Big Pharma in Effort to Stimulate Innovation

GSK (GSK) to shake-up research strategies (Financial Times)
UCSF, Pfizer (PFE) sign collaborative research deal (San Fransisco Chronicle )

Both Via Pharmalot

It’s no secret that big pharma players have some work to do on their late-state pipeline and that they are collectively grasping at straws trying to bring in revenue.

Clearly, deciding to reorganize your entire R&D structure isn’t a small undertaking. Head of drug discover at GSK, Patrick Vallance, told a conference in London yesterday (from FT.com article):

GSK would increasingly try to become “more biotech-like” in its efforts to stimulate innovation.

He said drug discovery would be split into “smaller units with a very clear focus on single [disease] areas . . . and reward people based on successful value creation”, with “disincentives” against destroying value.

Wait, reward people based on value creation and discourage people against destroying value? What a crap line. Just say you are shaking things up. I commend GSK for at least making drastic changes to combat a vicious problem.

Pfizer, on the other hand, isn’t being so dramatic. Paying UCSF to do some research is hardly a novel idea; a baby step compared to GSK.

I think the problem isn’t with big pharma though, I think it’s with our expectation. These companies bring in tens of billions of dollars revenue. To sustain a 10% annual growth rate is like adding a blockbuster drug ever year at a minimum (not counting patent expirations). I hope I’m not the only one that thinks this standard might be a bit unreasonable.

Comments

[The Real Ex...:]

Where is the investment relevance?

"To sustain a 10% annual growth rate is like adding a blockbuster drug ever year at a minimum (not counting patent expirations)."

Where did you arrive at this? I think you have this all wrong. You haven't factored in the sales growth of drugs. Take a look how much growth Lipator or other "blockbusters" have had.

Understand that no one will care to look at your site if this is all you have to offer. If you are going to shay away from investment relevance (which might be a good idea) then at least provide some real insight into the industry instead of summarizing a news post. Just a friendly tip.

2008 Jun 10 11:08 AM

[DRich:]

You say "I think the problem isn’t with big pharma though, I think it’s with our expectation." ....? Well, as a long term investor in PFE, I would appreciate a company that knows how to do something, anything, beside preside over a value trap that can't do any better than increase dividend yield by ever decreasing stock prices and making a new yearly low every day of the month or

2008 Jun 10 08:49 PM

[Eben Tessari:]

The Real Expert,
Where is your site? Where is your analysis? Are you just one of those losers who rips everyone else apart without bringing anything to the table?

2008 Jun 11 08:21 AM

[Eben Tessari:]

DRich,
I don't disagree that Pfizer shareholders don't have a valid gripe and that the company is floundering. I was speaking strictly from a revenue growth perspective. I don't think I made that clear in the post.

Drug discovery and development is difficult (and recently it's been made only more so by the FDA), even for Pfizer.

Expecting one or two blockbuster drugs a year is unreasonable. The low hanging fruit has been picked. It is just unreasonable to think that 50B in revenue can grow at 10%/yr given all the variables, but that is what people expect.

Again, this doesn't mean that Pfizer doesn't need some managment changes or a rethinking of their strategic plan, just that we as investors should re-evaluate what we need out of pharma stocks.

2008 Jun 11 08:31 AM

[The Real Ex...:]

Eben Tessari....sorry but my analysis is restricted to institutions who pay a large premium for my advice. I have no desire to promo myself on a site whose readers are mainly idiots who have no idea what is going on. Remember, nothing of any value is ever free.

2008 Jun 11 10:33 AM

[snowjob:]

Then why are you here and why are you commenting to the very people you disparage. I've never met anyone of true intellect who needed to promote himself. I think you are your biggest fan


On Jun 11 10:33 AM The Real Expert wrote:

> Eben Tessari....sorry but my analysis is restricted to institutions
> who pay a large premium for my advice. I have no desire to promo
> myself on a site whose readers are mainly idiots who have no idea
> what is going on. Remember, nothing of any value is ever free.

2008 Jun 11 11:49 AM