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Introduction Page 2 R&D Outsourcing Page 3 Business Case Pages 4-8

This article is focused on Building top performing Acquisition of Covance those business models R&D (outsourcing) by Laboratory that could match with the services portfolio. Corporation of America main principles of value (LH). investment concept, SLA Newsletter

Value Investment and Business Model Prototypes Abstract

The article is focused on the What kind of operational Which operational steps have to be application of the main principles of characteristics of candidates for taken in pre-feasibility and post- value investment concept in the acquisition would be the most acquisition phases to achieve top pharmaceutical research and attractive for value investors efficiency of the acquisition process development (R&D) industry sector. according to principles formulated by itself? Continuing mergers and acquisitions Benjamin Graham? Article discusses the most used process among the R&D outsourcing Is there any specific characteristic of working approach to valuation of providers reveals resource based pharmaceutical R&D sector that merging companies. theory framework use in order to distinguish this industry from other achieve optimal selection of markets and have to be considered Keywords: business model, research retrievable business model on all phases of acquisition process? and development, prototypes, prototypes for their multiplication Article is focused on pharmaceutical mergers and acquisitions, financial within the window of the opportunity. R&D sector and evaluates the recent performance. This article has an objective to candidate that fit the principles of answer following questions. growing by acquisition corporations.

Introduction

This article is focused on those business models that could match with the main principles of value investment concept, brilliantly developed by Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss, the most prominent followers of value investing guru Benjamin Graham.

All References are located at the end of the article.

This article is focused on those Failures are happening mainly due to business models that could match overoptimistic appraisal of synergies - Which operational steps have to be with the main principles of value and market potential, skepticism taken in pre-feasibility and post- investment concept, brilliantly about rebound from a cyclical slump acquisition phases to achieve top developed by Warren Buffett, William and rapid growth continuity. Other efficiency of the acquisition process J. Ruane, Irving Kahn and Walter J. reasons are: overlooking due itself? Schloss, the most prominent diligence problems, overbidding with - What is the most used working followers of value investing guru escalation commitment, and poor approach to valuation of merging Benjamin Graham (Buffett & Clark, post-acquisition integration. In companies? 2006; Miles, 2004]. addition, managerial hubris, beliefs - Is there any specific characteristic In different industrial sectors two that acquiring company’s managers of pharmaceutical R&D sector that following Graham’s principles were are good at identifying undervalued distinguish this industry from other explored by value investment targets are resulting in acquiring markets and have to be considered apologists: first, investing in companies overpay. on all phases of acquisition process? businesses within the “circle of Above principles are interesting from competence” around the businesses, the point of view of research and understandable and secure enough development (R&D) companies that Failures are happening to forecast and grow economic may join the group of candidates for mainly due to performance of earnings rate on value investment acquisition. This overoptimistic equity capital even under article has an objective to answer appraisal of synergies and market potential, extraordinary adverse conditions; following questions: skepticism about second, avoiding risk reward and - What operational characteristics of rebound from a cyclical periodic acceptance of occasional candidates for acquisition would be slump and rapid inactivity even in successful investing the most attractive for value growth continuity. ( Inc., 2012). investors according to principles Evidence on value creation in M&A formulated by Benjamin Graham? transactions in Pharma R&D - How to define in Pharma R&D becomes clear when the combined sector of Contract Research value of companies engaged in Organizations (CROs) the candidate mergers and tender offers increases that would fit the principles of actively by about seven percent around growing by acquisitions corporations takeover announcements (Food and as Laboratory Corporation of Drug Administration, 2013). Usually, America (LabCorp)? targets get the bulk of value shared, while acquirers get roughly zero.

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Building Top Performing R&D Outsourcing Portfolio

Pharmaceutical firms are forced to balance competing (technologic or geographic, etc.) oligopoly in the industry economic and scientific priorities before the start of is critical for the financial leverage business model, which research in a climate that is becoming more stressed by was confirmed by Labcorp in laboratory testing sector. increased regulatory standards, high and inflexible cost Viability of business model could be tested against its structures, depleting product pipeline and increased generic copying multiplication as an evaluation of complexities of clinical trials (Kaitin, 2010). Reduction in sustainability of its intrinsic value identity. Ideal business research and development productivity makes only one in model prototype has no generic analog with tangible asset 13 compounds to reach the market (Khanna, 2012). value and brand identity. Mergers and acquisitions, outsourcing, combined with Although short-term, built on common sense generic downsizing and strategic alliances, have become the new prototype may compete against seemingly reliable norm (Lowman et al., 2012). CROs industry offers broad context-built business models, engineered under Labcorp range of research and development services for brand and leadership architecture of post-investment pharmaceutical and biotech sponsors, including product development assures continuous cash flows, including development and formulation, clinical trial management, following acquisitions. central laboratory services, and data management for Acquisition candidates pipeline appreciate “came-to-stay” regulatory Investigational New Drug (IND) and New Drug image of LH: Labcorp offers after acquisition not only Application (NDA) filings (Nigro et al., 2012). reputation of its owners, but also its brand and solid The literature on clinical trials suggests that CROs are resource for specialized niche campaign. able to conduct clinical trials up to 30% faster than Availability of attractive market sectors with the high average pharmaceutical firms (Korieth, 2013). Pharma intrinsic value candidates determines future investment executives are using CROs more than ever to reduce portfolio that will be used for retrieval as soon as price costs while maintaining quality and improving operational volatility or other critical will trigger next acquisition. efficiency (KPMG, 2011). Laboratory Corporation of America (LH), better known as Labcorp, presents example of such performance by leveraging in laboratory testing sector assets of companies that were never considered as a “star” by their “internal DNA” or internal marketing and personnel engagement. However, Kirchmer & Scheer (2003) found that relative

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cash flows (Barney, 1991). Armed with RBT we’ll review the case of Labcorp’s Business Case: Acquisition acquisition of Covance in order to come with optimized business model prototype that will be used for CROs in of Covance by Labcorp Pharma R&D and potential Total market capitalization of same time achieving the new sources multiplication in the whole Pharma Laboratory Corporation of America, of revenue, broader payer mix, and industry. Changes in stock price for according to Yahoo Finance (as on greater international presence to Labcorp and Covance Inc. (CVD) on Nov. 4th, 2014) exceeded 8.5 billion expand in the $141 billion the day of the acquisition USD. After the merger of National biopharmaceutical research & announcement was following: Health Laboratories and Roche development market. As an Market had different perceptions of Biomedical Laboratories in 1995 alternative, Labcorp has the right to value creation in the deal with a during the last 14 years LabCorp has create a centralized R&D lab positive effect on CVD and negative continued to expand its esoteric and powerhouse. on LH. For transaction price $4.3 specialty laboratory testing capabilities Taking in consideration that Covance billion in cash and $1.8 billion in stock by acquiring scientific leaders in the released its third quarter 2014 paid by LabCorp compensated loss of , anatomic , and earnings, reporting strong quarterly Covance’s earning streams and personalized medicine arenas results; it can bring Labcorp almost $ increased CVD’s market capitalization (Laboratory Corporation of America, 250 million net profit. by $1.3 billion. 2014). However, continue having major Simply put, assuming constant P/E Total Labcorp’s post-merger restructuring costs in post-acquisition ratio for CVD, sold Covance Inc. had investment plan included more than period similar to 70 billion dollars in an intrinsic value of $4.8 billion ($4.3 twenty acquisitions totaling at around 2011-2012 and pursue major billion plus $1.8 billion minus $1.3 two billion dollars. Post-investment acquisitions to Labcorp becomes more billion). $ 0.85 Billion loss of LabCorp development of acquired companies difficult while share prices of R&D imply that the intrinsic value of has similar patterns: all of them had outsourcing providers are growing Covance was insufficient to drive benefited from restructuring and more together with recovering novel drugs market price up even with added to than 100% growth of shares’ price as approval rates (Stanton, 2014). (assumed as constant) P/E ratio’s market recognition of LH investors’’ Immediately after announced denominator $0.25 billion per annum. I acceptance of assets’ quality. acquisition of Covance on November assume that sum of these 2 numbers Selected for acquisition companies 3rd 2014, Moody's Investors Service – loss of market capitalization of assured 10 years net sales CAGR of (2014) affirmed LabCorp’s Baa2 senior LabCorp and cash payment for 9.76 percent, and transformed more unsecured rating, and changed the Covance ($5.15 billion) represents than two billion long-term investment outlook to negative from stable. expected earnings to be generated by conditions into immediate Labcorp’s Covance under LH’s management. What makes Labcorp’s investors profit with net earnings CAGR of 7.88 Both “Sold” and “Incorporated into LH” confident about its legacy? percent (Laboratory Corporation of Covance has perceived “intrinsic High reputation of Labcorp’s decisions, America, 2014). value” between $4.8 billion and $5.15 operational excellence of management As an example, in Genetics billion. team to maintain post-investment post-acquisition 2011 net sales of The value of the bid for Covance has a performance to achieve established Genomic and Esoteric Testing grew high premium between $0.95 and $ goals, and flexibility options to meet 20.9 percent that significantly 1.3 billion in comparison with the firm’s investor’s expectations are traced contributed to corporation gross profit intrinsic value if we take in back through the history of Labcorp’s growth of more than 8 percent. consideration total package of $4.3 deals on following example of During 2011, the company recorded billion in cash and $1.8 billion in more Covance acquisition. net restructuring charges of $ 22 Mio risky stock. Acquisition of Covance Inc. Resource primarily related to facility-related based theory (RBT) founded by Edith costs associated with Genzyme Penrose in 1959 raises following key Genetics acquisition that was the main points of competitive advantage: reason for seven percent decline of essential organizational capabilities to operational net earnings. perform operational value (V) capture $6.1 Billion transaction with contract in highly efficient “isolating research organization Covance has a mechanism” (Rumelt, 1984, little different flavor. Chairman and p. 56) depend on rarity (R), in- chief executive of LH stated that this imitability (I) and non-substitutability transaction provides LabCorp with (N), applicable for different scale immediate scale and a comprehensive operations profitably in discounted R&D outsourcing platform, while at the

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Value Drivers of LabCorp’s investment decisions

McKinsey (Koller, Goedhart & Over the past one year, through Sep - We are excited to bring two industry leaders together to provide a unique and Wessels, 2010) suggests value drivers 30, 2014, the combined business had complete set of services that will benefit all rule for organization or its strategic pro forma revenues of $8.4 billion, health care stakeholders business unit as following: invest only adjusted EBITDA of $1.6 billion and when having abnormal profit with free cash flow of over $700 million. - Dave King, Chairman & CEO of LabCorp return on invested capital (ROIC) The new company is expected to higher than weighted average cost of derive approximately 20% of revenues capital (WACC) in the sector of from outside the U.S. (Laboratory confidence. Corporation of America, 2014). Multiplication of Retrievable Financial Risk management includes three Example of Covance shows another Business Model Prototypes Economists Ken Arrow (1969), Zvi areas: economy-wide risk that is LH’s business model of financial Griliches (1958) and Robert Solow (1956) business cycle related; operating risk - leverage of mature CRO industry reviewed exponential growth coming from degree of capital intensity, and sector that appears to be attractive for the production of something that enables financial risk leverage. investment and generates growing organizations to produce more and itself becomes a multiplication factor of LabCorp’s investments in molecular dividends flow. Laboratory Corporation production. The key sources of wealth as diagnostics (National Genetics of America’s shareholders had to land, labor and capital transformed over Institute in 2000, ViroMed in 2001, endorse the acquisition of Covance for 200 years to various forms of human Dynacare in 2002, Genzyme Genetics the following reasons: sustain capital, such as investment in education and intellectual property (IP), which today in 2010, and Covance Genetics forecasted future cash flows, payback is no less important than factories and Laboratory in 2014) are based on debt/interest and other obligations of machinery. U.S. Bureau of Economic partnership interests in specific LH in front of its creditors; dilute with Analysis only in 2012 complimented business cycle, not as much additional assets (including goodwill) to IP a $560 billion “increase” in the U.S. GDP (Bernstein & Baker, 2013). Land as marketable high-profit drivers at the highest in the industry sector, does not multiply to produce more land. their near-term prospects. sharing debt to Pharma R&D strategic Growth of labor cannot by itself produce Investment into Litholink (2006), partnership parties, and multiplicate more income per person. Solow explained Tandem Laboratories (2008), this business model through exponential growth of economies by technological progress. Monogram Biosciences (2009), continuous next acquisitions of central Technology is not exactly a form of capital MEDTOX Scientific, Inc. (2012), and R&D laboratories. (although it is related to human and recently Covance (2014) allowed LabCorp turned maturity and lack of intellectual capital), because the LabCorp to have expandable R&D double-digit growth of public technology state of the art is not exactly owned by anyone. Arrow (1969) and treatment filings. healthcare sector into cash flow Griliches (1958) suggested that as a factor Unlike in cases with ownership of certainty and claims of risk ignorance of production, technology produces wealth companies, where cash flows are in Pharma R&D. Creation of huge LH and produces more technological constructed through public healthcare conglomerate is by definition risky progress, enabling a virtuous cycle of exponential growth. In the next chapter I funds management, LH’s business in enterprise with multiple exposures to will introduce multiplication factors in the centralized R&D labs is funded by legal issues. pharmaceutical industry in consideration Pharma R&D industry flows. Probably, “too big to challenge” status business models of Contract Research In Covance post-acquisition period allows LabCorp to respond state Organizations – the major performers of R&D outsourcing. LabCorp projected this transaction to regulators and R&D sponsors’ bids be accretive to adjusted earnings per more comfortably. Time will show how share in 2015 before synergies. LabCorp’s philosophy is matching with Moreover, LabCorp expects to achieve extremely interesting practices of annual cost synergies in excess of using Graham’s value investment $100 million to be fully realized within principles to retrieve from the three years of closing. confidence circles one from several business models to multiply the “intrinsic value”.

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Valuing Strategic Advantage of Central R&D Hub

A firm creates value only if it earns a The key element of the valuable for Relative valuation approach return on its invested capital that is reflects market sentiment and investment asset is free cash flows that are generated by the asset: after- higher than the cost of financing the moods, results in under- investment. Three main value drivers: tax cash flow from operations andover-valued stocks, and growth, abnormal return (ROIC > remaining after all re-investment requires less information than WACC) and WACC (risk) have needs have been met; available for DCF. different metrics: distribution to all providers of capital EPS (Earnings per share); Profit (both shareholders and bondholders). Margin (Return on Sales); Book-to- Acquisition strategy in pharmaceutical Here are five steps that McKinsey R&D sector Market (B/M); Price-Earnings ratio recommends to be taken in order to Acquirer Laboratory Corporation of (P/E); ROIC (Return on Invested valuate the company (Koller et al., America is compliant with restrictive Capital); Economic Profit or EVA regulatory requirements of US healthcare 2010): 1) Estimate the EBIT – laboratory testing sector, and has a earnings before interest and taxes; (Economic Value Added); DCF reputation of "laboratory testing 2) Calculate NOPLAT – net operating (Discounted Cash Flow); CFROI innovation” company due to Labcorp’s (Cash Flow Return on Investment); profit less adjustable taxes – a concept imperative looking into the future of new and TRS (Total Return to Share- technologies, standing in the same row that avoid double counting and other holders). The last parameter in the list with Quest, the leader in the sector. The errors related to manipulation of tax business model might base on IP and is defined as share price appreciation numbers and forecast debt shield as legal asset management teams. LH differs added dividends - has an issue with one of the major factors impacting from similar companies by its rare capital two root causes: noise in share prices source options, an inimitable value future profits; 3) Review Changes in (outside manager’s control) and the potential for market identity in intellectual Working Capital, which are capital leverage, non-substitutable loyalty expectations treadmill. In the short expressions of how operating cash, of clients in specific target states and term, differences between actual accounts receivable and inventory are product & service line scale-up offered to performance and market expectations acquired company. changing in dynamics against Accustomed by Labcorp for Pharma R&D accounts payable and accrued and changes in expectations drive sector, the acquisition growth enterprise expenses; 4) estimating Capital share prices more than the level of model may be applied successfully performance per se. Expenditure is important to discover through close financing channel with high Relative valuation is an alternative to authority and reward patterns within the increase in net balance of Property, above mentioned DCF and uses "close channel cash flow" of Pharma R&D Plant and Equipment (PPE) and in the sponsors’ networks, protected by Federal Multiple approach that assumes firm income statement Depreciation. Sum Government Regulation, available only for value is proportional to some value of these numbers gives Gross large size “cash caw" corporations, and drivers, such as: sales (P/S), earnings under management of developed by Investment; 5) estimating Free Cash (P/E), book value (P/B), growth Laboratory Corporation of America Flow. structures of in-imitable performance in (PEGR). EBIT (Step 1) minus cash tax impact continuous leverage. Financial resources Multiples method brings much less gives NOPLAT (Step 2) that is added of corporation are centralized in US information to bear on the valuation holding, and have high liquidity with depreciation before subtraction of operational block of LH’s laboratory hub change in operating working capital process, and results in “relative” not totaling 8 billion USD. “absolute” valuation, since firm value is (Step 3) and capital expenditure (Step estimated relative to the pricing of 4). Opportunity cost is achievable by comparable firms. McKinsey (Koller et subtracting CAPM (Capital Asset al., 2010) is applying relative Pricing Model) from estimated Cost of valuations in following order: identify a Equity. set of comparable firms; scale prices The required return on equity is a of these firms by value-driver; average function of the risk of equity that these scaled prices; multiply the consists of economy-wide risk projected „value-driver‟ of the (business cycle), operating risk company that we want to value with (degree of capital intensity), financing risk (leverage). the „Average multiple‟.

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Is LabCorp’s R&D Development Strategy Future-Proof?

Jacobides (2010) described strategic In the pharmaceutical R&D sector playscript tool for pharmaceutical the complementary resources industry with an underlying analysis of factor, when the target may have a future-proof strategy as based on unique product but lack the following fundamentals: research and engineering and sales organization development investment (percent of total to produce and market it on a large Future-proof resilience program sales value) brands with their loyalty scale, becomes the most is the key competitiveness (percent of repeated business) and considerable factor. As it was characteristic of an organization awareness (percent of recognition demonstrated in the LH’s practices, (Jacobides, 2010). in target group). The key elements of the merger or acquisition is quicker strategic playscript are following: and less expensive with a firm that resilience program that would assure already has a lot of talent than to Resilience program sustainable performance of the develop one from scratch. Here are Koller et al. (2010) suggested following performance metrics to measure resilience organization, value capture capabilities possible financial synergy factors capabilities of pharmaceutical R&D retained for the future shifts in industry for acquisition strategy: unused tax companies: management and board’s sector landscape, and the next target shields, coinsurance of debt , past performance (historical financial role that is a result of successful economies of scale in raising indicator) and motivation (performance based compensation and staff turnover); multiplication of one of today business external financing, cash poor innovation power, expressed as percent of model prototypes. combined with cash rich. Efficiency new product sales in total sales; encoded Strategic industry sector have also their arguments also include practices of and embedded tacit person-independent windows of opportunity for business management teams of acquiring knowledge; IT investment and percent of technology usage in customers, model prototypes that could be used by firm managers to meet usual employees, suppliers relationships. The all competitors. Economies of scale and overoptimistic targets. authors suggest evaluating using relative scope in manufacturing and distribution market share (percent company sale usually are integrated with opportunities relative to top four companies sales). In R&D industry sector of 30 billion USD, top to cut costs and improve product and Next Target 8 CROs are presenting more than 62% of service quality, i.e. improve the level of the market value. CRO market is operating efficiency to lower “cost of Role centralizing due to regulatory and natural goods sold” (COGS), general and barriers to entry into the growing 5-6% industry sector (Bali, de Lima, & Yang, administration costs as well as working Analysis of the target company 2014). Expansion of business model capital/fixed assets. Such opportunities includes evaluation of financial and portfolio enhances the value of a firm are achieved through strategic non-financial business models. increases operating efficiency (NOPLAT outsourcing partnerships. In addition, Non-financial business model flows) and return on new invested capital (ROIC). Availability of business model sales growth has a foundation of gaining describes location of headquarters, prototypes allows increase the growth (g) access to new customers or customer countries of operation, subsidiaries, by investing in new project only when segments or complementary products and their quoted publicly listed or ROIC is higher than WACC, prolong the and services, cross-selling opportunities. private status. For global strategy period of competitive advantage, and reduce the cost of capital. Architects of conglomerate mergers also important are M&A experience, claim economies of scale with cost organic growth current and future savings from sharing headquarter potential. Product pipeline portfolio, functions. breakdown of products’ categories, This part of article is focused on market drivers and challenges, identifying value creation possibilities of competitors and Porter’s 5 forces acquisitions and answers the question: analysis are expressed in BCG What makes two pharmaceutical R&D matrix and a SWOT formats. firms worth more together than apart? Financial business model is Synergy (scientific or operational composed of revenue structure by relatedness, economies of scale and area, cost structure (R&D, scope), economies of vertical integration marketing, manufacturing), and (merger of companies at different phases benchmarking of competitors and of drug development or production), and the target. complementary resources are the most frequent factors for the acquisition.

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Next Target Role’s Strategy: Start-Up’s Guide

Success in Mergers and Sufficient product and service References

Acquisitions strengthens or prototypes portfolio, financing and Arrow, K.J. (1969) The organization of economic activity: Issues leverages acquirer’s core leverage potential of R&D outsourcing pertinent to the choice of market versus non-market allocations. In Analysis and Evaluation of Public Expenditures: The PPP business, capitalizes on functional providers, developed regulatory and System, 1, 47–64. Washington, DC economies of scale, and benefits legal institutions elevating barriers Bali, H., de Lima, B., Yang, C. (2014) CROs and other outsourced pharmaceutical support services. M&A drivers and from technology of skills transfer. against entry and generic copying, trends. Results Healthcare. NY. Retrieved from massive and sustainable cash flows of http://www.resultshealthcare.com/media/114306/20131128_cros _and_other_outsourced_pharmaceutical_support_services_m_a Big Pharma – all these factors make _drivers_and_trends.pdf Multiples analysis of comparable pharmaceutical R&D industry sector Berkshire Hathaway Inc. (2012) Annual Report. Retrieved from companies. http://www.berkshirehathaway.com/2012ar/2012ar.pdf Before estimating the average and the attractive for value investors following median of the multiples above a careful principles elaborated by B. Graham Bernstein, J., Baker, D. (2013) What is ‘Seinfeld’ worth? New York Times, 31 July, A21 consideration shall be given when ruling and his followers. Portfolio of business out outliers. Outliers are numerical values models consistently applied by Buffett, M. & Clark, D. (2006) The Tao of Warren Buffett. NY: diverging from most of the sample. It Scribner Laboratory Corporation of America’s should be noted that the median is Food and Drug Administration (FDA) (2013) FDA: FY 2012 estimated for ensuring that the sample is management team gives source of Innovative drug approvals: Bringing life-saving drugs to patients quickly and efficiently. Retrieved from uniform (i.e. all outliers have been opportunities to reproduce the most http://www.fda.gov/AboutFDA/ReportsManuals excluded, sample is converging). After working ones in the pharmaceutical Forms/Reports/ucm276385.htm analyzing and deciding on the final R&D sector. Griliches, Z. (1995) Handbook of industrial innovation. Blackwell, multiples the market value of Equity and London: P. Stoneman Ed. the Enterprise Value can be estimated This article integrates intrinsic value Jacobides, M.G. (2010). Strategy tools for a shifting landscape. based on the corresponding multiples and investment concept with resource- Harvard Business Review. January-February, 77-84. financial data of the target company (e.g. based theory in order to obtain set of if the average of P/Sales of the Kaitin, K.I. (2010) Deconstructing the drug development process: strategic tools of pre-acquisition The new face of innovation. Clinical Pharmacology & comparable companies has been Therapeutics, 87(3), 356–361. estimated, then it should me multiplied by corporate valuation, acquisition the sales of the target company to Khanna, I. (2012) Drug discovery in pharmaceutical industry: planning and operational priorities of productivity challenges and trends. Drug Discovery Today, measure what its P is i.e. its market value post-acquisition program launch. 17(19/20), 1088-1102. of equity). Valuation methodologies have detailed Kirchmer, M, Scheer, A.-W. (2003) Change management — key The best acquirers are successful in for business process excellence. In Business Process Change identifying and screening candidates using description both within and out of Management (pp. 1-14). Berlin, Heidelberg: Springer-Verlag developed database, assessing high LabCorp’s financial practices, Koller, T., Goedhart, M., Wessels, D. (2010) Valuation. potential candidates in depth with focus on including recent acquisitions in Measuring and managing the value of companies (5th ed.) value and price to pay. The value of Hoboken, NJ: By McKinsey & Co. John Wiley & Sons, Inc. pharmaceutical R&D industry sector. synergy can be universal, endemic, or Laboratory Corporation of America (2014) Labcorp to acquire unique. Acquisition operations are Theory of building portfolio of business Covance for approximately $5.6 billion, creating world’s leading including contact, court, and negotiating model prototypes in the Pharma R&D healthcare diagnostics company. Retrieved from https://www.labcorp.com processes. They are not completed real industry segment was evaluated in intensity of the acquisition starts on post- Lowman, M, Trott, P., Hoecht, A., Sellam, Z. (2012) Innovation merger integration management phase. conjunction with the most applicable risks of outsourcing in pharmaceutical new product development. This phase is determined by several business model prototypes of central Technovation, 32, 99–109. practices, the first of them is method of R&D laboratory hub and might need Miles, R.P. (2004) Warren Buffett Wealth: Principles and payment. practical methods used by the world's greatest investor. NJ: further investigations for multiplication John Wiley & Sons, Inc. Mode of transaction affects value: stock returns to acquired companies are more opportunities in the other markets. Nigro, G., Perrone G., Chiapparrone, S., (2012) Governance Generalization of the theory of forms drivers in biopharmaceutical inter-firm relationships. positive in cash transactions. Returns to International Journal of Production Economics, 140(2), 604-613. acquiring companies are less positive or retrievable business model prototypes even negative when stock is used. Penrose, E. T. (1959). The theory of the growth of the firm. New portfolio is possible in synergy with York: John Wiley

financial value investment modeling. Rumelt, D.P., (2002) Towards a strategic theory of the firm. Transformation of Pharma R&D Alternative theories of the firm (2nd ed.), 286–300. Elgar Reference Collection. capabilities inline with global business Solow, R.M. (1956) A Contribution to the theory of economic and social community expectation growth. The Quarterly Journal of Economics, 70(1), 65-94. needs further case study (ies) of generalized and scaled up business model prototypes.

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