4 Trends Driving M&A Activity in Outsourced Pharma Services

APR 13
Market attention in outsourced pharma services remains strong, despite broader market headwinds and softer M&A markets overall. As noted in TripleTree’s recent Pharma Services Report, the ongoing momentum around large molecule specialty drugs, expanding pathways to precision medicines, along with the macro forces fueling more evidence-based, value-based, and patient-centric healthcare, are all contributing to continued M&A activity. As we reflect on recent market activity and continued interactions with both pharma services companies and healthcare investors, we highlight several important key trends focusing the market’s interest and attention:

The Expanding Role of Artificial Intelligence (AI) Across the Value Chain

Despite uncertainty about the impact of AI in other industries, TripleTree continues to observe the expansion of AI across key components of the biopharma value chain. Within the pre-clinical and clinical trial ecosystem, trial sponsors have a strong desire to reduce the time needed to develop a new therapy / device, lower failure rates, and minimize associated costs. Sanofi recently released an article detailing the revamped approach to integrating high-quality, diverse data for use in AI models across drug discovery including molecular design, chemical synthesis and new therapeutic targeting. Leveraging partnerships with emerging venture-backed players in the AI space, including Owkin, Exscientia, Atomwise and Insilico, Sanofi’s approach to implementing AI to improve the drug discovery process is one example among many similar recent moves by other large pharma companies. Bristol Myers Squibb recently announced a multi-year collaboration with Envisagenics, with plans to use their cloud-based platform to further develop its oncology pipeline and GSK expanded its partnership with Tempus in precision medicine.

AI is also making equal inroads in commercialization as a necessary capability to deliver operational efficiencies and previously untapped insights that improve the probability of a product’s financial success. Early examples span the value chain. AI can help support market access strategies by delivering targeted prescribers of newly commercialized products with real-time clinical decision-making tools tailored to their underlying patient base. Delivering AI-derived recommendations to pharma-sponsored patient support programs can help maximize therapy starts, improve medication adherence, drive clinical education, and pharmacy pay-for-performance. While the industry is still in its very early innings of establishing concrete success stories and ROI proof points, early adopters of these disruptive AI technologies potentially gain a market edge and capture outsized market share while recognizing better long-term economics on their commercialized products. AI can also be applied in other areas of the pharma value chain, and recent market activity demonstrates the market potential – and investor interest in these new capabilities:
  • MassMutual and Action Potential Venture Capital (GSK) led a $25M Series A round with Onc.AI, a novel platform that leverages radiomics and deep learning to assist medical oncologists in clinical decision-making.
  • German-based BioNTech is set to acquire InstaDeep, a U.K.-based AI startup, with the intent of using its machine learning capabilities to “improve its drug discovery process, including developing personalized treatments tailored to a patient’s cancer”.
  • Atomic AI, a biotech company merging cutting-edge machine learning with state-of-the-art structural biology to enable the world of RNA drug discovery, launched with a $35M Series A round led by Playground Global.
  • Certara (NASDAQ: CERT) announced its acquisition of Vyasa Analytics, a scalable deep-learning software which allows life sciences organizations to perform predictions and answer complex questions around all phases of drug development.

Focus on Clinical Trial Optimization

With even more careful consideration about which drugs / indications to develop and commercialize, pharma and biotech companies remain hyper-focused on evaluating the tradeoffs among speed to market, trial cost, and likelihood of achieving therapeutic success. A budding ecosystem of site optimization solutions are enabling more intelligent and efficient research sites. In a recent article, Inato CEO Kourosh Davarpanah cited that ~75% of all clinical trials are run by the same 5% of academic sites. Inato’s platform is one of a growing collection that allows community providers to showcase their unique attributes (physician expertise, patient population demographics, past performance, etc.) to trial sponsors. Allowing community providers to ‘raise their hand’ for trials that are the best fit for them increases overall trial diversity and geographic accessibility.

Likewise, new therapeutic advances require protocols with more complex design elements. Faro Health has introduced a platform that moves the drafting of protocols away from long-form text documents. Their software designs and authors studies to answer key scientific questions while minimizing the administrative burden on patients, sites, payers, and regulators. While talk of decentralized and hybrid trials was prominent last year, more recent M&A activity has centered around on-site capabilities and technology:
  • ARCH Venture Partners and General Catalyst (along with consortium of other co-investors) co-created Paradigm, a clinical trial technology platform, with $203M in Series A funding. Paradigm aims to automate the movement of clinical trial data and improve patient-matching to simplify the patient recruitment process while improving equitable patient access to more clinical trials.
  • GLO Healthcare, a portfolio company of CapVest Partners, announced the acquisition of Calyx. Calyx’s market-leading eClinical service and technology offerings have seen continued momentum in supporting the fast-growing clinical research market.
  • Science 37 (NASDAQ: SNCE) announced its acquisition of Vault Health, a national life sciences platform with compelling workflow features such as advanced scheduling, investigational product tracking, and data exchange with EDC and EMR systems.
  • Global management consulting and technology firm ZS announced it had entered into a definitive agreement to acquire Trials.ai. The acquisition will allow ZS to augment how clinical development teams design smarter studies, optimize the participant experience, and reduce the time it takes to bring pharma therapies to market.
  • TriNetX, backed by Carlyle, announced both the acquisition of Clinerion Ltd., a subsidiary of Norstella, and its global research network of more than 75 healthcare organizations and RWE generation, and a strategic partnership with Norstella to leverage TriNetX’s RWD and research network to optimize clinical trials.

Bolstering Market Intelligence & Consulting Services to Support Commercial Strategies

Outsourced commercialization services were in extremely high demand and led to a record-level of M&A activity in 2022. The trend has continued and remained a core focal point for M&A and growth equity investments in the beginning of 2023. Activity to date has included both platform acquisitions as well as tuck-ins for strategic (and sponsor-backed) platforms focused on adding or expanding critical commercial capabilities including, HEOR, omnichannel marketing campaign design, patient-centric medical writing, and securing more scientifically led advisory professionals. One such firm that embodies this advisory-driven commercialization trend is Fingerpaint Group, a portfolio of Knox Lane, which has recently acquired two market access and communication agencies with expertise in the oncology and biologics space (The MYND Group, PharmaHEALTHLabs).

The ever-increasing complexity surrounding drug discovery and development (e.g., real-world evidence (RWE), genomics, mRNA), combined with a continually changing regulatory environment, has further highlighted the demand for medical affairs professionals that can be a value-add to the commercialization process. TripleTree expects heightened transaction and investment activity across these key areas to continue, invariably linking and leveraging market access, medical communications, medical affairs, and hub services across more fully developed platforms. Several transactions from 2023 demonstrate the ongoing drumbeat of activity in commercialization:
  • QHP Capital (QHP) announced an investment in COPILOT, an innovative technology provider of hub services and market access services to pharma manufacturers. QHP’s investment is an acknowledgement of the growth inflection point of COPILOT as the company is rapidly working to connect more patients with complex therapeutic treatments.
  • OPEN Health, a portfolio company of Astorg, acquired New York-based life science strategy and advisory firm Ascel Health. The firm’s focus on commercial strategy, pricing and market access, and commercial excellence will complement OPEN Health’s existing offerings.
  • Knox Lane announced a strategic investment in Spectrum Science, an independent, integrated marketing communications, and media firm focused on the pharma and life sciences industry. Knox Lane will serve as Spectrum’s first institutional partner and seek to build out its approach to clinical trial recruitment, broaden its consulting capabilities for medical affairs clients, and drive further technology-enablement across the organization.
  • Danforth Advisors, a portfolio company of Avesi Partners, announced the acquisition of strategic communications consultancy firm Argot Partners. The acquisition allows Danforth to provide the highest-level counsel and execution on a full suite of corporate communications services to the life sciences industry, including investor relations, merged media, creative services, and event planning.
  • NMS Capital announced the recapitalization of Health & Wellness Partners, a leading medical communications solution to broad set of life science companies. Health & Wellness Partners’ expertise, content and technology delivers high-impact education engagements, both in-person and digital / virtual, across both the multiple therapeutic areas and pre- and post-approval.
  • Sciris, a global healthcare communications platform backed by Waterland Private Equity, announced the acquisition of Source Health Economics, an agency based HEOR platform.
  • Renovus Capital Partners announced the majority recapitalization of Thomas J. Paul (TJP). TJP is a leading provider of market access, payer marketing, and patient access & affordability solutions to pharma clients.

Worlds Colliding? Commercial Pharma Services and Specialty Pharmacy

The convergence of outsourced services and technology into both the biopharma and specialty pharmacy end markets is a recurring topic heard from TripleTree’s recent market engagement. Existing platforms across both ecosystems, with proven services, expertise and infrastructure are building investment theses based on their ability to enhance specialty patients’ access to therapy, while positively impacting both affordability and adherence. The recent acquisition of TrellisRx by Comprehensive Pharmacy Solutions, recognized as the 2022 Mid-Market Deal of the Year by Buyout Insider, highlights how a technology-enabled, specialty focused, clinically-led patient experience can deliver broader clinical and drug-specific benefits to patients inside health systems (TripleTree acted as financial advisor to TrellisRx on this transaction). The question is, can pharma tap into these capabilities and insights to better commercialize a new product? Or from the pharmacy perspective, how can differentiated specialty pharmacy-focused platforms offering patient / prescriber / specialty pharmacy network insights and health system relationships be leveraged to support pharma – whether in the pursuit of outcomes-based contracting, more informed market access strategies, or improved HCP / patient engagement strategies? As both sides of the aisle look to solve the persistent problems of adherence, access and affordability of specialty therapies, the opportunities for convergence begin to crystallize. TripleTree is excited to watch what unfolds and participate in the discussions about market-disruptive strategies and emerging partnerships.

These four trends demonstrate the rising importance of outsourced pharma services in the years ahead, especially as the broader market forces shaping more patient-centric, personalized, and value-based healthcare are considered. Layer in other tailwinds, such as FDA and EMA regulation and nascent technological advances, and the opportunity to disrupt the traditional approach to drug development and commercialization is profound. Top buyers across both the strategic and private equity space are continuing to show sustained interest in pharma services. For the private equity and investor world, it continues to represent a diversified opportunity to benefit from the ‘rising tide’ of growth in underlying pharma and biotech. For strategic platforms, it is an opportunity for further competitive differentiation, addressable market expansion, and new market entry. TripleTree is excited to observe this market momentum and believes consolidation will continue amidst a backdrop of innovative point solutions in an ecosystem of few scaled, multi-dimensional platforms.
Colin Aldridge
Matthew Yates
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