New research shows that SME growth provides the best prospect for economic recovery in the UK. But, as private equity firm ECI notes, finding the cash to reach out to global partners and markets can be a critical hurdle.

With continued pressure on governments across the Western world to reduce their expenditure, together with sustained macro-economic uncertainty and a tightening of bank funding, times are not necessarily easy for the average healthcare company – which often relies on the public purse for reimbursement and debt funding for growth. One might therefore expect the short-term outlook for growth to be somewhat muted, despite the backdrop of positive longer-term demographic drivers of demand.

Hence it is interesting that a recent survey of UK SME businesses by ECI Partners, a UK-based midmarket private equity firm, has found executives to be generally positive about growth prospects over the next 12 months, with 74% of respondents anticipating headcount growth and 60% expecting double-digit turnover growth.

The results met with a warm response from the Government, with Mark Prisk, Minister of State for Business and Enterprise, saying: “It’s good news that despite a tough few months, nearly three-quarters of the SMEs surveyed by ECI are looking to recruit over the next year and half expect to see substantial profit growth in that period. Up and down the country, it is Britain’s SMEs that are driving our economic recovery.”

Reaching out

This year, the survey conducted each summer by ECI Partners gained responses from a total of 246 chief executives from UK growth companies from a range of sectors with turnover between £10m and £200m. The results paint a positive picture against the gloomy economic backdrop of the Eurozone crisis and sluggish UK economy, and suggest that there remains growth potential amongst SME businesses – which account for around a third of UK private sector employment.

Steve Tudge, a Managing Director of ECI, commented: “Despite the barriers to growth, which are principally cited as a weaker macro-environment and funding constraints, we continue to be optimistic about the prospects for good mid-market companies.”

Executives see the key growth drivers to be increasing international sales – with Europe and the USA remaining the dominant international markets, though India and China are becoming more important – and organic growth through investment in sales and marketing and new product development. Over 40% of companies are also planning to increase their use of overseas suppliers to improve their margins.

Internal cash flows are viewed as the most likely source of funding for this growth, though around half of respondents say they are likely to seek bank debt within the next 12 months (despite continued complaints about its cost and due diligence requirements) and around 40% are also likely to look at private equity backing. Fewer than 10% of companies see the public markets as accessible, perhaps reflecting the recent volatility and liquidity issues associated with the AIM market.

Healthcare respondents are less bullish about high growth than their peers in other sectors, and are noticeably less positive about growth than they were last year. This no doubt reflects, in part, the political uncertainty surrounding the current UK healthcare reforms and the public sector spending constraints that are impacting on the health and social care sectors.

Despite this, companies remain more confident of raising growth financing – and of raising it from private equity firms, with over 50% saying that was a likely consideration over the next year.

Financing growth

What does all this mean for SME healthcare businesses in the UK? The sector certainly faces challenges in responding to Government spending cuts, which are tending to put pressure on margins if not always on volumes.

However, opportunities for growth remain amidst these challenges, particularly for companies who are able and willing to venture beyond the UK in order to seek new customers and cheaper suppliers.

Of course, this internationalisation can put a strain on smaller businesses, which may lack the scale to fully support an international infrastructure. Private equity groups with experience and expertise in this process can potentially offer support to management teams in this position – whether by making introductions, sharing best practice or simply financing the required infrastructure.

There are significant sums of capital available for investment from the UK private equity industry, and there remains an appetite to invest in market-leading healthcare businesses. Thus private equity should be considered seriously as an option by management teams in the healthcare industry who are looking to fund growth to help their companies succeed in the current economic environment.

ECI is a private equity group that has been investing in mid-market growth businesses for over 35 years. It invests across sectors, with a focus on UK and Irish companies. Healthcare companies in its current portfolio include a primary care provider (Harmoni), assisted living specialists (Premier Bathrooms, DLP) and medical software companies (Clinisys, Ascribe).

Eli Lilly has withdrawn Xigris (drotrecogin alfa) from all markets due to it showing no gain in 28-day survival of septic shock patients in the PROWESS-SHOCK study.

New results showed that the drug failed to meet its primary endpoint and question the overall benefit-risk balance of Xigris for patients with severe sepsis.

Timothy Garnett, Senior Vice President and Chief Medical Officer of Lilly, said that the results were unexpected to the company. “A contributing factor to these study results could be advances in the standard of care for treating severe sepsis over the past 10 years.”

Xigris was approved in the US by the FDA in November 2001, and in the EU in 2002 under exceptional circumstances for septic shock patients with multiple organ failure, in addition to best standard care.

As a condition for continued market authorisation in Europe, Eli Lilly established the placebo-controlled PROWESS-SHOCK study in March 2008, to assess the benefit-risk profile of the product.

Aside from failing its primary aim, the study also failed its secondary endpoint of reducing mortality in patients with severe protein C deficiency. The small difference in the 28-day mortality of the overall population (26.4% in the Xigris arm versus 24.2% in the placebo arm) was not statistically significant.

Xigris is administered as a continuous intravenous infusion, in one dose for a total duration of 96 hours.

The CHMP will assess the issue during its plenary meeting in November 2011.

Results from the Pf survey find medical sales executives are slowly adjusting to NHS reforms and widespread company restructures. 

It’s been another eventful 12 months within the medical sales industry. As the industry continues to announce job losses the Pf survey provides sales executives with an anonymous voice to have their say on the good, bad and ugly sides of their job. 

It’s an uncertain time to be working in the medical sales industry. Pharmaceutical bosses might be making the right noises and towing the company line but the industry is fighting against a number of forces. Within the last twelve months a series of large pharmaceutical companies have been forced to use the two words no medical sales professional wants to read on an internal memo: austerity measures. 

The result of price cuts across Europe, as governments continues to tighten their belts, and pipelines continue to fail has been a formula even the most trusted research and development teams have failed to solve a way around. But where do these measures, and what they mean in the long term, leave sales executives working within the industry? The Pf Company, Perception, Motivation and Satisfaction Survey provides an annual temperature check of those working within the pharmaceutical and medical sales industry to gauge opinions.

The survey – now in its 11th year – lets respondents have their say on the things that matter the most to them. It focuses on everyday factors which either make going to work a joy or a struggle and reflects the opinion of staff on key issues such as remuneration, motivation, satisfaction, perception and recruitment. 

Motivation and satisfaction 

The results of the 2012 survey, which relate to 2011, show that once again money makes the work go around. For the fifth year in a row, salary was chosen as the main motivating factor from the 1,215 respondents. It’s also no surprise that job security was chosen as the second highest motivating factor with the wide spread job cuts employees will have witnessed in the last year. 

In fact, there was only change in the top 18 motivating factors (see Figure 1) from last year’s survey – personal development swapping places with autonomy. Surprisingly, respondents appreciated being given the freedom to make individual decisions more than the opportunity to progress up the career ladder. 

Motivational factors may not have changed much in the last twelve months, but satisfaction factors certainly have. Belief in present products again came out on top but there were big declines in satisfaction levels in company culture and salary – which dropped four places, respectively – and in car policy which dropped from 10th last year to towards the bottom of the chart in 16th. Companies abandoning their principles to make people redundant, whilst trimming or freezing wages and taking back company cars and fuel cards did not go unnoticed by the field force. 

But it’s not all bad for organisations – they have been doing other things right. Satisfaction levels in pension schemes, work-life balance and training all improved slightly. Accountability for sales and recognition of achievements also improved. But it was in job security where respondents said they were the most satisfied. After being voted as the 14th highest satisfying factor last year, the survey found pharma companies had made improvements in assuring staff their jobs were safe in the last twelve months as it improved three places.   

Facts and figures 

The number of total respondents – see Figure 2 – totalled almost an identical number to the 2009 survey. For a third successive year, the number of primary care and primary care and secondary care sales executives fell slightly – and now accounts for a third of overall respondents. The number of hospital specialists also dropped slightly. However, numbers of first-line managers (10%) reverted back to their usual figure after falling the year before. 

Although numbers of primary care, secondary care and hospital specialists are down when compared to the turn of the millennium, the recent raft of job losses in the industry doesn’t seem to have impacted experienced and valued team members. The number of respondents with more than eight years’ experience within the industry continues to grow. Almost three-quarters (73%) of respondents say they have now worked in the medical sales industry for eight years or more – nearly double the amount that could say that nine years ago. However, those with between two and eight years’ experience may have been presented with their P45, after figures dropped slightly. More worryingly, the amount of people who said they had started a new job within the industry in the last year totalled only 2.3%.  

Employer of choice 

Away from motivational and satisfaction factors, the survey also quizzes respondents on the company they would most like to work for. For the fifth year running Boehringer Ingleheim again topped the charts as the 2012 Employer of Choice. In recent years, Roche has followed closely behind but lost the runner’s up position this year to Eli Lilly – who moved up a position from third. Novo Nordisk again established its position within the top five, with Abbott Laboratories the biggest mover as it improved on last year’s 10th position to finish fifth this year. 

Napp and Bristol-Myers Squibb – which jumped seven places in the chart – both made a return to the top ten after missing out on a place last year. Astellas also had reason to celebrate as it entered the top ten for the first after respondents voted it in eighth position.  

The Pf Company Perception, Motivation and Satisfaction Survey has been conducted annually by HSP, publishers of Pf, since 2002. It provides a benchmark of field force renumeration, motivation, satisfaction, perception and recruitment. As the Survey is managed by Dr B Payne of Conker Statistics – a fellow of the Royal Statistical Society – and respondents are anonymous, it is able to provide a unique and impartial snapshot of workforce attitudes at the time the research is conducted. These latest results were gathered in early 2012, but relate to 2011 and the early part of the year.