Accenture Widens Exposure in Pharma - Analyst Blog


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Management technology outsourcing and consulting service provider Accenture plc ( ACN ) recently agreed to take over Octagon Research Solutions Inc., a reputed software solutions provider for the life sciences sector. Financial terms of the buyout remained undisclosed. The deal is set to be completed in two months, pending regulatory approvals.

Founded in 1999, Octagon provides clinical and regulatory information management solutions to pharmaceutical firms. The company helps the pharma industry market new drugs faster by way of eliminating redundant processes of drug development. The solution helps in prompt clinical data collection as well as submission of results for fast regulatory approval.

Of late, Accenture was noticing increasing demand for solutions that could effectively reduce drug development life cycle, time to market as well as cost. Management believes the acquisition to be timely and hopes to meet the surging demand as soon as the new unit is completely integrated into its life sciences industry group.

The drug development lifecycle is a complicated and lengthy process and it might take years to market a drug. The lifecycle involves hundreds of people, drug testing procedures, and above all, high financial risks. Therefore, the longer the process, the higher the financial risks associated with it. Hence, pharma companies often have to rely on outsourcing service providers, such as Octagon, to make the task of marketing a drug faster and easier.

With Octagon, Accenture will boost its exposure into the life sciences sector, which will allow the company to secure large deals from its existing customers and acquire new ones. Reportedly, in its last quarter, Accenture's Product segment delivered high single- digit revenue growth with major contributions from life sciences industry group.

We are encouraged by the steady flow of new business and believe that the trend will continue given Accenture's rich industrial experience. However, increasing competition from IBM Corp. ( IBM ), a strained spending environment and Accenture's broad European exposure (roughly 40.0%) may temper its growth prospects to some extent.

Currently, Accenture has a Zacks #3 Rank, which translates into a short-term Hold rating.

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