Thursday, November 08, 2007

The Disaggregation Road

When we saw a conference selling itself with the concept that Big Pharma is likely to disaggregate, we began to realize that what we had once seen as a kind of quirky idea has now gained the respectability of promotional material.

So first, let us invite you to follow our logic for disaggregation: just click here (the presentation’s free).

Since that talk, at the Pharmaceutical Strategic Alliances conference in September, we’ve only become more convinced that Big Pharma – at least to thrive, if not survive -- has got to start thinking small.

Some are. The less-than-confirmed but more-than-rumored information we've got is that AstraZeneca is set to spin off its GI R&D organization, keeping of course its big commercial assets, the Nexium franchise, but letting private equity fund the early-stage candidates. Good idea, we say. AZ is simply too big to manage the internal research it’s got – let alone depend on the notion that it can afford big bets on areas unlikely to generate big advances in medical care. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO).

AZ has by no means abandoned primary care blockbusters, but is clearly moving towards an increasingly disaggregated future. That, it seems to us, is one key message of its independently managed MedImmune acquisition-now-division. We’ll see how much farther AZ is willing to push its strategic envelope – perhaps, eventually, all the way down the disaggregation road paved by the most successful drug company in the industry—the Roche-Genentech-Chugai cluster?

We acknowledge there’s risk to the AZ strategy (spending 20% of one’s market cap for a company providing an additional 5% of sales looks pretty dicey – even if it does provide 25% of AZ’s pipeline going forward). Disaggregation is no panacea. But big-bet development--witness Novartis' well-publicized struggles with its diabetes would-be blockbuster Galvus and the management reshuffle in the wake of that debacle--is no strategy, either.

1 comment:

MichaelRS said...

The concept of disaggregation has been around for many years in other industries. Case in point, we introduced it back in the late 90s to Pharma in consideration of the problems with the blockbuster strategy (funny enough while looking at Astra's exposure with omeprazole). Back then, M&A was the answer du jour. Ten years later, the concept starts getting traction, which reflects the average time of concept to execution in Pharma. High-tech is faster in embracing nex concepts and maybe that is the reason why it is comparatively doing better in the market: It is quicker in responding to market changes.