How Big Pharma’s R&D Focus Is Changing

The secret for success in today's pharmaceutical industry is how to mold the company around the concept of developing value-added drugs by using technology rather than focusing the company on the technology itself. As an example, Roche has been hugely successful but came to realize that the biologics and innovation culture from Genentech were its primary growth drivers. Predictably, Roche decided to acquire and integrate Genentech into its operations. But, the far more difficult and potentially much greater opportunity is how to transform the rest of Roche to also take advantage of Genentech's way of discovering and developing drugs, whether the agents are small molecules or larger proteins.

Not only has the pharmaceutical industry gone through an acute phase of cost-cutting and downsizing (or right-sizing), driven mostly by global economics and payer cost-containment initiatives, but many Big Pharma managements are now also aggressively working to change their company's behavioral culture and R&D operations. Companies need to make strategically important commitments to new R&D models, which may be experimental models right now but have the potential to be new growth engines.

Questions Answered

• Much innovation occurs by academic and government-funded researchers who have a passionate focus and comprehensive understanding of science. What strategies are some Big Pharma companies adopting to better access academic research and researchers? What is open-access R&D? What is the academic superstar model?
• Many Big Pharma companies embrace the strategy of externalizing R&D to improve R&D productivity. What strategies are GlaxoSmithKline and Pfizer implementing for this purpose? What percentage of its development operations does Pfizer want to move out of house?
• Some companies are moving to downsize their R&D operations and diversify into market sectors that are less R&D intensive. What opportunities exist in generics, branded generics, and OTC market sectors? What transformational new model does Teva Pharmaceutical Industries say has the potential to reshape the entire global OTC market?
• For far too long, some Big Pharma companies have defined themselves as small-molecule or chemistry-based outfits rather than as companies designed to produce value-added drugs. Why has this created an identity crisis for these companies? Why is bolting on a biologics or vaccines company only a short-term stopgap for fixing this crisis?
• When Pfizer acquired Wyeth Pharmaceuticals in 2009, the combined R&D spend of the two companies was about $11 billion. In 2012, Pfizer plans to invest only between $6.5 billion and $7.0 billion on R&D. What is targeted R&D? What affect will it have on R&D spend?
• GlaxoSmithKline has said that the biggest threat facing the pharma industry is the growing pressure from payers around the world who demand drugs that make a real difference to patients and provide economic value to society. What is GlaxoSmithKline doing to address this threat? What is market-driven R&D?