Welcome to our latest update on the outsourced Pharma Commercialisation Services sector. In this report we will be reviewing deal activity across 2022 and taking a look forward to see what 2023 may hold for the sector.
We hope that you enjoy this report and look forward to discussing the data and underlying themes with you. Do get in touch!
Click to read Pharma Commercialisation Services Update – February 2023
Katherine Hobbs, Director at CG Results and Neil Trickett Managing Director of E2X discuss the outlook for ecommerce and why, despite the headlines, they see opportunities for operators and investors across the sector over the next 18-24 months
As Black Friday and Cyber Monday draw to a close, you could be forgiven for concluding that the ecommerce revolution is over. The administration of high profile brands such as made.com and Joules and swingeing job cuts at Meta, Amazon and Shopify have grabbed the headlines over recent weeks but while operators are undoubtably facing a challenging 2023 we identify five themes which offer a more positive outlook for the sector.
- Ecommerce penetration of retail continues to increase
While rates of growth have slowed from heights seen during the COVID-19 pandemic, ecommerce continues to grow as a percentage of retail sales. Statista estimates that ecommerce will account for close to 25% of global retail sales by 2026 up from 19% last year. While inflation and the cost of living is undoubtably eating into overall retail performance, ecommerce continues to expand. The high profile job cuts and administrations owe more to over-investment and poor execution than structural decline in the market.
- Myriad software tools and “MACH” architecture driving D2C expansion
Gone are the days when building an ecommerce platform was a risky, time consuming, expensive project. New technologies have significantly lowered the TCO and speed to market for brands looking to build a D2C offering. Brands can build a scalable, agile, D2C proposition incorporating best of breed ecommerce solutions, across multiple platforms in a matter of weeks for relatively low cost. Gartner estimates that by 2023, 50% of new commerce capabilities will be incorporated as API-centric SaaS services. As brands look to internalise margin and connect directly with their customers in a competitive market we expect software and service providers which support the development. maintenance and migration of core D2C platform architecture to continue to outperform.
- Brands need to elevate their propositions in a competitive market where consumer expectations have never been higher
The heady days of using paid marketing to buy market share have long been replaced by a focus on customer engagement, UX and conversion. In addition to the cost of living and supply chain pressures, retailers have also had to deal with regulatory hits such as the UK SCA changes (which have had a notable impact on conversion rates) and the end of third party cookies. As revenues come under pressure, retailers cannot afford to give consumers a reason to go elsewhere. The retailers of the future need to offer a consistent, frictionless, personalised customer journey across multiple platforms with real-time availability and flexible, fast, convenient fulfilment options. Solutions which facilitate a frictionless, high quality experience for consumers whilst providing a tangible ROI are likely to be in demand. We also expect renewed focus on loyalty and reward programmes as brands seek to offer value for money and a reason to return without getting sucked into a cycle of discounting.
- “Consumer data will be the biggest differentiator in the next two to three years. Whoever unlocks reams of data and uses it strategically will win” Angela Ahrendts, Senior VP Retail, Apple
Enterprises have been grappling with how to maximise the value of their data for years. In a recessionary environment with marketing budgets under pressure it is going to be more important than ever for brands to monetise their existing customer base. Customer data platforms are going to be at the heart of the tech stack, pulling and interpreting data from different systems to enable insight and (importantly) action.
- Recession inspires innovation
The 2008 “Great Recession” bred a generation of entrepreneurs and set the stage for ecommerce boom we’ve seen over the last 15 years. In 2020, the pandemic accelerated things once more, making digital interactions the norm and establishing D2C as the default for many organisations. It seems inevitable that the current economic environment will inspire a new wave of innovation and disruption of the retail landscape. Could this recession be the catalyst that the metaverse / AR / VR has been waiting for? We’re excited to see how the sector evolves and are in no doubt that a new cohort of winners will emerge over the next 2 years.
CG Results has recently advised E2X.COM on its acquisition by Apply Digital.
E2X.COM is an award-winning, specialist commerce strategy and development agency, providing composable commerce, content and operations services to enterprises and other high growth companies. Founded four years ago, E2X.COM focused on pivoting clients to a modern technology stack, moving away from older ‘monolithic’ on premise technology to ‘MACH’ philosophy and technologies, (Microservices, API-first, Cloud Native and Headless) and was one of the founding members of the MACH Alliance.
CG Results supports clients in the following technology sub-sectors:
We are pleased to share our introduction to Pharma Licensing. This guide provides an overview of both in and out-licensing as well as insights on what to anticipate during the process.
We hope that you find this guide useful and look forward to discussing the underlying themes with you. Do get in touch!
Click to read Pharma licensing – an introduction>>>Pharma Licensing: the why the how and a few things to get right
Results Healthcare has recently advised Servier on the out-licensing of the global rights to the Sym022 programme, an anti-LAG3 monoclonal antibody.
Our specialist healthcare team, with backgrounds in the life sciences, understand the complexities of valuations and deal structures that are unique to licensing deals in pharma and biotech and are with our clients every step of the way.
– In-licensing
– Out-licensing
– Co-development
– Co-commercialisation
Platform or asset licensing has increasingly been utilised across the bio-pharmaceutical industry to achieve Corporate objectives by sharing intellectual property (IP). IP includes patents and know-how and third-party proprietary technologies, compounds and products, and can be used to build on existing therapeutic areas, expand into different geographies or to diversify portfolios.
A pharma licensing deal is effectively a collaboration where IP is shared and the contractual arrangement between the licensee and licensor reflects both the intrinsic value in the IP, in addition to recognition that the licensee will need to further invest in research and development (R&D) and commercialisation costs before both parties can share in any future benefits.
Key questions before a licensee will engage in a process
The key areas of focus when a Company considers an in-licensing opportunity are threefold: does the asset satisfy a high unmet need, what level of market exclusivity does it realise, and is there a differentiated efficacy over the current standard of care (SOC). There can be other considerations such as the licensee’s ability to leverage synergies, either through existing infrastructure e.g. R&D, supply chain, commercialisation capabilities etc., or if they have a complementary expertise which can be utilised to expedite a product to market in both time and the probability of success. As a result of this strong focus on these key considerations, licensees usually expect to start detailed due diligence much earlier than in a straightforward divestment or M&A process. Once it is determined that an asset or platform ticks all or most of these boxes, then it is game-on, and a non-binding offer is likely to be submitted.
Negotiation challenges
During negotiations, a key challenge for any licensing transaction is the aligning of expectations of the value split between licensee and licensor i.e. what percentage of the total deal value does a licensor realise through deal payments, versus what a licensee retains through future profits. In a licensing transaction both parties collaborate to realise value over potentially many years, so the value at the point of the transaction as well as the evolution of the respective contributions and arising benefits to each party needs to be determined, agreed, and codified at the onset. The result of having to make such a determination and obtain both parties agreement, at potentially a very early stage of an assets lifecycle, can mean that licensing structures and agreements can be very complicated.
Whilst both parties tend to directionally agree on the importance of the asset and the overall commercial opportunity, there is, more often than not, a discrepancy in the perception as to where an asset sits along its development pathway or where it stands in its lifecycle, with licensors having a much more optimistic perception of the development status than a licensee. This can lead to tension, as the stage of development of the asset or remaining market exclusivity, strongly influences the value a licensor can realise in the near-term.
Early-stage assets and especially those with novel modalities or mode of action (MoA), regularly generate a lot of excitement in the market. However, whilst a licensee does see the future benefit of acquiring such an asset, this “novelty” comes with a lot of risk, and upfront and near-term financial terms usually reflect this uncertainty – rather than scientific excitement – with the bulk of the reward to a licensor being attributed at a later stage through development and commercialisation milestones. This situation is usually contradictory to a licensor’s expectations, as they believe that they should be rewarded for their innovation with a big value upfront and near-term milestones, whist also ascribing a higher premium for their novel asset, compared to those values achieved for established MoA’s.
The key inflection point, where a licensee is more willing to pay higher up-fronts or early-stage milestones is once proof of concept (PoC) has been demonstrated, either through a Phase 2 clinical trial or possibly earlier when looking at certain cancers or rare disease assets, given the limited number of therapies with significant efficacy in these fields.
Insight into the Due Diligence process
Unlike in a M&A transaction, where a company acquires multiple products, people and infrastructures, the licensing of a single asset or early-stage platform technology is much more transparent to third parties and a Licensee will be judged on their ability to accurately assess the opportunity. The consequence of this visibility to Investors, Board of Directors and even peers, is that before a Licensee commits to deal terms, they will take a much deeper dive in due diligence and, not just by looking at the data provided, but also by taking a critical look at the expertise and knowledge of the Licensor’s employees. If any data is ambiguous or not presented clearly, this is a red flag to a potential Licensee, so they will dig deeper and keep on digging until they either get a satisfactory answer or prove that the Licensor has spun the data in a more positive light. If, after undertaking such an investigation, the Licensee still wants to license the asset, a Licensor can expect to see an adjustment to the deal terms, in overall value, timing of milestones or both, as the Licensee starts to get nervous about what they might have missed.
The best way to avoid this uncertainty, is for the Licensor to prepare a clear Information Memorandum which is supported by a robust and well-structured Virtual Data Room. The Licensors internal experts should be available for Q&A sessions, with questions or topics being submitted by a potential Licensee at least 48 hours in advance of the expert Q&A session to allow data to be gathered and well presented.
Build a relationship based on trust
When going on a journey to licence an asset or portfolio there is a lot to take in, but the biggest advice I could give to any Licensor or Licensee, is that before either party walks into a licensing opportunity, they both need to recognise that once the asset is licenced, a partnership is created, and that this partnership needs to be built on trust and must feel to be balanced for both parties right from the start. The Licensor has the knowledge and has invested time and money in creating the IP for the asset, but Licensee will be responsible for bringing the product to market and, to do this, will need to invest a significant amount of money and time before getting their reward. Ensuring alignment of knowledge at an early stage is critical to the success of the asset or platform and, to the financial and mental wellbeing of both parties.
CG Results Healthcare has recently advised Servier on the out-licensing of the global rights to the Sym022 programme, an anti-LAG3 monoclonal antibody.
Our specialist healthcare team, with backgrounds in the life sciences, understand the complexities of valuations and deal structures that are unique to licensing deals in pharma and biotech and are with our clients every step of the way.
– In-licensing
– Out-licensing
– Co-development
– Co-commercialisation
Welcome to our MedTech Services Report. This sets out our views on the tailwinds driving growth and increased outsourcing, an overview of the MedTech CDMO and CRO market as well as the key drivers of consolidation in the sector.
We hope that you enjoy this report and look forward to discussing the data and underlying themes with you. Do get in touch!
Click to read MedTech Services Drivers of Growth and Consolidation – October 2022Welcome to our latest update on the outsourced Pharma Commercialisation Services sector. As well as our usual update on M&A activity, this report takes a deep dive into one of the biggest challenges businesses are currently facing – the War for Talent. A phrase first coined by McKinsey in the late ’90s but one that is now familiar to business leaders throughout the sector.
We hope that you enjoy this report and look forward to discussing the data and underlying themes with you. Do get in touch!
Click to read Pharma Commercialisation Services Update – September 2022The HRTech sector is more active than it has ever been before with the pandemic accelerating the adoption of technology across all HR processes. No longer seen as an administrative function, HR is now viewed as a strategic business unit focusing on the mission critical challenge of identifying and recruiting top talent but also retaining them.
Whilst this challenge is not new, the problem has escalated due to the pandemic, with businesses experiencing the “Great Resignation.” Since the beginning of 2021, employees have been quitting and switching jobs in record numbers, further driving a global skills emergency, and acting as a significant risk to growth for many companies.
Amazon has a 150%+ turnover rate in its distribution centres and needs to rehire a quarter of its workforce every month to stay in business
Therefore, best in breed HRTech solutions and next-gen technologies that address the employee lifecycle and enable successful talent attraction (recruitment) and talent development (training and retention) are on the watch list for all the larger acquisitive players in the market.
In 2021, more than $12 billion in venture capital poured into the HR technology market, with the rate of investment more than tripling from 2020 to 2021. As investors continue to back innovation in this space, the focus is increasingly on talent attraction and development; in Q2 2022 alone, 70% of global HCM M&A deals were across these two components of the value chain.
Below we look at some of the key capabilities in these hot areas that are attracting buyers and investors in large numbers:
- Recruitment: Leveraging AI
As companies compete for talent, hiring people faster, better and cheaper by streamlining the recruitment process is key. Nowadays, companies need to be able to quickly source and connect with potential candidates as well as screen their skills ahead of time using automation. Whilst in its nascency, AI-based algorithms are increasingly being leveraged to effectively match skills to individual roles and also enable employers to better ‘outbound’ target (reverse recruitment) specific individuals by drawing from a variety of sources including social media activity.
With only 9% of companies actually using AI today, the growth opportunity is large
Gamification is also used in the hiring process, screening candidates by turning tests of critical skills and cognitive abilities into a competitive game format. Behind these recruitment games sit algorithms tracking key metrics, providing hiring managers with a bank of data to help determine the suitability of candidates efficiently. This also has the added benefit of reducing bias in the recruitment process which is increasingly critical to an organisation’s commitment to diversity and inclusion.
Selected Transactions in 2022
- Training: The rise of hyper-personalised e-learning experiences
Hybrid working and technological advancements have changed the nature of work, and this is very evident in corporate learning where the market has never been so vibrant and healthy. The most competitive businesses are those that successfully identify skills gaps and respond by reskilling and upskilling their employees. This is only achieved through adopting digital learning and development strategies to foster a culture of growth in the workplace. As automation assumes more repetitive tasks, soft skills are more critical, and this trend will likely increase in importance.
HR technologies that personalise learning and development content continue to be on the rise whilst the existing more traditional LMS systems (Workday, SAP, Oracle) are deemed not fit for purpose. There is a new breed of ‘micro-learning platforms,’ modernised LMS systems, and new AI-based systems that hyper-personalise learning and offer mobile solutions to make content more accessible. These ‘experience platforms,’ such as Degreed, Udemy and Articulate have become increasingly popular as they provide a learning experience employees are engaged with, drawing parallels from on-demand content services like Netflix or YouTube.
The more traditional HCM vendors (Oracle, SAP, Workday) have been less successful in L&D but the likes of Microsoft (Viva Learning), LinkedIn Learning Hub and Cornerstone Xplor have continued to innovate
Selected Transactions in 2022
- Retention: The employee experience
A surge in employee expectations for a healthier and more inclusive working culture has motivated companies to implement initiatives such as agile working and place holistic employee well-being at the top of their agendas – the complete package is now just as important as the salary. Not only is it expensive and difficult to hire externally but if the company is ‘leaking’ people it will never be able to hire fast enough.
Tracking employee sentiments through feedback platforms and monitoring productivity metrics and performance allows businesses to better address employee needs and improve engagement and retention. AI-powered, user-friendly, HR technology tools that enable on-demand access to curated data and visualisations, easy analysis and actionable insights will be a high priority.
In a recent survey, 77% stated that they are more likely to stay at the company if they have received training, with retention rates 14% higher for employees receiving training
Selected Transactions in 2022
- Introduction of Virtual Reality to the corporate landscape
The adoption of VR technology in the recruitment and training process to elevate the employee experience is an emerging trend and will continue to reshape the corporate environment. Thought has been given to virtual careers fairs, immersive training experiences, and digital meetings and these capabilities have the potential to cut costs as well as provide employers with real-time information and deep insights.
Selected Transactions in 2022
The role of HR today continues to evolve and adapt to changes in trends and constant innovations. This combined with the pandemic and the mass adoption of remote and hybrid working has created a range of differing tools and disconnected solutions for individual aspects of the value chain. We are therefore likely to see continued consolidation in the market with providers seeking to acquire emerging HRTech solutions to expand capabilities and maximise customer wallet share. For example, Workday recently acquired Peakon ($700M), a tool to measure employee sentiment and engagement, and Vndly ($510M), a cloud-based hybrid workforce ‘gig’ management solution.
The next 18 to 24 months will be a crucial window for providers to solidify their positions. HRTech that offers smarter best in class point solutions in the areas of talent attraction and development will likely continue to be the most attractive to potential investors and strategic buyers.
We are pleased to share with you the H1 2022 Marketing Services Sector Review, where we analyse global M&A activity and public market performance in the marketing services sector.
H1 2022 has been an exciting and active period for M&A in the marketing services vertical with 425 deals recorded globally. This represents a 15% and 40% increase on volumes seen in the same period in 2021 (368 deals recorded) and 2020 (303 deals recorded) respectively.
Whilst growth remains a key driver of valuations across the space, capability and talent continue to inform wider M&A appetite with ongoing demand across verticals including data, ecommerce, digital transformation, performance and influencer. We also note ongoing good levels of activity in the B2B space as consolidation continues at pace.
Click to read Global Marketing Sector Review: H1 2022
We are very excited to share that we have agreed to join forces with Canaccord Genuity – a leading full-service investment bank serving growth companies in the middle market. This is an important milestone in our journey and we wanted to update you on why we’ve taken this decision and what it means for you.
Since it was founded in 1988, CG Results has grown into a leading independent sector-focussed advisory firm, advising corporate, founder-owned and private equity clients on transactions in the healthcare and technology sectors. We’ve advised on over 60 transactions in our focus sectors in the last three years alone. The combination with Canaccord Genuity will enable us to enhance our global reach, expand our advisory capability and continue to deliver outstanding outcomes for our clients.
Canaccord Genuity is one of the most active mid-market advisors in the US, with deep industry expertise across technology and healthcare. Canaccord Genuity is ranked #1 for Middle Market TMT Deal Activity in the US and #2 for Middle Market Healthcare transactions. Canaccord Genuity’s US investment banking team has over 160 professionals, including over 90 in technology and healthcare.
Strategically Canaccord Genuity is a great partner for our business; with a focus on building lasting client relationships, deep sector expertise and dedication to client service. Culturally our businesses are also an excellent fit; we share the same entrepreneurial spirit, partnership mentality and emphasis on collegiality.
We want to assure you it’s business as usual. We will remain in our new offices in Fitzrovia, and will continue to focus on mid-market transactions for our private equity, founder-owned and corporate clients. Whilst becoming part of a larger organisation gives us deeper resources to draw on, it does not change our approach. We remain fully committed to putting our clients’ interests first and ensuring that every mandate has the full attention of our team.
We look forward to continuing to work with you as we continue on this exciting journey with our new partners at Canaccord Genuity.