State of the Pharmaceutical Industry 2011 - Industry Remodeling Activities

Management rather than technology or money has become the crucial rate-limiting factor in creating future value for tomorrow’s pharma company. Management has begun the task of remodeling the pharmaceutical industry for the 21st century. New corporate strategies are coalescing around three major themes: fixing R&D, taking advantage of new markets, and spreading risk through diversification. In this report, we discuss the world economic outlook and analyze strategies that companies are using to adapt to their changing business climate.

This report discusses five major approaches being embraced by different companies to remodel their pharmaceutical operations: (1) strengthening the R&D core, (2) vertical and horizontal diversification vectors, (3) achieving profitability in emerging markets, (4) consumer health opportunities, and (5) adding generics operations to access or further penetrate emerging markets.

Questions answered in this report:

- The global financial crisis has morphed into an economic recovery phase now called the Great Recession. What is the current outlook for world economies? Which country economies weathered the storm easily? Which industry sectors seemed recession-proof? Which country had the world’s largest IPO market in 2010?

- In December 2010, GlaxoSmithKline CEO Andrew Witty said the pharma business model is transforming. What new approaches is GlaxoSmithKline employing? What is “blockbuster-capable”?

- According to Roche CEO Severin Schwann, personalized healthcare is becoming a reality. What strategies is Roche using to restructure its operations? What approach does Schwann call “giving up”?

- Novartis’s global head of development, Trevor Mundel, sees two major trends occurring as pharma companies revamp their drug development process. What approach is Novartis using to improve R&D productivity? Does the company favor outsourcing?

- Lilly’s CFO Derica Rice says that Lilly has historically used its own venture capital fund to access new technologies. What new venture funding approach did pharma companies adopt in 2010? What is a mirror portfolio and how does it affect a company’s drug pipeline?

- Pharma’s current interest in emerging markets is to further expand operations or take advantage of new opportunities. What is the traditional approach used by Western pharma companies to access emerging markets? What is the branded generics approach? What is the add-on generics approach? Which companies favor which approach and why?

- Whether to diversify is becoming a key question for pharmaceutical companies. What is concentric versus asymmetric diversification? What businesses are pharma companies operating in and why? What are the new diversification trends?

- Big Pharma companies are becoming interested in rare diseases. Which pharma companies established rare disease business units in 2010? What is a rare disease business model and why is it similar to a personalized medicine model?

Scope of the report:

Geographies: Asia Pacific; Europe; United States; Brazil, Russia, India, China, Mexico, Turkey (BRIC-MT); Middle East and North Africa (MENA); North America; Japan; Central and Eastern Europe (CEE); Latin America.

Economic landscape: International Monetary Fund’s economic outlook for world economies; Great Recession; World Federation of Exchanges (WFE); world stock market capitalizations; growth in global, advanced, and BRIC-M economies; uncertainty in financial markets; regional financial markets; world IPO markets; industry sector recovery; pharmaceutical layoffs.

Strategies: Three major themes for restructuring; business model transformation; blockbuster-ready; rare disease business model; R&D productivity; new market opportunities; diversification—asymmetric, concentric, and additive; vertical integration; resource allocation; strategic alliance model; venture funding; add-on generics approach; branded generics approach; building the brand.

R&D: Enhancing R&D productivity, R&D expense versus number of NMEs, value-added drugs, comparative effectiveness research (CER), targeted therapies, personalized medicine, proof-of-concept, outsourcing, silos, bounty hunting, venture funds, mirror portfolios.

Markets: Branded generics, generics, BRIC-MT, consumer healthcare, OTC drugs, biosimilars, market access, market expansion, brands, MNCs, market customization, pharmaceutical companies with consumer healthcare sales of more than $500 million.

Expert insight: Neil Grubert, M.A., provides insight on OTC markets and emerging-market considerations. Mr. Grubert is the director of pricing and reimbursement research at Decision Resources. Previously, he spent several years at Nicholas Hall & Company, a leading authority on the worldwide market for nonprescription medicines.

Expert insight: Barrie G. James, Ph.D., provides insight on pharma industry restructuring, strategies to enhance R&D productivity, and diversification vectors. Dr. James is the principal of Pharma Strategy Consulting in the United Kingdom. Previously, he held executive positions at Ciba-Geigy, Merck & Co., Syntex, and Schering-Plough in strategic planning, marketing, and business development.

Expert insight: Peter Wittner provides insights on Big Pharma’s emerging-market strategies and company operating margins. Mr. Wittner is the principal of Interpharm Consultancy and specializes in generics strategies. Previously, he worked at Ranbaxy (U.K.), H.N. Norton (subsequently part of Ivax), Evans Medical, A.H. Robins, and Koppel & Co. in general management, business development, and sales and marketing. SHOW LESS READ MORE >

Executive Summary
- Strategic Considerations
- Stakeholder Implications

Economic Recovery
- International Monetary Fund’s World Economic Outlook
- Financial Sector Recovery
-- Global Financial Markets
-- Regional Financial Markets: Asia Pacific, BRIC-MT, Europe, Americas
-- World IPO Markets
-- Industry Sector Recovery

Pharmaceutical Industry Layoffs

Remodeling the Pharmaceutical Industry
- Strengthening the R&D Core
-- Diversity of Approaches
-- Pros and Cons
- New Markets
-- Market Development Approaches
-- Pros and Cons
- Diversifying into New Businesses
-- Diversification Vectors
-- Pros and Cons
- Consumer Healthcare Opportunity
-- OTC Market Segments
-- Renewed Pharmaceutical Industry Interest in Consumer Healthcare
-- Emerging-Market Considerations
-- Building the Brand
-- Pros and Cons
- Simultaneous Approaches
-- Pros and Cons

Can Generics Business Strategies Save Big Pharma?
- Emerging-Market Deals and Investments
- Margin Analysis
-- Novartis’s Business Units
-- Teva Pharmaceutical Industries
-- Sanofi-Aventis
- Will Big Pharma’s Generics Strategy Work?

Outlook

Tables

1. Top Number of Layoffs by Pharmaceutical Companies, 2007-2010
2. Big Pharma’s Diversification Based on Business-Sector Sales, 2009
3. Recent High-Profile Generics Deals, 2009-2010
4. Consolidated Income and Operating Margins of Novartis’s Business Units, 2009
5. Consolidated Income and Operating Margin of Teva Pharmaceutical Industries, 2008 and 2009
6. Consolidated Income and Operating Margin of Sanofi-Aventis, 2009

Figures

1. International Monetary Fund’s Outlook for World Economies, 2010 and 2011
2. Largest Domestic Stock Market Capitalizations in November 2010
3. Extent of Financial Recovery: Regional and BRIC-MT Markets
4. Extent of Financial Recovery: European Markets
5. Extent of Financial Recovery: Asian Markets
6. Extent of Financial Recovery: Banking, Biotech, Financial, Pharmaceutical, Telecommunication, and Industry Sectors
7. Pharma Strategy Vectors
8. R&D Spending vs. FDA New Molecular Entity Approvals, 1997-2009
9. Evolution of the Global OTC Market, 2006-2009
10. Strength of Pharmaceutical Companies’ Presence in Consumer Healthcare, 2009

Experts

- Neil Grubert, M.A., director of pricing and reimbursement research at Decision Resources, provides insights on OTC markets and emerging-market considerations.
- Barrie G. James, Ph.D., principal of PharmaStrategy Consulting, provides insight on pharma industry restructuring, strategies to enhance R&D productivity, and diversification vectors.
- Peter Wittner, principal, Interpharm Consultancy, provides insights on Big Pharma’s emerging market strategies and company operating margins.

- Abbott Laboratories
- Actavis
- Alcon
- Amgen
- Arrow Group
- Aspen Pharmacare
- Association Européenne des Spécialités Pharmaceutiques Grand Public (AESGP)
- Astellas Pharma
- Astellas Venture Management
- AstraZeneca
- Aurobindo Pharma
- Australian Stock Exchange
- Avid Radiopharmaceuticals
- AZ Tika
- Bayer
- Bayer Schering Pharma
- Biocon
- Bioniche Pharma
- Bioton
- BM&FBOVESPA
- BME Spanish Exchange
- BMP Sunstone
- Boehringer Ingelheim
- Bombay Stock Exchange
- Bristol-Myers Squibb
- Bursa Malaysia
- Calgon
- Cephalon
- Challenger, Gray and Christmas
- Chattem
- Ciba
- Claris Lifesciences
- CMEA Capital
- Consumer Healthcare Products Association (CHPA)
- Crucell
- Daiichi Sankyo
- Daiichi Sankyo Espha
- Dainippon-Sumitomo
- Deutsche Börse
- Dr. Reddy’s Laboratories
- Ebewe Pharma
- Eden Biodesign
- Eisai
- Eli Lilly
- Enlight Biosciences
- GE Healthcare
- Givaudan
- GlaxoSmithKline
- Hoechst
- Hong Kong Exchange
- ICI
- Indonesia Stock Exchange
- InnoCentive
- Insmed
- Intercell
- International Monetary Fund’s
- Interpharm Consultancy
- Istanbul Stock Exchange
- JCR Pharmaceuticals
- Johannesburg Stock Exchange
- Johnson & Johnson
- Kelco
- King Pharmaceuticals
- Korea Exchange
- Kowa Pharmaceuticals
- Kyowa Hakko Kirin
- Laboratorio Teuto Brasileiro
- Laboratorios Kendrick
- London Stock Exchange Group
- Maxinutrition
- Medley
- Mepha
- Merck & Co.
- Merck KGaA
- Merieux Alliance
- Mexican Exchange
- MICEX
- Mitsubishi Tanabe Pharma
- Mylan
- Nanjing MeiRui Pharma
- Nasdaq OMX Group
- Nasdaq OMX Nordic Exchange
- National Development and Reform Commission (China)
- National Stock Exchange India
- Neptunus Interlong Bio-Technique
- Nichi-Iko Pharmaceutical
- Nicholas Hall & Company
- NovaMin Technology
- Novartis
- Nycomed
- NYSE Euronext
- Palomar Pictures
- Pfizer
- Pharma Strategy Consulting
- Piramal’s Healthcare Solutions
- Ranbaxy
- Ratiopharm
- Rhône-Poulenc
- Roche
- Sandoz
- Sanofi-Aventis
- Sanofi-Aventis Nichi-Iko
- Sanofi Pasteur
- Santiago Stock Exchange
- Saudi Stock Exchange
- Schering-Plough
- SciGen
- Sepracor
- Shanghai Stock Exchange
- Shantha Biotechnics
- Shenzhen Stock Exchange
- Shionogi
- Sigma Pharmaceuticals
- Singapore Exchange
- SIX Swiss Exchange
- Sloane Robinson
- SR One
- Stiefel
- Taisho Pharmaceutical
- Taiwan Stock Exchange
- Takeda Pharmaceutical
- Takeda Research Investment
- Teva-Kowa Pharmaceuticals
- Teva Pharmaceutical Industries
- Thermamex
- Tokyo Stock Exchange Group
- TSX Group
- UCB Pharma
- UDL Laboratories
- Uni-President China Holdings
- Walvax Biotech
- Watson Pharmaceuticals
- World Federation of Exchanges (WFE)
- Wyeth
- Zentiva