FRANKFURT - New solar installations reached a fresh record of 7.5 gigawatts (GW) in Germany in 2011, playing into the hands of advocates for steeper cuts in tariff subsidies to reduce growth of solar power and the resulting higher costs for consumers.
HIV deal shows need for new pharmaceutical models
NEW YORK/LONDON |
NEW YORK/LONDON (Reuters) - The pharmaceutical industry is going back to the lab for its business models as it faces historic challenges.
Large drugmakers are experimenting with various collaborations as their major products face revenue declines, research productivity stalls, and governments and health insurers crack down on drug prices and healthcare costs.
The new ventures -- from deals on products to mega mergers -- seek to meet these challenges by cutting costs and mitigating the risks of research into new treatments.
Look no further than Thursday's deal between GlaxoSmithKline Plc (GSK.L) and Pfizer Inc (PFE.N). The world's two biggest drug companies announced plans to merge their HIV operations into a new company.
"Pharma is feeling its way," said Erik Gordon, a professor at the Ross School of Business at the University of Michigan. "They know that the present business model isn't going to work in the future ... What they're not sure of is what will work."
Glaxo and Pfizer said the new HIV business would be more sustainable and broader in scope than either individually, with the potential for cost savings by melding the commercial operations.
"What you are seeing is an industry facing the realities of the challenges that exist and also, to some degree, a new generation of management being prepared to come forward with different solutions," Glaxo Chief Executive Andrew Witty told reporters.
Indeed, in the past, such collaborations would be unlikely because rivals would be reluctant to share information about product development or sales strategies, said Morningstar analyst Damien Conover.
"You're almost giving away some of the secret sauce to a major competitor," Conover said.
"In the new environment where cost controls are so important, we're going to start to see maybe some more shifts like this where that old way of doing things by yourself may not make as much sense."
Virtually all large drugmakers are seeing patents lapse on big-selling drugs, with a lack of blockbusters to fill the gaps, driving the need to cut costs to shore up profits.
"They have to have a more efficient cost structure," Gordon said. "They are not going to get the kinds of margins they used to get."
At the same time, the desire to stem healthcare costs means governments and other healthcare payors are reluctant to reimburse for new therapies unless they represent a significant medical advance, forcing drug companies to take more research risks.
"They're working against a higher risk, so one response is combine some pipelines," Gordon said.
The HIV tie-up follows risk-sharing deals forged by drugmakers, such as Bristol-Myers Squibb Co's (BMY.N) licensing of two experimental diabetes treatments to AstraZeneca Plc(AZN.L).
The formation of an entirely new company struck experts as an unusual move for the drug industry.
"It is a sign of the times," said Navid Malik, analyst at Matrix Corporate Capital in London. "Everyone is looking at their portfolios -- exiting some areas, entering some and refocusing in others."
With Glaxo owning 85 percent of the HIV company, Sanford Bernstein analyst Tim Anderson questioned whether Pfizer would shift resources from HIV to other areas. The new company will have 11 marketed products which generated sales of $2.4 billion last year, plus a pipeline of six experimental medicines.
"The deal essentially looks like GSK is buying access to Pfizer's HIV/AIDS medicines," Anderson said in a research note.
While the structure of the GSK-Pfizer deal is unusual, its financial impact is a drop in the bucket compared with enormous acquisitions sealed recently to address the industry's challenges.
In the United States, Pfizer is buying Wyeth WYE.N for $68 billion, while Merck is gobbling up Schering-Plough Corp SGP.N for $41 billion. Swiss drugmaker Roche Holding AG(ROG.VX) shelled out $46.8 billion to acquire the part of its U.S. biotech partner Genentech that it didn't own.
Rather than large-scale consolidation, others, like London-based Glaxo, are emphasizing smaller deals and diversification into areas such as emerging markets and consumer health.
"We're prepared to try different models and this is an example of things we want to do," Witty said of the HIV deal. "It isn't necessarily the template of the things we want to do."
(Editing by Gerald E. McCormick)
- Tweet this
- Share this
- Digg this