Pharma as Biz

[Guest guest]

An interesting " business " perspective of Pharma.

So their role, to keep business happy, the parasites on Wall Street

skimming investors dollars off a creamy top, is to re-package and

reformulate. I guess we'd used to say they're saying " hire

Madison Ave. to heal your woes! "

Screw the researchers and scientists. To hell with treatments for

infectious diseases that kill millions--they're just poor ni--er....well,

suffice it to say, they're just too darn dark, too darn far away and too

darn poor to give a flying....well...gosh!

I love this line: Be patient for growth, but impatient

for profits.

Sounds about like what they've been doing, but I guess that

Clayton is so blinded with greed he isn't seeing enough return on his

investment to keep his fat, miserable ass happy.

I guess in my cynicism, I'm trying to say that big pharma and privatizing

discovery has been largely a disaster. Drugs they do develop have to keep

slugs like the author below and his minions happy so the price must be

high, IP protected over human life and access restricted to those that

can afford it. Hello, Donut Hole! Then they buy the dirty, miserable

little Frists of the world to legislate their larceny into law.

M.

***

http://www.forbes.com/2006/07/31/leadership-innovation-pharmaceutical-cx_cc_0801pharma.html?partner=biotech_newsletter

Commentary

Big Pharma's Prognosis

Clayton Christensen 08.01.06, 6:00 AM ET

Cambridge, Mass. -

Big Pharma is not an industry that typically engenders pity. With

historical growth rates in double digits and 20% operating margins,

pharmaceutical firms have enjoyed a heady combination of growing demand

and big profits. But times are changing.

The industry's tremendous success has been built upon blockbuster drugs

like Zocor, Zoloft and Lipitor. To develop them, firms such as

Pfizer (nyse:

PFE -

news -

people ) and Merck (nyse:

MRK -

news -

people ) invested heavily in proprietary compounds and then put

hundreds of millions of dollars behind intensive marketing campaigns. But

now patents are expiring on some of the biggest-selling drugs, insurance

companies are becoming stingy about drug treatments and sheer saturation

is pushing down the returns gained from big marketing campaigns. If these

companies don't adapt their businesses to new conditions and reframe what

" quality " means, those heady days will soon come to an end.

Many firms have responded to the threats by investing heavily in

next-generation drugs, often based on biotechnology. But there are two

big problems with this strategy. First, the promise of biotech has been

greater than the payout, and the industry has been investing more money

to deliver fewer drugs. Worse, many patients don't actually need these

next-generation drugs--the old blockbusters are perfectly

adequate.

What can Big Pharma do? The industry needs to orient itself toward new

dimensions of performance--not necessarily better effectiveness against a

condition, but factors such as convenience, accessibility and safety.

Instead of just developing better drugs, they need to develop better ways

to deliver medication.

One example: & 's (nyse:

JNJ -

news -

people ) Concerta drug for attention deficit and hyperactivity

disorder uses the exact same active ingredient that is found in Ritalin.

Concerta, however, delivers the drug through a patented capsule design

that allows for twice-daily dosing, versus three times a day with

Ritalin. The big advantage: The pill allows children to avoid

embarrassing visits to the school nurse. The result? 2005 sales of almost

$1 billion for Concerta versus close to $200 million for

Ritalin.

To deal with expiring patents, some companies are smartly taking a

" if you can't beat them, join them " approach. Pfizer, for

instance, has announced that it will launch an " authorized

generic " form of its antidepressant Zoloft. While specialist generic

companies like Israel's Teva Pharmaceutical Industries (nasdaq:

TEVA -

news -

people ) and India's Raxbury may also compete using the same

active ingredient, Pfizer hopes that brand loyalty and patient inertia

will allow it to retain considerable market share.

Novartis (nyse:

NVS -

news -

people ) is going a few steps further. The company spent more than $8

billion in the past few years to make it the world's number one generic

drug manufacturer. Its generics unit has sales of over $5 billion and

more than 20,000 employees. This is big business. The company sees

generics as not only providing a new revenue stream, but also as a way to

gain scale in manufacturing and create an attractive product line for

large drug purchasers. The generics may sell for less than half the price

of patent-protected drugs, but for Novartis, they produce a wide range of

advantages.

Drug companies can learn from the lessons of other firms that have

entered businesses with distinctly different business models than the

core. Some have been spectacular successes, such as

Hewlett-Packard's (nyse:

HPQ -

news -

people ) inkjet arm and Dayton Hudson's Target (nyse:

TGT -

news -

people ). But many others have failed, such as Digital

Equipment, the minicomputer titan that fumbled in its efforts to move

into the personal computer market. A few principles for success really

stand out:

-- Give the new business autonomy. Companies invest untold

fortunes to develop " core competencies, " but these can become

" core rigidities. " When a different business model is required,

it helps to give the venture real autonomy. Managers need the freedom to

approach an opportunity as an entrepreneur would. They can then borrow

resources, such as sales channels, from the parent company as their

business demands.

-- Be patient for growth, but impatient for profits. Perhaps the

most harmful thing a parent company can do to a new venture is to push

for fast growth. The result is a cramming of innovations into existing

markets, where they may generate decent initial revenues but ultimately

represent a poor fit with customer needs and motivate competitive

response. Firms need to step back and assess when an innovation is really

plug-and-play with the existing industry, and when it needs time to

establish a market and iterate its way to success. Early profits are one

of the surest indicators that a successful path is being found in a

foothold market. Once the foothold is secured, further growth can

come.

-- Frame threats as opportunities. Often firms ignore emerging

threats until it's too late to respond. Think of Digital Equipment

ignoring the threat posed by personal computers until it was too late, or

incumbent airlines dismissing the threat from low-cost carriers.

Companies need to develop a habit of scanning the horizon for these

potential game-changers, thinking about how they can result in overall

growth for the industry even as they threaten traditional product lines.

Novartis has done so with regard to generics; time will tell if other Big

Pharma firms follow suit with such conviction.

Clayton M. Christensen is a professor at Harvard Business School and

the founder of Innosight, a Watertown, Mass., innovation consulting firm.

He is the author of The Innovator's Dilemma , The Innovator's

Solution (with E. Raynor) and Seeing What's Next (with

D. and A. Roth).