That’s Nice’s Nice Consulting division offers services as diverse as finding suitable facilities to acquire to providing full-time business development support. The sister service Nice Match is an exclusive community that connects purchasers with suppliers in all phases of pharmaceutical development, helping to find the right relationship to get programs done. Our depth of knowledge from over two decades of connection to the industry supports a full range of strategic agency services.
Nice Consulting focuses on strategic organizational consulting, providing a range of services including organizational assessments, financial modeling and forecasting, looking at capacity and the benefit of CapEx, and new technologies to optimize existing footprints. In the M&A space, we’ve been asked to help companies understand where they stand in the market. We help them realize their potential, whether they choose to exit their ownership or acquire strategic assets, whether the client in question is a privately held company, an independent individual-owned company, an organization that’s ultimately owned by some type of investment or private equity organization, or an organization that’s looking to potentially just carve out part of their business.
We’ve been active in the life sciences space now for 25 years, having attended annual industry conferences and trade shows and built up our relationships. As we honed our talent and our thinking, our connections also advanced, graduating from positions such as marketing coordinator to CEO.
Consulting Experience Informs M&A Work
In the beginning of Nice Consulting, we mostly worked with private companies looking for very confidential support as they mapped out their growth strategy. These conversations follow a pretty natural evolution, moving from marketing, to sales, to new technology, to helping them better understand key account management, until inevitably you’re talking about the health of the organization overall. One example would be a retiring owner telling us, “I’d like to retire now and I want to sell the business. How do you think we would do it? Where’s our value?”
We’re not one of the big consulting organizations; however, there’s been value in that — people are often looking for much more direct, personalized, and highly flexible help in doing whatever it is they wish to do. That value spills over into the M&A work as well — we’re highly transparent, which makes things more efficient and reduces the pressure on both sides. Whether you’re speaking with the seller, the owner, or the potential buyer, discussions are more productive when there is maximal transparency, rather than either party trying to overly capitalize on the opportunity. This balance and fairness have had a real impact on our success. Our knowledge of multiples, based specifically on services offered within the CDMO space, contributes to a much more realistic approach to advising.
In the beginning, we wanted to understand the terrain as much as possible, so we spent a lot of time in dialogue with investment banks, private equity firms, and private investors. Because of this research, we’re viewed as a trusted resource among the investment community, including private equity firms that have portfolios of CDMOs who are looking to learn more and become more active in life sciences. The word-of-mouth support we have received has resulted in requests for representation as companies move toward divestment or acquisition. I think we complement our investment banker colleagues and partners by providing the market and technology knowledge that balances their financial advisory role in a very positive way that helps all parties understand the relative addition of value, demand, and growth potential for certain types of manufacturing. Our experience, combined with directness in communication and our personal convictions about the contours of the market, has been well received.
Growth and M&A Among CDMOs
We anticipate that we will see more interest in acquisition because as we all know, the growth, consolidation, and competitiveness in the CDMO space has not ceased for several years now. There was some speculation after some high-profile mergers took place that things would quiet down a bit, but that doesn’t seem to be the case at all. Whether it’s private equity money or corporate financing, the move to grow and consolidate to build larger CDMOs seems to be continuing.
I think one of the big factors in Nice Consulting’s success is our network of highly talented and knowledgeable individuals, who we often bring in as specialists. The division is also supported by our internal research department, Nice Insight, and Pharma’s Almanac, our content enterprise. Pharma’s Almanac has become a tremendous resource to chart new growth, changes, and trends in the industry, including some of the incredible science that will also start to dominate the market over the coming years. We’re seeing the shift from chemical-based APIs and drug products toward high-potency or reformulated products, as well as what was a burst of growth in biologics, a segment that has been backed by some massive investments from big pharma.
We see continued renewal and expansion of a lot of microbial-based platforms as well, which has helped certain parts of the vaccine industry, as well as early successes in cell and gene therapies and other advanced therapies, such as stem cells or viral vectors, and the microbiome. All of these factors impact our consulting and M&A work, depending on where our clients are positioned.
If we look at the top dozen of the most prominent players in the global market who already have tremendous mass, nearly all are making substantial investments to add cell and gene to their organizations in a very substantial way. Alternatively, we see solid free-standing specialty CDMOs and suppliers within cell and gene. I think the value in these organizations lies in defining themselves, or redefining themselves, with a very clear business model as to what part of the supply chain they’ll serve. CDMOs are seeking to be all-inclusive (in the case of the very large players) or are otherwise highly specialized. There is an ever-growing array of specialties, whether that’s traditional solid dose, new delivery efficiencies, the full range of sterile and liquid-based therapies, as well as some of the more radical stem cell therapy concepts that are being researched or are in trials.
The Landscape of the CRO Industry
Changes in the CRO industry have been vast, even in just the last two or three years, with the onset of virtual trials, the need to access a broader range of populations and demographics for testing, and the drive to better serve a global patient population. After a bit of a dearth in R&D for a few years, these new technologies and successes around some of the new technologies have led to a resurgence in trials.
Over just the last few years, there has been pressure on the clinical research part of the market which is driving a lot of voluntary collaboration with related suppliers (e.g., logistics) to expedite operations. Our experience over the last 10 or so years has mostly been with smaller CROs — free-standing, often private companies — and many of these CROs have been absorbed by larger organizations, a movement that doesn’t seem to be slowing.
COVID-19 and Accelerated Adoption
We’ve had an increase in requests for proposals from organizations looking to explore how quickly their existing footprints could be modified to swiftly meet new demands that have arisen around the essential drug supply chain, as well as any specific work (for example, with vaccines). That was happening very swiftly in March and April of 2020, including national initiatives in the United States where companies were asked to help secure the U.S. supply chain. I think we’ll see more of those supply issues being addressed, although it’s a bit difficult to predict while we’re still in the throes of the pandemic.
Pharmaceutical manufacturing has generally been perceived as an industry of late adopters. Indeed, there is a great amount of resistance to changing business models or manufacturing practices, which has persisted up until the last several years. People are now embracing change fairly radically. Federal initiatives have supported innovation around manufacturing efficiencies, continuous manufacturing, greater safety in manufacturing, reduction of human interaction, and the movement from the suite to the batch model. Because we experience so much in the industry from the ground floor, following the prevailing influences and changes, we are able to broach these topics with our clients in a way that allows even late adopters to become more focused on their own improvement.
The Takeaways
One of the big lessons learned from our work in consulting and M&A is the reality that things can change on a dime. What is progressing forward one day can take a completely different turn the next day, and you just need to be very flexible and objective to handle that. We generally work in situations where valuations are fair, even if they’re conservative, and find less success when valuations are perceived to be astronomically inordinate to the situation, which can potentially happen in private ownership scenarios. Typically, we objectively observe that valuation is related to key financial expectations and to sound operations, but also reflects the relative position of any particular technology platform or product offering in the supply chain.
