An Analysis of the External Innovation Strategies of Pharmaceutical Companies to Strengthen Their Product Portfolios

Details

Supervisors

Cornuel, Eric

Faculty

Louvain School of Management

Degree label

Master [60] en sciences de gestion (horaire décalé)

Abstract

enThe global pharmaceutical industry faces a structural innovation crisis. Declining internal R&D productivity (Eroom's Law) and tightening reimbursement regimes compress profitability. In response, companies have increasingly shifted from organic R&D toward inorganic growth through M&A and licensing. This creates a paradox: while M&A has become imperative for survival, empirical evidence shows a substantial share of pharmaceutical M&A fails to generate long-term shareholder value, often coinciding with reduced R&D spending. This thesis investigates how pharmaceutical companies strategically structure external innovation transactions to optimize product portfolio risk across therapeutic areas while sustaining long-term value creation. A qualitative, multi-case study design was adopted, analyzing five post-COVID transactions (2022–2026) spanning North America, Europe, and Japan: four full acquisitions (Pfizer/Seagen, Astellas/Iveric Bio, BMS/Karuna Therapeutics, Roche/Carmot Therapeutics) and one licensing collaboration (Merck/Daiichi Sankyo). For each case, pre- and post-deal product portfolios were reviewed, together with the public financial disclosures and industry reports, to find the strategy being taken by pharmaceutical companies for external innovation. Findings show that there is no unified M&A strategy, but rather three largely independent levers. The governance structure (acquisition versus licensing) determines how financial risk and reward are shared; this sample did not confirm recent findings that licensing systematically outperforms M&A. Asset-stage risk at signing which is linked with the financial structure of the deal. It can de-risk clinical outcomes, but it does not eliminate commercial or regulatory risk. The therapeutic-area strategy (deepening an existing franchise versus diversifying) broadly confirmed that diversification carries higher execution risk, though one case shows this can be managed successfully when driven by a deliberate market entry rather than a short-term response to Loss of Exclusivity. The most robust transactions combined clear product synergies or well-timed market entry, while deals structured to urgently offset loss of exclusivity were shaped more by opportunity than by coherent strategic planning. Given the limited sample, these findings offer insights rather than statistically representative conclusions.