Big Pharma management could do worse than take a look at Shire when trying to figure out how to get out of their mess. This specialty pharma turned biopharmaceutical firm has seen its market cap quadruple over the last five years, and just upped 2007 revenue growth guidance to at least 25%. It’s also managed to buy biologics and turn them into a future growth driver—as most Big Pharma are attempting to do.
For now Corporate sits above two broad divisions, Specialty Pharma and Human Genetic Therapies (ex-TKT, acquired in 2005 for $1.6 billion, shocking the market at the time). It’s a logical split given the fundamentally different nature of biologics versus small molecules. But the fact that TKT has barely changed since it was acquired--“If you went to Cambridge [MA, HGT's main site] now and compared it with four years ago it would probably be the same,” says Emmens, except for the 50% more people—best illustrates the hands-off approach. And the principle applies to the ADHD, GI and renal business units within Spec Pharma too.
Apparently the arm’s length strategy isn’t just helping internal productivity, it’s helping win licensing deals, too. Shire in June won a competitive auction for ex-EU rights to Renovo’s Phase II scar treatment Juvista, a human form of TGF beta 3, for $75 million up front and a $50 million equity stake. Shire beat the Big Pharma, in Renovo CEO Mark Ferguson’s eyes, because it could point to TKT as proof that it was not about to grab the asset and run (not that Shire would have wanted or been able to do so). Renovo’s team will continue development of Juvista, with Shire funding trials relevant to US approval.
Juvista may yet form the seed of Shire’s newest portfolio company—in cosmetic medicine. It’s still specialist, low-ish-risk, with good IP, but provides Shire with a foot in the private market—not a bad thing given the pressure on reimbursement. (And look what Allergan did with Botox, say analysts.) Portfolio management again, then, this time balancing risk across different pricing mechanisms.
So what about Big Pharma? Stop the M&A and start managing a portfolio—which includes selling as well as buying.