IMS Health and Quintiles to merge

Both market leaders in their respective spaces, IMS and Quintiles are merging in an all-stock deal that will create a combined company currently with $17.6 billion in equity value (based on pre-announcement stock prices). After the merger, IMS stockholders will own 51.4% of the combined entity; Ari Bousbib, chairman and CEO of IMS will hold those titles for Quintiles IMS Health Holdings, Inc., and Tom Pike, CEO of Quintiles, will be vice chairman. Both companies will maintain their current headquarters in Danbury, CT (IMS’ home) and Raleigh, NC. Synergies from combined back office services and the like will generate $100 million in savings by the third year—a relatively small amount which implies that no broad layoffs are planned.

Shareholders greeted the news unenthusiastically, with both companies’ share prices dropping by several percentage points over the day; speculation was that shareholders were looking for a substantial premium in stock repurchases. One media outlet (Fierce Biotech) called the deal a “major megamerger,” but in these days where tens of billions of dollars’ worth of stock are reshuffled by pharma companies, insurers and healthcare providers almost weekly, this is just one more case of the big getting bigger.

Both companies have complementary clinical research and commercial development skills to offer to pharma clients: Quintiles, one of the pioneers in contract research organizations (CROs) is a leader in preclinical to commercial research, and has a contract sales organization and other commercial services. IMS has a massive depository of scrip data and other healthcare information; in recent years it has built out an IT platform, IMSOne, for supporting marketing and sales, and acquired Mobile Intelligence, a leading customer relationship-management platform, through its purchase of that asset from Cegedim.

In statements, Bousbib and Pike emphasized new capabilities in real world evidence (RWE), a coming trend for value-based pharma sales contracting, and better patient recruitment, a key issue for clinical research efforts. Even so, the companies anticipate only a 1-2% addition to growth rates of the separate companies by the third year of the combination. (Both companies also reported Q1 results just before the merger announcement; year-over-year revenues grew for both in the high single digits, excluding the additional revenue from recent IMS acquisitions.)

It wasn’t highly emphasized in the companies’ announcement, but both have substantial operations globally---Quintiles through its relationships with hundreds of investigator sites and non-US contract sales resources, and IMS through its tracking of physician identity data and scrip gathering. Both companies each have operations in over 100 countries. That certainly is a benefit to pharma companies contemplating global rollouts of product launches.