Just curious, are there any pharma-focused search funds out there?

February 02, 2021

by a searcher from University of North Carolina at Chapel Hill in Durham, NC, USA

I am going to guess the answer is no, but was just curious whether there are any search funds out there who are looking to acquire pharma companies and wait out the approval process. It seems like a monumental effort, but would love to hear from anyone who has a perspective on this. Thanks!

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Reply by a searcher
from Harvard University in Cambridge, MA, USA

^redacted‌. thanks for the tag. ^redacted‌, while pharma is certainly an interesting space for public policy reasons, my view is that pharmacies do not make for a good Search Fund investment, for several reasons. Happy to discuss those over the phone if you want to chat, but the 3 biggies are (1) the pharmaceutical reimbursement process is REALLY complicated (you've got drug makers, drug wholesalers, PBMs, 3rd party-payers, and the pharmacy itself - I can send you a 1-pager that lays this out) and with Search, you want simple businesses; (2) the biggest 3rd party-payer is the govt. (Medicare & Medicaid), and considering the current state of govt. finances, you should expect reimbursements (what the pharmacy gets from the 3rd party-payer to fill your prescription) to continue their current long-term downward trend; and (3) Amazon bought PillPack a few years ago, and PillPack is trying to disrupt the sector (just google them, read a few articles, and you'll see what they're doing). So as reimbursement rates decline, the competition for margin between all the players in the reimbursement value chain will get more fierce. When I was in b-school, I did research on Rite Aid, CVS, Walgreens, read their 10-Ks, investor presentations, etc. It was all gibberish until I started reading this blog: www.drugchannels.net. I found it to be the best source of digestible info on the sector. Lastly, about 6 months ago, a broker sent me a CIM on a pharma biz that was for sale. I did not spend much time on it for the above reasons. If you want, I can send you his contact info. I don't want to discourage you, just sharing my thoughts in the good spirit of the SearchFunder community.

Reply by a searcher
from Georgetown University in Chattanooga, TN, USA

Hi John. I fall into that bucket. Happy to share my experience with you. I was under LOI to acquire a portfolio of drugs when COVID hit and eventually killed the deal. I’ve pivoted to pursuing other drug acquisitions and a JV with a CDMO to file a few generic drug applications.

Before going down this path I was a policy and reimbursement advisor to several pharma, diagnostics, and specialty provider companies if you want to chat about the health sector more broadly too.

And I’ll echo what Johnson said about DrugChannels. It’s a must read

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