The Banking and Strategy Initiative

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The big pharma wannabes

Last year Glaxo Smithkline signed deals with Dynavax worth $810 million for “endosomal toll like receptors” for immune inflammatory diseases and $375mm with Supergen also of California for epigenetic targets for Cancer drugs. In India Biocon produces APIs for use in many new age drugs despite early challenges in the last decade.  Similarily, Hoffman La Roche could potentially sign away $580 mm according to its partnership with Galapagos NV of Belgium for molecule and antibody drug collaboration for COPD. Pneumococcal vaccines on the other hand are not the object of this article as these are instead cross subsidiesed in global sales contracts by non profits like GAVI and the Gates Foundation..

Last week GSK (Glaxo SmithKilne , another big merger in the industry) signed a $1.5 billion drug discovery alliance with Isis of you guessed it, California.  These so call early option deals have really fueled decision-making and monetization in the industry where the biggies have frequently been cited for runaway costs ( esp Pfizer and Novartis) and mismanaged pricing without adequate returns from R&D. Eli Lily has made $800 million from sales of Byetta which it sells in conjunction with Amylin Pharmaceuticals, jointly developed and launched in 2005.

As with advertising and Equity research, these longer term alliances with boutiques have already been studied in great detail along with costs in developing markets and drug outsourcing. However, in its global business form, its predominant nature is that of an alliance leveraging the creative boutique’s research strengths with big pharma’s reach and distribution in giving the resultant product a label of veracity, managing its sales during the patent protection period and for the big pharma companies getting around costs in cycle time of NPD ( New Drug Discovery and Development) and costs of unproductive research projects. Though Pfizer does carry on in-house research even now across at least 21 projects in 2010, Glaxo has succeeded in far greater detail worth such alliances with boutique abs without paying for concomitant research failures likely to be in the ratio of 10:1

Some drug markets like India and China would have unrelated consequences as boutiques like Biocon and Stride Arcolabs in these countries also consequently take over industry leadership from the Big Pharma company offices that resort to selling all these drugs in alliances to the mass market according to the market’s policy semantics. Though the trend to use incremental patents as R&D produce has subsided, patent policies in these markets and the public control of pricing also plays a major role in limiting the impact of big pharma’s R&D budgets on these markets.

Another food for thought, basis the same developments would be that emerging markets in Asia ( Bangladesh, Vietnam) and Africa  (Kenya, Congo, Niger, Sudan, Ethiopia) would thus get neglected in this axis dependent wholly on leadership from non profits if any accessing their country’s health system and enabling reach,. This is currently limited to life threatening pandemics and diseases for which preventive medicine like Vaccination is available. Even that is a new development and not all corners of these potential markets have been reached.

The Big Pharma players and the second layer of corporations growing in this light have to develop stronger cost optimisation strategies that will survive its franchise with Doctors, Patients, Governments and the other stakeholders thru Healthcare IT, Policy participation and through managing their brand and that of others in the industry effectively for a support structure that is portable to such “new” markets and without loss of budgets and marketing reach.  There will be more on the subject to follow..

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