Survival or growth - which strategy?
Historically pharma organisations have been ‘Cash rich and organisationally poor’ however from the Global Big Pharma’s to University spinouts a mixture of the current economic climate, governmental healthcare policy and competition driven by emerging markets has put a stop to the lacklustre attitudes of the past.
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Pressures on R&D and Supply chain costs are nothing new, neither is the constant burden of balancing investment in emerging therapies with deploying generic strategies. What, however, is causing most difficulties for all levels of business is the fact that costs have been cut, talent has been rationalised, investment from traditional sources of funding has dissipated yet there is  more need than ever for investment in R&D and new markets, development of talent and the need to bring infrastructure and Information technology up to speed with many non-pharma marketing led industries.
The good news in light of this pressure is for interim management once the current tactic of  ‘freeze don’t do anything just yet as a precaution’ has lifted is that it would appear three survival strategies have emerged which will all have there place for Interims.
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Mega mergers. We have already seen a number of big ticket transactions announced, resulting in major integration projects creeping slowly towards the horizon. Having shed in many cases up to a third of workforces I can see there being needs for specific skill sets to facilitate the operational integration left behind in the wake of strategic plans from consultancy based organisations. I see the biggest pressures in project managing the integration of organisational development, marketing, IT and Finance functions that have over the last few years been heavily reduced in numbers.
M&A, however, is not seen by all as the only route to survival, enlarging offerings and investment into generic and emerging markets has to be a key step given last year’s 70% of growth in the pharma market was in the pharma emerging area’s such as , India, Russia, Brazil, Turkey, Mexico and South Korea. This in turn will lead to the need for interims with exposure in global supply chain and procurement exposure as well as the need to manage local personnel within newly formed alliances from a HR point of view. The Far Eastern markets are also being targeted by European and US companies as potential pharma gold mines given the huge amount of government investment, large numbers of relatively cheap research subjects and low costs of R&D and manufacturing facilities. This coupled with untapped patient markets in the 10’s of millions makes it an obvious focus. We have already seen a number of opportunities for interims that are prepared to travel. Â
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The third potentially interesting area is the investment in fledgling business by larger pharma companies along side government funded research schemes as opposed to traditionally  investing in own R&D. The UK in the recent budget has pledged £750m alongside the US government’s major change in tack in terms of its cutting edge pharma development and investment. The question of where and how this is to be distributed is still to be answered. Commercial direction in the short term for these businesses is a key hot spot for interim MD’s and CEO’s prepared to balance the interests of IP versus survival and growth.
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The pharma industry has and always will be a changing industry with the need to merge, collaborate and develop, however, the key to current success and survival is doing it as efficiently and as cost effectively with fewer resources. Â The flexibility and cost effective solution of deploying an interim manager has to be the commercial option in an academic industry.
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If you have any thoughts on which strategies will prove most popular and successful or indeed your wider take on current market issues, the Pharma Interim community and myself would be interested to hear from you.
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James Fargus is a Senior Consultant in the Pharmaceutical and Biosciences Practice of Interim Partners.
November 20th, 2009 at 4:05 pm
This is really interesting stuff. I, like you, have also realised that M&A is not the only route for survival… B&O, S&M and even B&D are equally prudent methodologies for survival. However, when you factor all of these elements into what has become, essentially, a proliferation of negative bracket creep, one must surely wonder about the implications for reverse (or even inverse) de-leveraging mechanisms taking hold.
A bigger issue in today’s hustle-bustle Pharma universe is undoubtedly the effect on vertical markets. Pharmaceuticals is certainly an area in which the vertically inclined will struggle. if one is not able to find the equilibrium between horizontal and vertical, one must surely fall over.
One last comment on this discussion must certainly refer to the most perplexing conundrum of all, and by this i must surely mean: just how big is big Pharma? There are those who simply do not address this question at all, preferring to bury their heads in the sand of Pharmaceutical ignorance, but not I. So, over to you…. just how big is big Pharma?
November 27th, 2009 at 1:51 am
Part of growing a diversified global business is finding growth opportunities in new areas. Hair and nail disorders are among the top 10 conditions treated by dermatologists and are becoming a focus for big Pharma. Many causes of baldness (also known as androgenic alopecia) exist in both men and women, and this can be disfiguring and cause significant quality of life issues, so they are most definitely “health” issues. While there may be opportunities to compete “head-to-head” with specific generic drugs in certain markets on the basis of scientific data (versus price competition), for most drug classes, minor differences between brand and generic drugs will not make a clinical difference to patients. For example Stiefel’s technology is currently licensed for use in baldness treatments like that in Rogaine foam (an OTC Pfizer product). Several companies are currently in discussion with regulatory agencies on the study design to possibly enter the market with new prescription products for alopecia. Clearly, healthcare economic information from these studies will be a key driver.