

Pharmaceutical Executive

David Brinkley, Theravance
DeBuono and her colleagues at Nellcor were concerned about the cultural mismatch even before the deal was signed. They retained an outside consultant to address the issue, but his recommendations went nowhere. In the end, most of the Nellcor executives were let go, and the merged company became top heavy with Mallinckrodt "suits." Then, the compensation system was changed. "Bonuses and options were cut back, and Nellcor employees weren't motivated by Mallinckrodt perks," DeBuono says. "Before long, disillusioned Nellcor employees began leaving. The merged company began to miss its numbers, and the business went sideways."

Mention the word culture to anyone involved in an international deal, and you will likely see visible pain and suffering. But some companies do it right. At J&J, an alliance with a Japanese partner was at that delicate decision point that typically causes most executives to lose sleep at night. After several months of painstaking analysis, J&J concluded that the product would not be a commercial success in the United States. Wills' alliance team members had to convince their partner that it would be best to cut its losses. That meant taking their Japanese counterparts through the decision process, but, "In Japan, decision making can be much slower and more deliberate than it is in the US," Wills says. "A decision of this magnitude needs to be made by senior management, but middle-management teams can be reluctant to escalate the issue, especially if it isn't good news."

Normally, at J&J a decision to abort would be made in six weeks. In this case, it took six months. But Wills believes it was worth it. "We had to ensure that their team could take this news forward through their organization in a way that it would be accepted, even if it was disappointing. At the same time, we were very interested in retaining a positive future relationship with that company. By exhibiting patience and demonstrating an understanding of their process, we achieved both goals."

Michael Curran-Hays
Old-fashioned, face-to-face communication remains one of the best ways to avoid misunderstandings. Wills believes that one of the major reasons J&J and Millennium have been able to avert major conflicts within the alliance for Velcade, an oncology treatment, is the close personal relationship that has been forged between executives at both companies. "Because they communicated so often and have so much trust in one another," he says, "all it takes is one phone call to get the alliance realigned."

5 If It Ain't Broke, Nurture It Time and time again, m&as fail because the larger partner just can't resist tinkering. Too often, no sooner does the dominant partner acquire the creative genius of a scientific team than it moves immediately to make changes in that "zone of excellence." Frequently, in a cost-cutting move, the R&D function of the smaller entity is absorbed by the larger one. But economies of scale often lead to deficiencies in creative output. It's better to look for cost-cutting opportunities in other areas of the company. Shared services is a logical place to begin, especially when one partner is substantially larger than the other and has well-established functions in place.


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Source: Pharmaceutical Executive,
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