The best companies often have a way of redefining their markets so as to solidify and expand their own competitive advantages. They want to make others play their game or risk becoming increasingly marginalized. The stock swap calls for each of Envoy's 24.4 million shares, plus 3.5 million outstanding options, to be converted into 1.166 shares of Quintiles in a tax-free pooling of interests. They get drugs to market more quickly and at a lower cost.
Speed is particularly important since drugmakers want to cash in before patents expire.
Yet the CRO market has evolved, with leading players offering more services, including not just marketing and consulting but sales as well. Indeed, contract research firms have moved even further toward analyzing the effectiveness of drug treatments so that pharmaceutical companies can get more bang from their marketing bucks. The goal is simply to collect the kind of data that can expand a drug's market penetration, thus leveraging the tremendous up-front cost of getting it to market in the first place. Size and scope appear to be meaningful competitive advantages in this marketplace. The CRO space has been consolidating partly because pharmaceutical companies are really looking for partners.