Tres estrategias tres para Pharma...

9 February 2010

Written by:

Mick Cooper

There is now more choice for pharmaceutical investors inspite of the sector struggling to overcome a lack of productivity in research and development (R&D), and the prospect of losing the patents on a number of important blockbuster drugs. There are three main strategies in play

• the mega-merger path,

• diversification route, and

• the focused prescription-drug strategy

each with a different risk/return characteristic.

-Merck & Co and Pfizer have resorted to mega-mergers with Schering-Plough and Wyeth, respectively, to delay the impact of falling off patent-expiry cliffs. (...)

-By contrast, GlaxoSmithKline, Sanofi-Aventis and Novartis are transforming themselves into balanced, diversified healthcare companies. (...)

-The last group of companies are sticking to 'prescription medicine' pure play strategies. They are radically changing their operating procedures, streamlining operations and overhauling their R&D operations. They have expanded into the biologics area, using greater outsourcing and accelerating drug development. Those following this path are AstraZeneca, Bristol Myers Squibb and Eli Lilly. They have a greater risk profile than the diversified companies, but do offer the prospect of a greater return if they develop blockbusters such as Brilinta and Onglyza.

Swiss giant Roche is the only major pharmaceutical company not struggling to re-invent itself. It was more progressive in changing its business practices and had the foresight in initially forming a partnership with Genentech before recently acquiring it fully.

An extra consideration for investors is geographic exposure. The key markets for the industry are the US and Western Europe, but this is changing with the growth of opportunities in the emerging markets.


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