Both stocks were down after the announcement because Wall Street typically looks for cost savings right away, Andrew Schafer, President, Industry Standard Research (ISR) told us, adding that “this merger is not about that.”
“It is about two companies adding complementary offerings to each other,” he said – which the company explained in its earnings call Monday morning.
The strategy is to provide a solution and to capture economic returns by designing more effective trials which reduce protocol amendments.
“What we’re doing is explicitly aligned with the IMS Health strategy,” said Quintiles’ CEO Tom Pike on the call, who explained that the relationship would be “very difficult to replicate at arm’s length.”
“The revenue and operational synergies presented today are high level, not entirely understood, with a medium 3yr time horizon at best upon closure, adding to Q’s [Quintiles] risk profile in our view,” added Garen Sarafian, VP Healthcare Technology & Distribution, Citi Research, in his report on Monday.
The “synergies” presented included leveraging IMS’ data to improve patient recruitment, as the company has data 85% of the places Quintiles recruits.
Additionally, Quintiles’ primary data will be combined with IMS’ secondary data for real-world evidence – a key part of Quintiles' business.
“Real-world data is critical,” said Pike. “For us … being the first one with this kind of enormous data asset and the ability to drive value out of it is really key.”
Schafer explained that the integration of both companies’ data will be one of the key success factors to the merger.
“Also, pharma is being pressed to provide more outcomes-based analyses of their products and using real-world data to produce real-world evidence of a product’s performance will shift from a post-approval activity to a pre-approval (e.g. clinical development) activity and any seamless analysis that can be accomplished before and after regulatory approval will help sponsors generate the most value from their products,” he added.
For the CRO industry, Schafer expects that the merger will shake things up.
“You have this merger and the rumored LabCorp/Covance and INC Research merger that would also send some shockwaves through the CRO industry,” he said. “We’ve seen the recent announcement of inVentiv, Medpace (and we think PPD) entering the public markets and we at ISR think the pace of change in the CRO industry will increase.”