An Industry Overview

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Robin Robinson

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The strategic plans for 2008 in the industry appear to be business as usual, which may not bode well for its future, according to PricewaterhouseCoopers’ (PWC) latest report. According to Pharma 2020: The Vision report, to make the most of future growth opportunities, the industry must fundamentally change the way it operates. This is also the advice of Diana Conmy, director of IMS Health. She says in forecasting for the coming year, pharma companies need to be mindful of such factors as the growth of biosimilars, changes in contracting in Europe, parallel trade practices, and FDA reform, to name a few. “The top 10 pharmaceutical companies already have been adversely affected by patent expirations and safety events, and there will be a need for further restructuring and adaptation of the business model to reflect the realities of the new marketplace,” she says. The industry will need to go global as a way to sustain growth, Ms. Conmy says. Overall global industry growth is slowing, with the key seven mature markets experiencing only moderate growth. Mature markets face pressure from payers, aggressive genericization, and health technology assessments. Around the Globe Global pharma will want to look toward what IMS identifies as the “pharmerging” markets, which include: China, India, South Korea, Russia, Brazil, Turkey, and Mexico. In the United Kingdom, value growth will be limited to areas of unmet needs as the industry undergoes increased scrutiny from government agencies. By 2020, according to PWC, the pharmaceutical market is anticipated to more than double to $1.3 trillion, with the E7 countries — Brazil, China, India, Indonesia, Mexico, Russia and Turkey — accounting for about one-fifth of global pharmaceutical sales. Analysts at PWC believe that the current pharmaceutical industry business model is both economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets. Global market expansion appears to be on everyone’s wish list for 2008, along with collaborations, mergers and acquisitions, and trimming costs via implementing more efficient manufacturing processes and by reducing the workforce. A review of the annual reports for the top 25 pharmaceutical companies reveal that these are the standard operating procedures in most long-term strategy plans. Joint Ventures And Collaborations Joint ventures will continue to allow companies to broaden their market base more expeditiously than if they tried to build a new pipeline in-house, such as the continuing collaboration between Baxter and Guangzhou Baiyunshan, which makes IV drugs accessible in China, or the partnership between Schering-Plough and Merck that produced Vytorin. Abbott and Takeda have a collaborative effort called TAP Pharmaceutical Products that researches the possibilities of developing new digestive disease treatments. Astellas has entered into several licensing agreements with other companies around the world and plans to continue to enhance its pipeline in this manner. According to the message from president and CEO Masafumi Nogimori, Astellas is making active use of in-licensing to reinforce new drug pipelines and will continue to seek more licensing opportunities. Some collaborations result in subsequent acquisitions, such as in the case of Amgen, Abgenix, and Immunex. In 2000, Abgenix and Immunex partnered to jointly develop the molecule that would become Vectibix. In 2002, Amgen acquired Immunex and inherited the Abgenix partnership, and in 2006, Amgen acquired Abgenix and took full ownership of panitumumab. According to Kevin W. Sharer, chairman and CEO of Amgen, this is just the beginning for the company’s oncology programs. “Vectibix is our first cancer therapeutic, and we expect many more will follow,” he told stockholders. He noted, however, that for the first time the company will be facing new competition from biosimilars in Europe. Acquisitions and Mergers Acquisitions and mergers help build drying pipelines as well as afford pharma companies the opportunity to add biotech options. Patent expirations also drive the demand for innovative technologies and products to fill product pipelines, and in the past few years there has been a growing trend to push in-license biological products or to acquire biotechnology companies. According to a recent article in The Financial Times Deutschland, Sanofi-Aventis is considering making acquisitions to catch up in the field of monoclonal antibodies. Other notable biotechnology/pharmaceutical deals include Merck’s acquisition of GlycoFi and Abmaxis and Pfizer’s acquisition of Rinat. In each of these acquisitions, a big pharma company and the smaller biotech company had prior strategic partnerships. In fact, Merck has collaborated with 16 biotech companies since 2000 and the acquisitions of GlycoFi and Abmaxis were its first strategic, long-term commitments. Pfizer, on the other hand, is growing its biotech business internally, as it makes plans to establish a new biotech center in the San Francisco Bay area that will be “independent, able to pursue its own research interests, free to establish its own distinct culture, and empowered to recruit entrepreneurial scientists.” Manufacturing: More Lean and Mean Companies also are exploring entirely new methods of manufacturing, restructuring manufacturing processes, and developing cycle time reduction strategies. Many are keeping the aging of the world’s population in mind during the discovery process, and some have renewed their focus on vaccines and biologics. More individualistic directions include advancing nutritional products, exploring new disease areas, and developing patient-centered or targeted treatments with genetic medicines. PharmaVOICE welcomes comments about this article. E-mail us at

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