First of all, a big thank you to the folks at asiahealthspace.com for the warm welcome. I am very much looking forward to contributing to the space.
In the next 2 – 3 years the much talked about patent cliff in the pharmaceutical industry will gain real momentum and traction. Some estimates value the impending loss of revenue as dramatic as USD 100 – 200 billion a year or approximately 10% of the total annual global pharmaceutical output. It is clear that the implications on the pharmaceutical industry as we know it today will be dramatic and profound.
Companies that stand to lose the most have been using a range of traditional M&A (merger and acquisitions) tactics to stem the pending revenue drain. 2009 alone brought three high-profile deals meant to strengthen product portfolios and pipelines: Pfizer paid US$68 billion for Wyeth, Merck bought Schering-Plough for US$41 billion, and Roche paid in excess of US$47 billion for the 44% of Genentech that it did not already own. This year Sanofi acquired Genzyme for US$ 21 billion and Takeda acquired Nycomed for close to US$ 10 billion.
Yet even with this latest round of M&A activity, it is remarkable that no single firm commands more than 8 – 9% of the global prescription drug market.
So, are companies now looking more inwards and starting to define strategies for growth from within? At least according to Chris Viehbacher, CEO of Sanofi this is certainly the way forward for his company. In a recent investor relations meeting, Chris Viehbacher stated that he is convinced that the key to avoiding another patent cliff in Sanofi is to reduce its dependence on “small molecules which have limited patent lives,” in favor of businesses with high barriers to entry, such as speciality health care and consumer health. At the same investor meeting, Chris Viehbacher stated the Sanofi’s “growth platforms”, i.e. emerging markets, diabetes, human vaccines, consumer healthcare, innovative products and animal health combined in 2011 will contribute to approx. 66% of total revenues and in 2015 approxiamately 85%. Reading between the lines, it is thus clear that at least in Sanofi’s case, speciality health care and consumer health will be key drivers for Sanofi’s future success and also a way to mitigate the risks of future patent cliffs.
In the next round of contributions, I will be focusing more on what the growing trend towards speciality health care means for Asia and how this is likely to reshape the industry in this part of the world.