Big Pharma: To be or Not to be
The Big Pharma has grown to dominate the world of healthcare, not just in the advanced countries, but also in developing nations. It’s almost a $1.5 trillion market, dwarfing several countries’ GDPs. With oncology, immunology and CRM being the top three therapeutic areas, large companies are pumping significant dollars in keeping their drug discovery engines running and hunting for acquisition targets.
In terms of revenues, the top ten pharma companies are: Pfizer ($58.5 billion), Johnson & Johnson ($54.76 billion), AbbVie ($54.32 billion), Merck & Co ($53.6 billion), Roche ($49.9 billion), Sanofi ($46.16 billion), AstraZeneca ($45.8 billion), Novartis ($45.4 billion), Bristol-Myers Squibb ($45 billion), and GSK ($38.4 billion). As evident, the US and European drug makers have ruled the market for over half-a-century, even with the advent of biologics and emergence of China and India.
In terms of R&D, leading pharma companies are set to invest $302 billion in R&D by 2028, with oncology taking up the lion’s share. However, the question remains: Are the investments paying?
This case looks at one of Europe’s leading pharma companies and identifies the challenges it confronts and how to address those.
About NuPharma
NuPharma is one of Europe’s oldest and best known pharma companies with its head-quarters at Paris. With revenues in excess of $40 billion, it has presence in over 140 countries, and with production facilities in 30 of those. The company is a pure-play branded/ innovative pharmaceutical company, with 10% of its workforce involved in R&D across its several research facilities. Some of its large research facilities are located at Andover, MA; Sandwich, UK; Billerica, MA; Cambridge, MA; and Rahway, NJ. The company also does research related activities at Tokyo, Beijing, Singapore and Bangalore.
The company’s top therapeutic areas are: Cardiovascular, Immunology, Neuroscience, Oncology, and Hematology. It spends close to 20% of its revenues in R&D, and does mostly organic growth, with minimal of acquisitions and collaborative R&D activities.
Managerial dilemmas
On the face of it, NuPharma seems to be doing well. The top 10 drugs, combined, contribute to around 75% of company’s revenues. Of these, three are going off-patent by 2026. While the company has got a good record in getting patent-evergreening in most advanced markets, but NuPharma, like most others, struggle in emerging economies.
Further, the current therapeutic focus areas are not in alignment with global trends. Especially, on diabetes, the company doesn’t seem to be adequately present. As for oncology, some of the competitors have shown greater promise. So, the choice of therapeutic areas remains a concern.
Thirdly, unlike other large entities, NuPharma hasn’t seen success with collaborative R&D, open innovation and M&A based growth, which has shown results elsewhere. This insular approach seems to be hurting the company in the race to the market.
Not to mention the head-winds, in terms of slowing growth in European countries, uncertainty over the socio-economic scenario in western world, rise of alternate therapies, and a more pro-social stance in several countries regarding pharma pricing.
Discussion points
Based on the above details, please share your approach regarding these questions:
- How does the company beef up its inorganic growth performance? What factors would be crucial?
- What does the company do about alignment to the market in terms of therapeutic areas?
- How does the company shrink the overall time to market for its drugs, given the even tightening regulatory norms?
- What ways are possible to bring together the science, technology, and firm’s commercial commitments?
Keep the analysis based on tools and framework of strategic management.