During this year’s J.P. Morgan Healthcare Conference, I had the opportunity to sit down with Vice President and Head of Communications, Pharmaceuticals at Bayer, Steven Immergut, and PRWeek Vice President and Editorial Director, Steve Barrett, to discuss a wide variety of topics including tax reform, the CVS-Aetna merger, the specter of Amazon and how these industry activities are making a substantial impact on the healthcare mergers and acquisitions (M&A) landscape. Additionally, we chatted about the importance of communications and reputation throughout every stage of M&A.
Check out our discussion via PRWeek’s podcast or read the transcript below (thank you to Bayer for sponsoring!).
Steve: Hi, this is Steve Barrett, editor-in-chief of PRWeek, reporting from San Francisco. We’re in town for the J.P. Morgan Healthcare Conference. We’ve just had a roundtable discussion about M&A and communications supported by Bayer and delighted to introduce Steven Immergut from Bayer who’s head of U.S. Pharma Communications. Hi, Steven.
Steve: We’re also joined by Jim Weiss who is chief executive officer of W2O Group. Jim, welcome. Great discussion. One of the big themes this week, Steven, was tax reform and the impact that that’s going to have on M&A and the logical extension of that for us, for our discussion. Communications over the next 12 months is tax reform. There is repatriation of cash. A lot of companies already may be sitting on a bunch of cash. What’s that going to mean? Is it going to be a big spike in M&A? How are companies going to spend that money?
Steven: Yeah, it was a big theme this week at the conference, Steve. And, you know, it remains to be seen how it’s going to actually play out. I mean it certainly seems like the stage is set for more activity, whether it’s M&A, large-scale M&A, or in-licensing agreements, or bolt-on acquisitions. You know, it kind of remains to be seen. There’s also a lot of talk about investing that cash back into R&D. One of the reasons why we were here as a company this week is to talk about our global innovation program. There’s a lot of investment and longer project, longer-term projects, in the innovation space.
Steve: Jim, what are you seeing from your clients? Because, obviously, the administration has brought in tax reform. It’s the repatriation of cash. They presumably want that to stimulate jobs and maybe even have some impact on drug pricing. I’ve heard a lot of talk about share buybacks and… But what’s your take from talking to your clients and your sort of experience in the sector over many years?
Jim: Well, talking to clients, helping them get ready for this meeting, but also going to many of the presentations and breakouts where many were grilled, “What are you going to do with this cash that will inevitably be there?” I think most of them are planning to stay the course at least for the next year too in terms of how they were going to allocate capital. And what I kept hearing over and over was that would be reinvested into the, you know, R&D function or to strengthen that in the pipeline and their people.
I think where there’s an opportunity to do the share buyback and do other things with the money, they will. But that’s all part of a…you know. And publicly traded global companies have very prescriptive long-term plans for that cash and they’re not… I didn’t hear plans to change that, at least not publicly as much. But like what Steven was saying, I do think companies are here talking about their goals and innovation. They’re talking to very different types of companies. It’s not just talking to other little biotechs which is what a lot of the big pharmas are doing here looking for partnerships or to fill their pipelines.
They’re also talking to health tech companies, digital health companies, companies that are focused on communicating or reaching patients. All of those things are, you know, in play as to what companies are going to do with the money. And I also heard a lot about opening innovation centers, partnership centers, places, incubators, where companies can flourish and grow under, you know, the tutelage and guidance and financing of larger company.
Steve: What does this mean from a corporate reputation and communications point of view, Steven? You know, if the…let’s say a company did invest a load in share buybacks that might not be what the administration was wanting that money to be spent, you may have the danger of a 3:00 a.m. tweak if you’re on the West Coast from the president or something like that. How do you react to these things? How do you prepare yourselves for things like that happening?
Steven: Well, you know, it’s never been a more exciting time to be in this industry, to be honest. The technology is amazing. The opportunities we have for curing diseases is unprecedented right now. And it’s just really exciting. So you focus on the difficult problems, meeting the unmet needs and patience, and investing in research and the science. And that’s what we’re focused on. I think that’s what’s really most important.
The other thing, as Jim mentioned, was a lot of discussion this week on technology and the use of machine learning, artificial intelligence, these kinds of new technologies in healthcare where we’re probably a bit behind the curve compared to other industries. So it’d be really interesting to see how that plays out going forward.
Steve: Jim, what’s your take on it? And this is going to mean cheaper drugs at the end of the day.
Jim: You know, I think the industry is obviously looking at ways to develop drugs that can, you know, not only help patients but also alleviate additional costs on the system. But I don’t think that that’s their foremost goal, right? It’s always been about their pipelines and patients and their people who do that so that I feel like that theme, I kept hearing those three P’s over and over in a lot of the presentations and discussions. I think that, you know, pricing the fourth P matters more than it ever has, and I think it’s the thing that’s keeping the executives up at night in terms of how do we solve this for the patient community and our physician community.
And the payer, another P, payer community, that they’re beginning to really, I think, acknowledge from the beginning. So they’re not developing the drugs the way exactly they used to and they know that an FDA approval does not mean or an approval in Europe does not immediately mean there’s going to be wide-scale use and distribution. They’ve got to work on the whole pattern of reimbursement and distribution and access. And I know that’s a function that we’re very focused on. We’ve created our own media platform called the Value Report that actually is designed to track what the industry is doing in this regard. And it did come up in many many of the presentations I saw.
Steve: Steven, how would you communicate around this issue about this sort of repatriation of cash in tax reform, the extra money in the coffers? How are you going to communicate around that?
Steven: Well, we’re going to continue to talk about innovation and driving value to meet unmet needs long term and even in shorter terms. So we’ve got a very ambitious high-level innovation program that’s tackling the toughest challenges worldwide facing humanity, both on the healthcare side and on the agriculture side. And the layer below that is our R&D program, phase 1 to phase 3.
We’ve got 50-plus projects in development across oncology, cardiovascular disease and others. And so you put those two together plus partnerships that we have in place here in the U.S. on the East Coast and our West Coast innovation centers. And that’s really the most exciting part about our story right now that we’re talking about. It’s to the whole R&D spectrum.
Steve: Jim, if you look at last year, 2017, it wasn’t a great year for marketing services holding companies. They were suggesting that companies were keeping their pocketbooks closed and budgets were under more scrutiny than ever. Do you think this extra cash is going to cause all boats to rise and, from a sort of selfish marketing and communications point of view, they were going to meet larger budgets available from your clients?
Jim: Well, you know, as we talked about in our roundtable earlier, I think the money will go, as it always has been, in pharmaceuticals and biotech into research and development. That’s where it always goes first. I think, you know, more scientists, more partnerships, more investment in innovation. But I think, of course, that will open up opportunities for communications firms like ours to help the companies spend that money wisely. And, you know, the opportunities may be a little bit different.
I think I mentioned that we’re looking at having a stronger clinical trial recruitment capability because, obviously, research and development is the priority of these companies and getting patients enrolled, and sometimes it’s very difficult. To enroll trials is job one. So it’s being nimble and capable of pivoting with the priorities of the industry that we have to be and then we can have the double-digit growth I know we’ve experienced because we’ve done that.
Steve: Yeah. Let’s change the conversation a little bit to general communications around M&As. One of the big themes of the discussions seem to be, Steven, that employee engagement and internal communications was absolutely vital if you’re going to have a successful transaction or merger or acquisition. Just talk us through a little bit why that is so important and some of the top tips that you would offer to our listeners.
Steven: Sure. I mean many…the employees are the key audience, really. They are paramount to the culture and paramount to the success of any integration. So, first and foremost, you need to really understand where they’re coming from, what’s in the hearts and minds of your employees pre-deal and throughout the process. So research is really important to be tracking the sentiments internally and then engagement. And it starts at the top.
So you have to have true genuine engagement from leadership with employees. Not necessarily to give status updates on a given deal, because many times there’s not much you can say, but just engagement. Answering their questions, talking about the status of the company overall, what’s been going on. And that really helps put people to ease. And I think employee engagement, starting at the top, is critical.
Steve: Certainly, you’ve learned during this ongoing months. And so by a deal, it speaks to those things and some of the things you’re doing in your department.
Steven: Yeah, that it helps. I mean when our leadership engages, we hear from employees that they really, really appreciate the effort that they’re taking to stand in front and answer their questions. And, again, not necessarily give an update on the status of the deal but to give an update on the business and where we stand and what’s important and on his mind.
Steve: Because, Jim, the internal messages then become the first line of external communications often [crosstalk] The people really naturally think about, “Well, what does it mean for me? What’s going to happen to my benefits? Where am I going to be working? Will I still have my same seat, same colleagues?” So how does that work from your point of view as an agency supporting clients in terms of helping them out [crosstalk]
Jim: Well, our job, and I was thinking about it when Steven was just talking, listening is probably the…one of the most critical parts of all of this. And I think, you know, this concept of being accessible to the employee population and hearing all of the various concerns because, again, there are many cultures within these very large organizations in tailoring communications and in specifying what you say to different groups is critical. And I think an agency can help analyze and listen to what’s going on, what the concerns are. There are now many more channels where employees can talk about their issues, concerns, questions, without going directly to management.
So we can, you know, track that, bring it to the client in a way that’s actionable. And we’re able to help, I think, in a lot of cases, you know, do a lot of that arms and legs and block-and-tackle work that our internal client is often stuck in meeting after meeting after meeting or traveling a lot. We can keep a certain level of continuity and be that canary in the coal mine if an issue does arise that they can address quickly.
But at the end of the day, listening and having a sense of empathy for the people going through the process of M&A on both sides is really critical. And I think we can play a big role in it.
Steve: Yes, Steven, one of our panelists today said that, actually, they struggle to find that internal communications expertise in some of their agency partners. Is that something you think there’s a…the agency should pay more attention to in terms of offering services to clients?
Steven: Well, I mean I think they do. I think a key role of the agency is to tell us what we don’t want to hear. So open our eyes because very often we’re running around to meetings and head down and writing the next plan.
Steve: Especially during a deal.
Steven: Right. Or talking to external folks, which is always a focus. So we need partners that will sit us down and say, “You need to be paying attention to these issues that are happening inside the company.” And that’s going to be really helpful.
Steve: Let’s finish by looking forward. Another big deal going on at the moment is the CVS Aetna merger. We have talked of Amazon and Walmart coming into this space. What do you expect…just to start with you Jim, what do you expect to see in the next 12 to 18 months with deals like that happening and new players coming into the market?
Jim: Well, I think it, you know, is an exciting time as Steven said. I think it acknowledges the power of the patient and also preventive medicine and wellness and, you know, the evolution of healthcare and how if you can sustain your health, we can reduce costs theoretically by being healthy or longer until a point where, you know, we can pretty much become more masters of our own health.
And I think we are going to see more deals that put the power of medicine into the hands of the patient or the physician or direct caregiver. And it’s a lot easier. And there’s a lot of things you don’t have to go to the doctor for or to the hospital for. Be it flu shots or taking care of some very basic needs. And I do think we’re going to see the continued evolution of that. I mean how far that goes and how fast I think will depend on some regulatory and other factors.
But a very exciting time, you know, to see healthcare finally truly impacted by technology as Steven referred to. So they’re going to have to be more innovative in how they deliver the care and the drugs that they’re…the drugs, devices, and services they’re delivering.
Steve: Steven, a lot of this seems to be driven by convenience and the modern consumer really wants that. They don’t want to have to wait a month to see their physician, for example.
Steven: Yeah, convenience and access. I mean it really is driven by the need for increased access. You do have a much more informed consumer these days about their health care. And so this deal, the Aetna CVS mega-merger, really taps into that more informed consumer, more powerful consumer. And, you know, what they’re talking about is pretty interesting in terms of offering that in a one-stop shop approach where you go into the clinic and also get access to your coverage as well. It’s a pretty interesting model.
Steve: If Amazon does come in, how disruptive do you think that would be to the market? And would it be a net positive or negative?
Steven: Really hard to say but it certainly…you know, Amazon is a platform that basically offers convenience. And, again, back to what is really needed in the marketplace and our focus is access. So when you put that together, it opens up interesting possibilities.
Jim: I think it’s a net positive in every way. Just like I think it’s impacted…you know. I think it’s impacted the growth of local economies and the global economy, and I think it’ll put healthcare, you know, much more front and center with consumers. I think it’s going to have a tremendously positive impact overall and it’s going to help the industry engage in technology. It’s going to probably force that a little faster than they might have ever wanted to.
At the same time, the more things change, the more they’ll stay the same. And, you know, we are still subject to regulatory and scientific hurdles that a lot of other industries aren’t. So nothing will replace good science, nothing will replace a good focus on the patient, and why we’re really here, which is, as Steven said earlier, the potential to cure disease or certainly completely prevent it is still the major goal. And the more players that are in that, the better.
Steve: Well, Steven, Jim, thanks for joining us. It’s been a great discussion here at the panel and on this video. Thanks to Bayer for supporting this program. You can check out more content podcasts and write-ups of this session at PRWeek.com. But this is Steve Barrett signing off from San Francisco.