In the Classroom
 Critical Care Issues for Pharmaceuticals and Biotech Managers

Rapid scientific progress is both the blessing and the bane of the pharmaceuticals industry, driving growth but also requiring investments in technologies with uncertain short-term and long-term payoffs. "Over the last decade, the pharmaceutical industry made enormous investments in new technology in genomics and other areas that were supposed to stimulate production of new drugs, but so far the return on that investment has not been realized," said Patricia Danzon, professor of health care management and academic director of the Wharton/Windhover Program for Pharmaceutical and Biotech Executives, a 5-day seminar held annually for executives in the pharmaceuticals and biotech industries.

Danzon said companies will need to develop a two-pronged strategy of stabilizing growth of gross earnings while improving productivity of internal research and development. "Several major pharmaceutical companies are facing patent expiration on current drugs, and so keeping the flow of new drugs in the pipeline to replace old drugs is the management challenge in this industry," she said.

Boosting Productivity

Companies need to continue to improve performance both in their existing portfolios and in their drug development. For existing drugs, stabilizing revenues will require more careful attention to managing brand lifecycles. For new drugs, companies need to combine careful management of their own internal R&D and smart licensing to boost R&D productivity. "The second strategy is for large pharmaceutical companies to license promising new compounds from smaller biotech companies, who then must manage their own in-licensing activity to supplement their R&D," Danzon said. "A third strategy, to the extent that the other two are not successful, is to use mergers and acquisitions as a way of cutting costs and buying time. When M&A is used in this way, there needs to be productive and efficient implementation and integration strategies in place."

One trend Danzon sees shifting in the pharmaceuticals M&A arena is better pricing for the mid- or early-stage biotech and pharma startups. "When everyone was looking for late-stage startups, prices were bid up high. It's become clear now that companies could do better by getting cheaper, earlier-stage companies," she said. "The market is acting in an efficient manner."

An Opportunity for Dialogue

Danzon, an internationally recognized researcher in the biotechnology/pharmaceuticals fields, will present results of her current projects looking at the influence of M&A activity on R&D productivity and international pricing during the annual Wharton/Windhover Program, which runs May 11-16, 2003.

Each year, the Wharton/Windhover Program draws experienced leaders from both industry and academia, who present case studies and examples of best practices. Sessions that Danzon teaches on pricing are supplemented by firsthand accounts by executives who have dealt with these issues.

New panel discussions led by FDA regulators and lawyers, added last year, will again be offered in May, offering a platform for open dialogue on regulatory issues and policy issues. This blend of academic and industry presenters gives participants practical knowledge that is focused on their industry. Past presenters, many of whom return each year, have included:

  • Michael Inouye of Gilead — Marketing and Sales for the Biotech Company;

  • Jim Frates of Alkermes — Financing;

  • Charles Fisher of Abbott Labs — Drug Development; and

  • Mark Skaletsky of Essential Therapeutics — Biotech Strategy and Management.

"We get participants from small startups and large pharmaceutical companies, from Europe, Japan, and around the world. It's an exciting mix of participants with different business models," Danzon said. "And our presenters come from a diverse mix of companies with different strategies."

    

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