Calls mount for rethink of "Big Pharma" model

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON (Reuters) - Is the "Big Pharma" model broken? An increasing number of people seem to think so.

Institutional investors with more than $1 trillion (500 billion pounds) of assets under management were the latest to call on drugmakers to offer better value to both customers and shareholders in a report on Tuesday.

The critical analysis -- sponsored by Dutch, U.S. and British pension funds and prepared by London consultancy SustainAbility -- follows a report from PricewaterhouseCoopers last week arguing the current business model was unsustainable.

Investors, meanwhile, have been voting with their wallets by dumping shares in a sector that has stumbled badly in recent months after a series of high-profile product setbacks.

Stocks in Europe's two biggest drugmakers -- GlaxoSmithKline Plc (GSK.L) and Sanofi-Aventis SA (SASY.PA) -- have both fallen 10 percent in the past month following body blows to key drugs that have exposed the innate risks in pharmaceuticals.

Glaxo shares have underperformed the UK market as a whole .FTAS by 25 percent through the past 12 months, Reuters data shows. The stock trades on around 13 times this year's forecast earnings, in line with the overall market and confounding expectations of the sector's traditional premium rating.

Glaxo's diabetes drug Avandia was linked to increased heart-attack risk in an influential but controversial analysis on May 21, while Sanofi's key obesity drug Acomplia, or Zimulti, was rejected by a U.S. advisory panel on June 13.

Both pieces of news lopped billions of dollars off expected revenues at the two drug giants.