Pharmaceutical and Biotech Growth Strategies: Future drivers and opportunities

Table of Contents

Demand for blockbuster drugs 19

Investors'  emphasis on revenues 20

Optimizing returns on pharmaceutical R&D 20

Innovation is more sustainable than patent defense 22

Current blockbuster market 23

Reliance on blockbuster sales 25

Is blockbuster growth sustainable? 26

Drivers of pharmaceutical M&A 29

Focus on productivity improvements 30

The productivity crisis in R&D 32

The productivity crisis in sales 33

Is consolidation the answer? 35

Downsizing to improve efficiency ? Short-term gains 36

Revenues are directly proportional to investment in sales ? No scale

economies 38

Pipeline productivity is directly proportional to R&D investment ?

no scale economies 39

Implications for major pharma 41

From blockbuster to 'multi-buster'  ? Opportunities arising from

pharmacogenomics 43

Treatment by genotype

Improvements in diagnosis

Maximizing revenues in the post-genomics era

Focus on core competencies ? Benefits of networked growth

Short-term tactics ? Becoming the licensing partner of choice

Longer term strategy ? Moving from licensing to networking

Search strategies

Acquisitions

Single product acquisitions

Franchise acquisitions

Corporate acquisitions

Focused sales and marketing activities

High cash burn

Over-reliance on individual product acquisitions

Lack of appropriate acquisition targets

Best acquisition targets too expensive

Growth drivers to 2007

Continued top tier consolidation liberates products for specialty

pharmas

Large pharmas ignore therapeutic markets with lower revenue

potential

Revenue window of opportunity for specialty pharmas

Patent expiries fuel generic and drug delivery company growth

Biotechs move downstream

Japanese market opens up to specialty pharmas

Barriers to short-term growth

Growth drivers, 2007-12

Genomics and related technologies yield more drug targets

Pharmacogenomics micro-segments disease markets

Introduction of biogeneric drugs

Major pharmas divest entire therapeutic franchises

Barriers to longer term growth

Winning growth strategies

Improved search strategies and better structured agreements

Targeting the right therapy areas

Creating partnership networks

Acquire or co-promote?

Moving upstream to reduce reliance on acquisitions

Changing competitive landscape

Intra-biotech competition

Biotech-pharma competition

Changing balance of power between biotech and pharma

Desire for independence

Stratification of biotech sector

Biotech growth influences

Cost containment

Income

Perception

Product potential

Adoption of growth strategies by biotechs at different stages of development

Integrated biotechs

Developing biotechs

Co-development companies

Platform technology companies

Integrated biotechs will consolidate to improve productivity

Developing and co-development companies will work together to avoid

restrictive agreements with pharmas

Development stage companies will partner rather than go-it-alone to market

Platform technology companies will expand their services to protect against

mimicry

List of Figures

Figure 1.1: The forecast for pharmaceuticals: challenges to the root causes of profitability are

gaining strength

Figure 1.2: Segmentation of the blockbuster market by therapy area, 2002

Figure 1.3: Relative reliance on blockbuster sales, 2000-02

Figure 1.4: The relationship between volume and costs in the traditional pharmaceutical business

model 31

Figure 1.5: The productivity crisis in R&D

Figure 1.6: Factors affecting physician detailing productivity

Figure 1.7: Workforce productivity at the top 15 Western pharmas, 1998-2000

Figure 1.8: Pharmaceutical revenues are directly proportional to investment in sales

Figure 1.9: The commercial value of leading companies'  late-stage pipelines is directly

proportional to their R&D spend

Figure 1.10: Using market-driven genotype screening to increase the revenue potential of

pharmacogenomics-derived products

Figure 1.11: Networked pharmas respond rapidly to fluctuating resource needs by outsourcing

cost-efficient specialist vendors

Figure 1.12: Networked pharma deals across the value chain

Figure 1.13: Networked pharma in 2015

Figure 2.14: Specialty pharma companies'  evolution towards fully integrated pharmaceutical

company status

Figure 2.15: Impact of acquisitions on specialty pharmas'  operating profit margins

Figure 2.16: Scenarios of future specialty pharma sector growth

Figure 2.17: A handful of mega-companies will dominate the industry by 2005

Figure 2.18: Future revenue opportunities for specialty pharmas

Figure 3.19: Biotech industry growth, 1992-2001

Figure 3.20: Comparison of therapeutic sources of revenue by 10 leading and 12 emerging biotech

players, 2007 113

Figure 3.21: Major influences on biotechnology growth strategies

Figure 3.22: Amgen' s alliance network, 2003

Figure 3.23: Biotech growth strategies

List of Tables

Table 2.1: Forest' s position in the global depression market, 2001-03

Table 3.2: Parameters of biotech industry growth, 1992-2001

Table 3.3: Relative importance of major influences on biotech growth strategies at different

stages of company development