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The divestment challenge

The N-Site portal was set up by FTI Consulting with the support of the BIA and MedCity, as a valuable tool to provide support, guidance and expertise for companies and people working in life sciences, from embryonic start-ups to established multinationals.

Combined with the comprehensive tax, investor relations, legal and IP strategy guidance provided by FTI Consulting, Taylor Wessing and Gill Jennings & Every respectively, the platform now has over 95 guidance notes enjoyed by 170 subscribers. PharmaVentures and Gallagher have also joined the group to provide guidance on deals and insurance matters.

The divestment challenge – PharmaVentures

Having advised multiple major pharmaceutical companies on manufacturing divestment strategy for more than 40 facilities globally, PharmaVentures shares insight on how to successfully divest any surplus sites and optimise manufacturing operations. Key considerations in this process are safeguarding the quality and continuity of supply, retaining jobs, and assisting the new owners to build and grow profitable new businesses.

It is vital that the correct steps are taken to de-risk the divestment, especially when the seller needs to ensure production quality and standards remain high in the hands of third parties and future supply is not interrupted.

Fintan Walton, CEO, Mark Andrews, Managing Director, and Jansen Jacob, Vice President, give their expert insight and experiences on life science M&A to positively transform your next divestment.

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For nearly 30 years, PharmaVentures has assisted companies in deal making activities. 20 years ago, the team began advising major pharmaceutical companies, giving them significant knowledge on how to best position themselves to successfully divest their manufacturing sites.

Dr Jansen Jacob, VP at PharmaVentures says: “It is vital that the correct steps are taken to de-risk the divestment, especially when the seller maintains access to production capabilities following the transaction. When allowing another company to take over daily running of operations, the seller needs to ensure production quality and standards remain high to maintain their reputation.”

According to Mark Andrews, MD at PharmaVentures: “Building relationships and trust between the two parties in the transaction is key. Buyers look for well-maintained operations to fit their infrastructure, needing to be confident that the site is well run. The capability of the management team running the manufacturing operations is always a critical factor in a successful divestment.”

Since the divestment process involves frequent dialogue and sharing of a great deal of confidential information between buyers and sellers, which is time consuming, the use of advisers like PharmaVentures can provide the parties with extra bandwidth and support, as the seller requires time and attention from their management team to ensure they continue to manufacture products on time, to the required standard.

From the outset, sellers of manufacturing operations need to take Corporate Social Responsibility (CSR) seriously, balancing their duty to continue supplying drugs to patients whilst trying to safeguard the jobs of their employees by divesting the sites as going concerns. This protects the seller’s reputation and shareholders’ interests while assisting the new owners to build and grow profitable new businesses.

“To ensure sites are divested safely and efficiently, it is important to understand the sellers’ business needs,” says Mark Andrews, MD of PharmaVentures.“This enables the tailoring of a defined and unique process to address any challenges they might face during divestment.”

Invest to Divest

As an important first step of a divestment process, PharmaVentures recommends getting an independent Valuation and Positioning (V&P) assessment. They provide an understanding of the asset value in the marketplace and can bring to light issues, including tax implications, that the client may not have considered, which may impact their evaluation and decision making.

One of the key lessons to learn is that investing in the divestment plan is really essential, because the most likely outcome from divestment is that a once operational cost-based manufacturing facility will most likely become a future profitable manufacturing facility owned by a CDMO,” says Dr Fintan Walton, CEO at PharmaVentures. “The biggest mistake that can be made by the seller is not to understand the current and future value of the site from both a buyer’s and a seller’s perspective. This can often mean the divestment is a non-starter.”

An independent assessment of the seller’s asset is very important to make an informed decision on the future of the manufacturing facility,” said Jansen Jacob, Vice President of PharmaVentures. “It’s absolutely worth considering if a divestment is indeed the best option for the site. Maybe there are other options the company should explore before making a final decision about the future of a site.”

According to Dr Walton, “The most basic lesson our clients have learnt is that it is wise to invest in order to divest”.

Expert advice

PharmaVentures has successfully advised on divestments globally for major clients including Novartis, Sanofi, UCB and Merck. The team can help with the important first step of a divestment process, providing an independent Valuation and Positioning (V&P) assessment using advanced and robust valuation methodologies built on their considerable experience. The company’s extensive network and years of building relationships with potential buyers world-wide mean the divestment process can be quicker and smoother.

Contact the globally experienced M&A team for more information:

Mark Andrews
Managing Director
Phone: +44 (0) 7951 204 401

Jansen Jacob
Vice President
Phone: +44 (0) 7951 205 420

Email: [email protected]

 

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