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A Global Pharma Company Transforms Itself and Generates $20 Billion in Value

A comprehensive transformation effort pays off quickly.

A global pharmaceutical company had been extremely successful, consistently growing earnings by 15% a year and reinvesting all excess capital beyond that point. However, management realized that it could improve that performance through a comprehensive transformation of the company. The investor community also indicated that the company could create more value by accelerating earnings growth. As the company began to consider a transformation, it faced an additional challenge—a hostile takeover attempt. 

In response, the company launched an extremely rapid initiative to cut low return-on-investment activity and restructure to quickly increase earnings. The entire company, globally, was analyzed and redesigned in just three months, and implementation launched without delay. Virtually all functions and business units were included in scope. Notably, the company implemented the transformation through both senior leaders and managers at lower levels in the organizational hierarchy. That led to very specific, pragmatic solutions, and it accelerated momentum for the initiative throughout the company’s workforce. 

Through this transformation, in six months the company cut costs by more than $500 million annually, and increased earnings growth rate from 15% to more than 20%. These changes yielded an improvement in company value of about $20 billion. The transformation also represented a value-creating alternative to the hostile takeover and enabled management to pursue a different option.

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