AI risk raises the bar for outsourced pharma marketing

AI risk raises the bar for outsourced pharma marketing

AI risk is raising the bar for outsourced pharma marketing deals.

Why it matters: This year has seen a cluster of sponsor-backed pharma marketing, communications and consulting companies come to market, but results have varied.

Context: AI presents an immediate threat to pharma agencies: McKinsey says it could cut content costs 30% to 50% and bring more work in-house.

  • That's on top of existing concerns about how well such businesses are integrated.

    • State of play: Ares Management took first-round bids for The Lockwood Group earlier this month, Axios Pro has learned.

  • Houlihan is running the auction and the business is being marketed off about $85 million in EBITDA. That's up a bit from the $70 million figure from our story in March, likely encompassing a recent bolt-on.

    • Friction point: Two down-market auctions were put on ice in recent months, amid valuation discord and tepid buyer interest.

  • Northlane Capital Partners-backed SAI MedPartners (with just under $20 million of EBITDA) and Trinity Hunt-backed Supreme Group (nearly $40 million of EBITDA) have both paused their processes.

    • Between the lines: Research-focused businesses like SAI MedPartners are "very prone to AI replacement risk," a source told Axios Pro.

  • "There's more integration work to do [with Supreme]," the source says. "Even the companies they bought are all these tiny little founder-owned PR creative agencies."
  • Supreme also has a wide variety of clients across pharma, med tech and health care services, the source adds.
  • "It's a bit of a confusing story."

    • Reality check: The market isn't entirely locked up.

  • Linden Capital paid 15x to 16x EBITDA to acquire Relevate Health from Mountaingate Capital, Axios Pro reported last month.
  • That deal followed Martis Capital's acquisition of Deerfield Group from Edgewater Partners for up to $280 million in June.

    • What we're watching: Linden Capital hired Jefferies to shop oncology-focused consultancy Aptitude Health, which recently held gold card meetings.

  • The process could help gauge how much specialization matters.

    • The bottom line: "You better feel pretty damn good about it when you're buying," the source says.

    Ares declined to comment. Houlihan, Northlane, Trinity Hunt and Linden didn't respond to a request for comment.