Pharma Strategy Blog

While recovering from Meltdown Monday, one might also have a eye for the future in 2009 onwards in the Pharma industry because tough times lay ahead.  As regulators increase restrictions, reduce profits and look at cost sharing options, the companies are under increasing global pressure to preserve or limit profit margin erosions.

Lately, drug innovation also seems to be coming up short and the latest news from AstraZeneca that Targacept was disappointing in phase IIb clinical trials for Alzheimer's Disease was just another brick in the wall.  Recent activity in the industry has focused on large scale redundancies and scaling back the sales forces.

Companies have also begun investigating further cost reductions and containment efforts have begun with an increasing dependence on outsourcing where possible, in areas such as medical enquiries, manufacturing and R&D.

Targeted acquisitions of smaller biotechnology companies to replenish the pipelines has also begun as a rash of blockbuster patent expiries over the next 5 years will lead to further reductions in profits and pressure on profits.  Competition from manufacturing, generic and copy companies in emerging markets such as China and India is more prominent than ever before.

Even oncology, the rock star of recent years, has begun to struggle with an increasingly fractured market, organ drug indications, pressure on prices, increased competition for patients in trials and generally disappointing pipeline results.  Quite a lot of companies are suddenly finding they have less than stellar compounds in phase III and a raft of agents in development in phase I plus a big hole in the middle. It's hardly surprising therefore, that many of them are searching for generic companies to buy and take up the shortfall with generic oncology drugs.  That's a real turn for books. 

Some big Pharma companies are already well placed, such as Novartis, which created Sandoz as it's generic arm after the Sandoz-Ciba merger.  Tough times require desperate measures, so what out for a raft of other big Pharma companies getting wise to this strategy to protect against revenue drops down the road.

In many ways, the pharmaceutical industry is a microcosm of life in general; time to trim the fat, reduce expenditures, tighten belts and ride out the economic waves while planning for bigger ones behind.  Those who are successful will emerge stronger and leaner for the efforts in the future.  The smart ones will do things more creatively and effectively rather than just doing more for less.

Prudence and innovation are sometimes a virtue in tough economic times.