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Some industry experts predict that drug makers will become active acquirers of direct-to-consumer (DTC) prescription delivery startups in the year ahead, Business Insider Prime reports.
Business Insider Intelligence
We know that deep-pocketed pharma cos aren’t shy when it comes to mergers and acquisitions (M&As): Through the beginning of December 2019, pharma and biotech companies spent a record $342 billion on M&A endeavors, according to MarketWatch.
Here’s why we think DTC prescription delivery upstarts would be attractive targets for pharma companies — and why startups might be willing to take shelter under their roofs:
- Snapping up buzzy DTC drug delivery firms could give pharma firms more direct access to consumers and their medication-related habits. Life sciences venture capitalists Adam Goulburn and Zavain Dar told BI Prime that scooping up DTC startups working in the Rx delivery space would be a smart way for pharma companies — which, by nature, lack direct touchpoints with consumers — to get “direct access to patients,” Dar says, and craft novel means of reaching customers with their products. While cash-rich pharma companies likely wouldn’t be embark on these acquisitions for a revenue boost considering these upstarts are tiny in comparison to drug-making titans, these startups would likely bring a positive return considering the bevy of attention they’ve been receiving from investors and consumers: Big names in the space like Nurx, Hims & Hers, and Capsule have all grabbed funding this year. And consumers are becoming more and more convenience-driven, which will likely up demand for fast and reliable med delivery services.
- Meanwhile, upstarts could lean on pharma giants’ massive footprints and deep pockets to expand into new markets and grow their offerings. Many prominent medication delivery firms are using fresh funding to fuel their expansion efforts: Capsule put a share of the whopping $200 million it raised in September 2019 to expand beyond its launching pad, New York City. But competition in the space is fierce — and waiting on funds to extend into new markets might not cut it, especially as disruptors like Amazon’s PillPack wade ever deeper into the pharmacy realm. But operating beneath a cash-rich pharma company could afford small players the financial cushion they need to tear into new markets. And tying up with a pharma company could allow these startups to expand their list of offerings — which also seems to be top of mind for some pharma supply chain startups: Hims & Hers is dipping into virtual care offerings via a newly forged partnership with a Louisiana health system, for example.
And as pharma cos wade deeper into the digital health arena, DTC prescription firms could be a better bet than digital therapeutics (DTx) companies. Scaling has proven to be a hurdle for DTx companies — which in recent years have launched partnerships with leaders in pharma — partly because convincing the 55% of US consumers who take at least one prescription drug to pivot to digital options could be tricky.
And we’ve seen a string of pharmaceutical firms back out of alliances over the last few months — with some citing over-investment as a reason, which raises questions about the value of these sorts of partnerships. But DTC pharma supply chain startups could be a stronger bet, considering it likely won’t be difficult to woo consumers to take up a service that conveniently drops prescriptions right to their door, as evidenced by DTC delivery companies’ expansion plans — and the markets they can operate in are endless.
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