Today we hear the news that Covance has done it again. Today they acquired two European R&D sites from Sanofi for $25 million. In addition, Sanofi agreed to purchase R&D services from these facilities for up to $2.2 billion over 10 years. This follows a similar deal struck with Lilly in the US in 2008.
It’s a fascinating strategy taking shape here. For Covance, the near-term risk is minimal because the contracts to generate revenue are part of the deal. These deals will be profitable from day one. Plus, they have the option to generate new business and cut costs, thereby making the deal even better.
Why don’t other Clinical Research Organizations do the exact same thing? There are plenty of really good R&D and manufacturing assets available from pharma, especially in Europe, the US, and Puerto Rico.
Savvy companies with the cash and the creativity to sign interesting deals like this will have no shortage of assets to acquire. This is a buyer’s market in many industries, and pharma is no different.