The Acquired Corporate Brand

After several years with no major deals, the pharmaceutical industry may be undergoing a resurgence of mergers and acquisitions, as seen with the recent Sanofi-Synthelabo/Aventis deal. However, the logic of such mergers is sometimes criticised, since the market perceives these companies as motivated mainly by the need to match the size of rivals and to reduce R&D risk, rather than by strategy-driven thinking. It’s true that the importance of considering the brand portfolio in a business context is often neglected, and this lack of attention to the brand portfolio can, and does, lead to difficulties in integrating salesforces, as well as confusion amongst doctors and patients. Ultimately, it may mean a failed merger.

Enhancing the offerings

When a pharmaceutical company is acquired, a key decision is made as to whether or not the corporate brand should be discarded or retained. This decision of how to use the acquired corporate brand has an internal and external dimension.

An acquired corporate brand can enhance offerings by being an endorser of therapies or specific products and, in that role, can be a powerful force to build credibility and confidence in a pharmaceutical company’s portfolio. However, to assess the ability of an acquired brand to enhance the offering, it is necessary to compare its market equity to that of the acquiring corporate brand. To do so, a company will need to understand the multiple factors associated with merging brands:

• Relative brand strength: Which brand is better established in pharmaceuticals or in key subcategories? Do the brands have strong and differentiated associations among a specific target audience that might be lost if transitioned to another brand? Following the Pfizer/ Warner-Lambert merger, Pfizer was clearly stronger than the Parke-Davis name in terms of its size and heritage in pharmaceuticals. As a result, Pfizer became the new corporate brand and the Parke-Davis brand has been slowly phased out, since Pfizer could better enhance the product offerings.

• Risk: Will key stakeholders, doctors or patients react negatively to brand linkage? When Glaxo Wellcome and SmithKline Beecham merged, GSK had to consider the reaction of UK stakeholders to the loss of the distinctly UK corporate brands, Beecham and Wellcome, which would not have provided the global associations necessary for GSK’s new offering.

• Credibility to key therapeutic areas: Is one corporate brand more strongly associated with a particular therapeutic area than the other? When Pfizer acquired Pharmacia, the central nervous system therapeutic area included Pfizer’s Zoloft and Pharmacia’s Xanac, with similar clinical indications. Which corporate brand was most appropriate to endorse this therapeutic area? The Pfizer brand offered more credibility than Pharmacia in CNS, since Zoloft and other key brands had strengthened its portfolio in this area, so Pfizer endorsed Xanac rather than Pharmacia. In the Sanofi-Synthelabo/Aventis merger, the choice to retain the Aventis brand (Sanofi-Aventis) to endorse the allergy therapeutic area is key, since Aventis has stronger equity in the over-the-counter allergy market with its product, Allegra. An endorsement of this important therapeutic area with Sanofi alone might otherwise result in lost brand equity.

• Innovation credibility: Does a corporate brand offer associations around innovation that can provide credibility through endorsement? Pfizer’s approach to innovation, for example, is unique in the Industry since the company involves marketing at the drug discovery stage and claims to ‘make’ blockbuster drugs rather than ‘discover’ them*. Thus, the strategy to endorse most product brands with Pfizer versus Pharmacia makes sense, since former Pharmacia brands benefit more from Pfizer’s associations of innovation.

By using the acquired corporate brand to endorse key products, pharmaceutical companies can potentially enhance their perceived credibility and differentiation. However, it may be that the acquired brand will be stronger in the short run, but the acquiring brand will have more resources behind it and be the better long-term choice.

Supporting organisational strategy

A corporate brand represents the culture, systems, people and strategy, and thus has a significant impact internally. If there is one integrated business strategy, one brand will be most supportive, especially with respect to the salesforce. However, if there are distinct strategies directed to different segments of the business, forcing them under the umbrella of one brand may not be helpful. These issues become magnified when a merger takes place because of the strains of bringing two organisations together, and we know that many mergers fail because there is a problem integrating two cultures and systems.

It is therefore critical to understand what role an acquired corporate brand can play in supporting the company’s business and organisational strategy. In particular, it is helpful to assess the acquired corporate brand with respect to its strategic importance, its role in go-to-market strategies and its level of control compared to the acquirer:

• Strategic importance: Does the acquired corporate brand represent an increased presence in key areas of the value chain, such as R&D, marketing or sales? Does the brand provide access to new geographic markets or new patient groups? In the AstraZeneca case, R&D capabilities and geographic coverage fro m both Astra and Zeneca were important to preserve in the new corporate brand.

• Go-to-market strategy: Is there a single focused strategy that provides synergy in operations and salesforce? Is there a common position? Is there any reason why a single organisation cannot deliver the brand promise? In Pfizer’s acquisition of Pharmacia, the latter’s diagnostics division did not offer a sufficient level of synergies to rebrand with Pfizer, due to the differences in salesforce expertise, manufacturing requirements and customer (doctor versus clinical laboratory) base. The result was to keep the Pharmacia brand as a separate division, Pharmacia Diagnostics.

• Control: Does the acquired brand represent an area of the business where the new company will have strategic control? When Merck fully acquired the Japanese pharmaceutical company, Banyu, the latter’s corporate brand was retained, most likely to signal a measure of strategic independence. Not only was Banyu able to retain the brand equity in the strategically important Japanese market, but also it prevented a needless organisational integration into Merck, which may have resulted in the loss of key scientists who were critical to the company’s track record of cutting-edge science.

Any merger will, to a greater or lesser extent, involve a combination of two organisations, even if one brand disappears. However, the use of a dual brand such as ChevronTexaco, DaimlerChrysler, MitsuiSumotono or AstraZeneca emphasises, both externally and internally, that the new organisation will retain and integrate the assets and qualities of both companies. In the case of AstraZeneca, Zeneca – seen as a fast-growing, nimble company – was able to infuse new associations to the more established Astra Laboratories; the new organisation and its brand drew from each of the founding companies and the dual offering serves to underline that fact. A single brand could be managed to make the same point, but the task will be more difficult. Again there is a short-term and long-term perspective to consider – the decision makers need to look both five months and five years ahead.

Conclusion

To provide better criteria for mergers and to facilitate integration, pharmaceutical companies would do well to consider the impact on doctor prescription and patient perception of merging portfolios. Special attention should be given to evaluating the brand equity of the therapies, as well as how the companies franchises overlap or conflict. Since franchise development is key to building competitive advantage, it is critical that, prior to merging, the organisations assess the complementarity of their portfolios. Then, once the merger is given the go-ahead, the naming choice, decision around how to leverage the corporate brand, and the migration plan for the new brands, will play a key role in achieving clarity and building credibility with doctors and other key stakeholders.

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