A Global Recession Drives New Business Strategies and Evolving Business Models in the Biopharma Industry

The biotechnology and pharmaceutical sectors as we know them will soon cease to exist. Companies in these sectors have come face-to-face with the harrowing ordeals of a global recession. Four stresses on the industry are rapidly depleting cash reserves, changing sources of growth, the specter of comparative effectiveness, and the threat posed by biosimilars. Staying alive in the short term and creating a more viable way of doing business are serious concerns. Many biotech companies have put themselves on ice with skeleton staffs in an attempt to ride out the recession, but they may never recover their scientific momentum. Mid-tier pharmaceutical companies are scrambling and fear for their independence. A new world order is on the horizon that will be a more unified biopharmaceutical industry. This report addresses the issues underlying the evolving nature of the biotech and mid-tier pharmaceutical sectors and identifies strategies and opportunities for moving forward.

Questions Answered in This Report

- According to the founder of Excalibur, a medical sciences investment house, biotech is facing “the most serious, dire situation that the sector has ever been in.” What strategies are companies using to survive? What strategies will have better chances of success?

- Burrill & Co.’s CEO has said, “The technology we’ve developed over the last 40 years is great at keeping us alive, but it’s not economically viable.” What are the alternative strategies? Is cost-effectiveness research the answer?

- Sanofi -Aventis’s CEO has said, “If you can partner, why acquire?” How has the nature of biotech-pharma collaborations changed? What is the prime directive of cash-strapped biotechs?

- Eli Lilly’s and GlaxoSmithKline’s CEOs do not believe that mega-mergers bring the added value that they should. What strategies does GlaxoSmithKline favor? What recent deals has the company executed? Why is Lilly confident of its ability to remain independent, and how will it do so?

- Mid-tier pharma is struggling to survive and remain independent. What approaches are Bayer Schering, Takeda, and Lilly pursuing? What could be the unintended consequences?

Scope

- Biotech industry: Bankruptcy, venture capital investing, bailout, cash reserves, comparative effectiveness, biosimilars, liquidation, job losses, white knights, IPOs, culling, registered direct offerings (RDOs), private investment in public equity (PIPE), corporate venture funds, number of venture deals 1995-2009.

- Pharmaceutical industry: Changing growth sources, mature markets, bioinvestment, biosimilars regulatory pathway, NICE’s July 2009 rejection of Merck-Serono’s Erbitux (cetuximab), E7 countries, top 25 pharma companies, top 20 pharma markets, midsize pharma, unintended consequences, survival strategies, animal health businesses, specialty medicines, biologics, consumer health.

- Strategies and business models: A ranking of 11 survival strategies in play in the pharmaceutical industry, cash-outs, FIPCOs, virtualization, hibernation, consolidation, reverse merger, emerging markets, selectively integrated business model, co-development, co-commercialization, Big Pharma collaboration, mega-mergers, joint ventures, takeovers, M&As, inlicensing, combined brand/generics model, proof-of-concept trials, spin-offs, diversification, divestments, evolve or die, geographic expansion, alliances. SHOW LESS READ MORE >

Executive Summary
- Strategic Considerations
- Stakeholder Implications

Stretched to the Breaking Point

Clear and Present Dangers to Biotech and Pharma
- Biotech’s Depleting Cash Reserves and Demands for Cash-Outs
- Liquidation
- Layoffs

Cash-Outs
- Pharma’s Changing Sources of Growth
- Specter of Comparative Effectiveness
- Threat of Biosimilars

Biotech’s Dream of the Past Three Decades Has Eroded
- Staying Alive—Biotech’s Short-Term Imperative
- Life-Saving Cash Injections

RDOs and PIPES
- Corporate Venture Funds
- Life Blood from Collaborations
- Virtualization
- Hibernation
- Consolidation

Big Pharma Turns to Other Big Pharma for Strength
- Recent Collaborations Between Big Pharma
- GlaxoSmithKline Collaborates with Pfizer on HIV
- Joint-Venture Strategies
- Gilead’s Strategies
- Takeover Possibilities
- Future Merger?
- Trend?
- Emerging-Markets Lifeline
- Emerging Markets
- Combined Brand and Generics Push
- No Overnight Miracles

Mid-Tier Pharma—The Law of Unintended Consequences
- Mega-Mergers
- Eli Lilly: I Am Biotech
- Bayer Schering: Don’t Put All Your Eggs in One Basket
- Takeda Pharmaceutical: A Balanced Global Presence

Strategies for Moving Forward

On the Horizon—A More Unified Biopharmaceutical Industry

Tables

1. Biotechs Out of Business, 2009
2. Biotech Job Losses, January Through June 2009
3. Several Biotech Financings, First Half of 2009
4. Select Pharma-Biotech Collaborations, First Half of 2009
5. Select Biotech-Biotech Collaborations, First Half of 2009
6. Select Mergers and Acquisitions of Biotech Companies, 2008 and 2009
7. Collaborations Between Big Pharma
8. HIV Drug Portfolios: Pfizer and GlaxoSmithKline Compared with Gilead Sciences
9. Gilead Sciences’ Drug Development Pipeline, July 2009
10. Top 20 Worldwide Pharmaceutical Markets, 2003, 2008, and 2013
11. Companies That Disappeared After a Merger

Figures

1. U.S. Venture Capital Investing: Number of Deals, 1995-Q2 2009
2. The New Virtualized Biopharma Business Model
3. Top 25 Pharmaceutical Companies Based on 2008 Worldwide Sales

- Abbott
- Acadia Pharmaceuticals
- Acusphere
- Adolor
- Adrea
- Advanced Life Science
- Advantryx
- Aileron Therapeutics
- Aivgen
- Akesis Pharmaceuticals
- Alexza
- Allergy Therapeutics
- Almirall
- Alnylam Pharmaceuticals
- Altus
- Amgen
- Anadys
- Arana Therapeutics
- Ardea Biosciences
- Arena Pharmaceuticals
- Argolyn Bioscience
- Armour Pharmaceutical
- Array Biopharma
- Association of the British Pharmaceutical Industry (ABPI)
- Astellas Pharma
- AstraZeneca
- Aurobindo Pharma
- Avalon Pharmaceuticals
- Bayer
- Bayer Healthcare
- Bayer Schering
- Bayhill Therapeutics
- Beecham Pharmaceuticals
- Bellus Health
- Biogen Idec
- BioIndustry Association (BIA)
- BioNovo
- Biopure
- BioSante
- Biotechnology Industry Association (BIO)
- Biovail
- BiPar Sciences
- Boehringer Ingelheim
- Bradmer
- Bristol-Myers Squibb
- Burrill & Co.
- Burroughs Wellcome Medical
- Calando Pharmaceuticals
- Cambridge Laboratories
- Cardiome Pharma
- Catalyst Biosciences
- Celgene
- Cell Genesys
- Cell Therapeutics
- Celldex Therapeutics
- Cempra Pharmaceuticals
- Cephalon
- Cerulean Pharma
- CIBA Laboratories
- Cipla
- Clavis Pharma
- Clinical Data
- Clovis Oncology
- CombinatoRX
- Cortex Pharmaceuticals
- Cougar Biotechnology
- Covidien
- Cubist Pharmaceuticals
- CuraGen
- CV Therapeutics
- Cytos Biotechnology
- Daiichi-Sankyo
- DiObex
- Dr. Reddy’s Laboratories
- DuPont Pharmaceuticals
- Dyax
- Dynogen
- Echo Therapeutics
- Eden Bioscience
- Eisai
- Eli Lilly
- Emisphere Technologies
- Endo Pharmaceuticals
- Enhance BioMedical
- Ensemble Discovery
- EpiCept
- Epix Pharmaceuticals
- European Medicines Agency (EMEA)
- Evotec
- Exact Sciences
- Excalibur
- Exelixis
- Facet Biotech
- Federal Trade Commission (FTC)
- Forma Therapeutics
- Fournier Pharmaceuticals
- Galapagos
- Geigy
- Genaera
- Genelab
- Genentech
- GenVec
- Genzyme
- Gilead Sciences
- GlaxoSmithKline
- GlobeImmune
- Haemacure
- Handok Pharmaceuticals
- Hisamitsu Pharmaceuticals
- Hoechst
- Hyperion Therapeutics
- Idenix Pharmaceuticals
- IDM Pharma
- ImClone
- Indevus Pharmaceuticals
- Infinity Pharmaceuticals
- Institute of Medicine
- Intercytex
- Interpharm Consultancy
- Intervet
- Ironwood Pharmaceuticals
- Isis Pharmaceuticals
- Isolagen
- Isotechnika
- Johnson & Johnson
- Kendrick
- La Jolla Pharmaceutical
- Lederle
- Lexicon
- Lilly Ventures
- Lundbeck
- Marion Merrell Dow
- Massachusetts Biotechnology Council
- Medarex
- MedImmune
- Medley
- Merck & Co.
- Merck KGaA
- Merck-Serono
- Merial
- Metabasis Therapeutics
- Micromet
- Millennium Pharmaceuticals
- Mylan
- Nanogen
- National Institute for Health and Clinical Excellence (NICE)
- NeoStem
- Neurobiological Technologies
- Neurocrine
- Neurogen
- NeuroSearch
- Northfield Laboratories
- Northstar Neuroscience
- Novacea
- Novartis
- Novartis India
- NovaVax
- Noven
- Novo Nordisk
- Novogen
- Nueromed Pharmaceuticals
- Nycomed
- Office of Fair Trading (OFT)
- OncoGenex Pharmaceuticals
- Onyx Pharmaceuticals
- Orexigen Therapeutics
- Oscient Pharmaceuticals
- Ovation Pharmaceuticals
- Oxford BioTherapeutics
- Oxygen Life Science Solutions
- Panacos
- Parke-Davis
- Penwest Pharmaceuticals
- Peptimmune
- Pfizer
- Pharma Strategy Consulting
- Pharmaceutical Research and Manufacturers of America (PhRMA)
- Pharmacyclics
- Plexxikon
- Poniard
- Portola Pharmaceuticals
- Pressure BioSciences
- Progenics
- Protein Sciences
- Proteon Therapeutics
- QOL Medical
- Ranbaxy Laboratories
- Rhône-Poulenc
- Roche
- Rorer Pharmaceuticals
- S*BIO
- Sandoz
- Sangart
- Sanofi -Aventis
- Santaris Pharma
- Santhera
- Schering-Plough
- Sepracor
- Sequenom
- Servier
- Sirtris Pharmaceuticals
- Smith-Kline French
- Solvay
- Solvay Pharmaceuticals
- Strativa Pharmaceuticals
- Synta
- Takeda
- Targeted Genetics
- Telik
- Teva
- Thomas Weisel Partners
- Titan Pharmaceuticals
- Torrey Pines Therapeutics
- Tragara Pharmaceuticals
- Transcept
- Trimeris
- Trubion
- Tyrian Diagnostics
- U.S. Congress
- US Oncology
- Vertex Pharmaceuticals
- Victory Pharma
- ViroChem Pharma
- VNUS Medical Technologies
- Warner-Lambert
- Wyeth
- Xoma
- ZymoGenetics