Something
very exciting has happened: a
forecast of the pharmabusiness in 2018 has been issued. This document is
very detailed and it takes a lot of time to digest it; however a brief look
revealed the tendencies. I found this review very rational and absolutely worth
to be studied. The conclusions of the author regarding R&D productivity and
risen questions are very sober and in
the same line with my previous suggestions:
The Industry has spent $1.1 trillion over
the last 10 years in R&D (page 15). With hindsight this appears to be an
inefficient use of this surplus cash. It is often said there is an R&D
productivity issue, but is it just poor portfolio strategy and investment
choices? Is too much money being spent chasing too few quality R&D
projects?
We may question whether certain companies
should even continue with new product R&D activities given their track
record. AstraZeneca, for example, with a string of high profile R&D
disappointments in recent years, is so poorly rated by the stock market that
the current market capitalization of $50bn is 30% lower than the company’s
aggregate value of its entire portfolio of products at $72bn (as valued by
EvaluatePharma’s NPV Analyzer).
Additionally billions are spent by the
Industry in the potentially aggressive transfer of risky, late-stage in-process
R&D assets in seemingly high-priced and speculative in-licensing deals and
company acquisitions. An example is Gilead’s $11bn acquisition of Pharmasset in
early 2012 for access to the Hepatitis C treatment GS-7977. This product would
ultimately have been pursued regardless of whether Gilead owned it. The
decision to pursue these courses of action stems from a combination of:
1) over confidence after bringing a
blockbuster product to market that the same successcan be repeated;
2) the need to grow share price; and,
3) the availability of surplus cash flows
from ageing blockbusters.
Real numbers
and sober conclusions. I will definitively come back to this review – for more
details and trends.
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