Too Big To Succeed: Where Are Large Pharmas Heading?
Company scale is a negative predictor of value creation among biopharmaceutical companies, says a new analysis by L.E.K. Consulting, and industry’s largest companies have simply become too large to generate significant shareholder return going forward. How can the largest pharmaceutical companies adapt to an environment where they’ve become too big to succeed?
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The biopharma industry enjoyed regulatory success in 2012 that was recognized by investors. The stench from the carcasses of industry’s genericized blockbusters has begun to fade, but R&D productivity for the most part remains poor, expensive late-stage failures abound, and industry is still searching for sustainable business models.
The pharmaceutical industry has a hard time saying goodbye to strategic assets. In fact, it’s much more adept at welcoming new ones: diversification – either geographic or into areas beyond pure-play pharmaceuticals – has become commonplace. But pharma needs to overcome its entrenched resistance to asset externalization, which should become a critical third leg in its attempts to build long-term shareholder value. Strategic, almost biotech-like externalization strategies should move from a peripheral to a core part of pharma’s activities. Why haven’t they already been embraced?
Blockbuster drugs are not going away but as science and market conditions continue to evolve and unmet needs shift to new territories, their profile is likely to change again. Companies can use strategies to offset the potential shortcomings of the new blockbuster model and improve their chances of becoming the successful players of tomorrow.