Two thirds of pharma companies face ‘strategic crisis’
pharmafile | October 25, 2010 | News story | Research and Development, Sales and Marketing | Novartis, Pfizer, Roland Berger, generics, pharma research, pharma sales
The pharma industry is moving away from traditional in-house innovation and toward a more diversified business model, but will encounter problems on the road ahead.
A survey by German analysts Roland Berger found that 65% of companies are facing a “strategic crisis”, with diversification the most common ploy to avert it.
The analysts’ Fight or Flight? study identifies three dimensions of diversification – innovate, integrate and de-risk, with the latter two proving most popular.
“Big pharmaceutical companies are at a turning point,” says Stephan Danner, partner and pharmaceutical expert at Roland Berger Strategy Consultants.
“With more than half of the industry’s sales going off-patent within the next three years, 65% of the companies surveyed think the pharmaceutical industry is facing a strategic crisis.
“In this context, 67% of pharma executives see diversification as a potential way forward.”
Roland Berger conducted a ‘high-level’ survey across 25 pharma companies representing over 40% of global pharmaceutical revenues and including 7 of the global top ten firms. The analysts also conducted 50 chief executive and board level face-to-face interviews.
Seventy-eight percent of executives questioned in the study perceived generics to be the most important area of diversification.
Pfizer and Novartis are two of the more recent examples of big pharma buying up generic companies to help offset looming patent expiries of their own.
This will come as a little surprise to the industry as almost half the pharma companies surveyed expect a negative return on current R&D investment and are losing faith in traditional patent-based protection.
Roland Berger said that there are two reasons for this. First, the industry expects the margins of innovative medicine to come under “tremendous” pressure, as government deficits need to be managed globally.
Second, the large R&D investments are no longer expected to bring the required level of return with many companies outsourcing their R&D to cut down on costs.
Danner said: “The future pharma industry will be more diverse, ranging from highly focused, innovative players to fully integrated healthcare conglomerates.”
He advised that companies considering diversification should start preparations today, concluding: “The first mover advantage provides an excellent position to shape the future healthcare environment.”
Ben Adams
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