Tuesday, September 22, 2009

Pharmaceutical Strategic Alliances: The Advantages of Scale, American Soccer, and the Cost of 'Virtual Critical Mass'

We concede that our blog post title is a little confusing but bear with us. This morning during one of the first sessions of our Pharmaceutical Strategic Alliances meeting we held a debate around the question of whether supersizing pharma provides a compelling strategic advantage in R&D.

Let us say right away that even before various points of view were aired, the bigger-is-better crowd on stage (Merv Turner from Merck & Co., Thomas Hofstaetter from Wyeth, and Elsevier's Roger Longman) out-numbered the small-is-beautiful gang (Elsevier's Melanie Senior and Ipsen CEO Jean Luc Belingard; as a consultant it was noted that fellow panelist Raj Garg from McKinsey would argue for both sides), and the conversation for the most part reflected that.

The discussion was interesting and touched on many points--some outside the scope of R&D, but all on the Big/Small topic: how to maintain focus in large organizations, various models for creating smaller units within larger organizations, externalization, regionalization, etc. Talk eventually wound around to how smaller companies could hope to compete in particular therapeutic spaces without necessary size, and really maximize the value of their medicines for shareholders and patients.

The Big Pharma contingent, not unsurprisingly, argued that without the necessary critical mass both industry and patients lose out, particularly in primary care indications. Belingard countered that there was plenty of 'virtual critical mass' out there--development and commercialization partners can be found, though this comes at a cost--provided you had the right asset (he used the example of Ipsen's GLP-1 analogue). The panel agreed, though some argued this cost is in some cases prohibitive even as such moves act as a hedge against development risk.

Merv Turner made the point that especially in primary care you needed size to absorb the shocks common in the pharmaceutical business--the Vytorins and the Vioxxes--to which Melanie raised the point that in any case isn't pharma moving away from its primary-care centric business model. Diseases, from cancer through heart disease, after all are increasingly recognized as multifactorial, heterogenous groups of related maladies, and in the future may be treated as such.

As he is wont to do, Turner, head of strategy at Merck, came up with a soccer (football/fussball, whatever) analogy.

"You can reduce cardiovascular mortality by 50%" by using statins, he said. "That means 50% cardiovascular disease is unsatisfied. Is that 50 different small diseases or one large one? Personalized medicine is like soccer in the US: it's the game of the future and always will be."

To which we say, somewhat sarcastically: you just wait til Philadelphia Union takes the field next year ...

Check out IN VIVO Blog, 'The Pink Sheet' DAILY, and our various twitter feeds (@invivoblogellen, @invivoblogalex, @invivoblogchris, @ebiwendy, @pharmalot) for more missives out of PSA.


Anonymous said...

The Big Pharma contingent, not unsurprisingly, argued that without the necessary critical mass both industry and patients lose out, particularly in primary care indications.

the critical mass a company needs to best serve patients and run quality development programs is mid-large sized companies, not big or super-sized pharma

Hofstaetter's comment that "The industry will go through more cycles of consolidation but these very large companies will break up again into smaller size" shows he knows the execs and big pharma are blowing smoke up our collective arses by insisting they need a bunch more mega-mergers to identify critical mass. What they need to do is to go back to a more traditional clinical development model (with staff qualified by depth and breadth of experience) instead of throwing more crap against the wall and then buying someone else when that fails

Anonymous said...

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