- An insight into the market and an overview of the latest trends and collaborations between the different industry sectors.
- A comprehensive analysis of opportunities for diagnostics and pharmaceutical companies within the area of personalised or individualised medicine.
- An overview of opportunities and developments in combination drug- device products
- Evaluation methodologies and industry-specific strategic recommendations that may be used by companies that are seeking to benefit from diagnostics, medical devices and pharmaceutical alliances.
Pharmaceutical stocks are traditionally a favourite during uncertain economic times. Underpinning this confidence in the sector is that even within periods of global recession pharmaceutical companies manage to post reasonable gains when compared to many other major industry sectors. In such a dynamic sector it is interesting to see how the market has fared over the last three years. Global pharmaceutical sales reached $466bn in 2003, up from $317bn in 2000. Despite this upsurge in the market institutional shareholders, in particular, continue to pile the pressure on pharmaceutical companies to satisfy increasingly elevated expectations. The overriding concern that shareholders have is that pharmaceutical manufacturers will not be able to maintain their growth unless an improvement is seen in the portfolio of late stage products in pharmaceutical pipelines. Coupled to this is the increasing burden of drug and development costs associated with new medical entities (NMEs). The current strategy for pharmaceutical companies is to utilise resources in such a way that strategic emphasis is placed on researching and developing products providing high value returns. This “blockbuster” strategy has its advocates but there is an increasing shift in expert opinion which veers towards advising pharmaceutical companies to adopt a different approach to how they discover, develop and market their products, and also how they partner with outside organizations. Biotechnology, medical device and diagnostics companies face similar challenges but the business models adopted by each of these industries differ in certain ways to the pharma approach.
This strategic report provides a review of the pharma business model currently adopted, and also offers an appraisal of current literature for and against the implementation of the pharmaceutical “blockbuster” approach. This analysis leads to a discussion on the reasons behind the belief that greater collaboration between the different industry sectors is likely to intensify and may hold promise for sustained profitability and business growth.
Emerging developments in the pharmacogenomics field and in combination drug/device products are setting the ground for increased licensing and collaborative efforts between pharmaceutical and medical device and diagnostics companies. With respect to pharmacogenomics, some companies such as Roche have laid the foundations within the business which sets the company on track to take full advantage of the trend toward personalised medicine. Its strengths in the diagnostics and pharmaceutical fields means that it is well placed to provide the tools for diagnosing disease, disease predisposition, response to drugs and the drugs themselves. The strategic review looks at where opportunities for diagnostics and pharmaceutical alliances may lie for those companies which seek to exploit the potential within the area of personalised or individualised medicine.
The medical device sector has created its own blockbuster product in 2003, within the area of drug eluting stents. This development suggests that combination drug/device products offer the potential for multi-million dollar opportunities. How do giants like Medtronic approach this area and what strategies do leading smaller companies generating products for the combination drug/device field like Angiotech Pharmaceuticals deploy? The HBS Consulting strategy review investigates and highlights the emerging technologies in this area, analyses the approaches of the main companies and points out some of the areas where collaborations and alliances are anticipated to bear fruit in the medium term.
Given the anticipated heightening in activity the review discusses the evaluation methodologies and requisite decision models used for assessing and negotiating licensing deal structure. While pharmaceutical companies will be adept at the use of these methodologies the review emphasises the use of these approaches for emerging diagnostic and device companies. This is particularly useful for those diagnostics companies and dedicated device companies offering technologies compatible with the product development activities of the pharmaceutical and biotechnology sectors. The methodologies discussed include discounted cash flow, decision analysis, sensitivity analysis, market forecasting analysis and real options valuation.
Using a combination of general case studies the report guides the reader through the licensing and portfolio evaluation methodologies necessary for licensing opportunities between the pharmaceutical and biopharmaceutical sectors and the device and diagnostics players.
Chapter 1 Pharmaceutical business model and strategies
1.1 The Blockbuster Model – If it isn’t broken don’t fix it?
Chapter 2 The emergence of personalized medicine
2.1 The right drug for the right disease
2.2 The right drug for the right patient
2.3 Single Nucleotide Polymorphisms and Haplotypes
2.4 Herceptin and Breast Cancer
2.5 Beyond cancer – expanding the potential for personalized medicine
2.6 Prevention and prediction of disease predisposition
2.7 Business implications of pursuing personalized medicine
2.8 Pharmacogenomics and impact on drug development costs
2.9 Personalised medicine and the drug pipeline 31
2.10 Genomics and the probability of reducing attrition rates
2.11 The rise of the biotechnology industry 35
Chapter 3 Bridging the pharma-device-diagnostics divide – tapping the potential
3.1 The Medical Device Industry
3.1.1. Medical devices and therapeutics
3.1.2 Combination drug-device products
3.1.3 Angiotech and combination products
3.1.4 Medtronic and combination product development.
3.1.5 Targeting the eye
3.2 The Medical Diagnostics Industry
3.2.1 Pharmacogenomics to push pharma-diagnostic collaborations.
Chapter 4 Evaluation methodologies of suitable licensing candidates
4.1 Market size analysis
4.2 Market size estimation for targeted therapies
4.3 Evaluation methodologies and models
4.4 Discounted cash flow
4.5 Decision analysis
4.6 Decision analysis output
4.7 Sensitivity Analysis
4.8 Sensitivity analysis on values
4.9 Sensitivity analysis on probabilities
4.10 Value of Information
4.11 Value of perfect information
4.12 Value of imperfect information
4.13 Real Options
Chapter 5 Conclusion