Page 25 - Linkline Yearbook 2018

generic companies and their growth has challenged the traditional branded drugs industry leaders.
M&A activity has therefore been at the heart of strategic growth initiatives as company CEOs try and maintain healthy financial earnings-per-share figures. Pfizer lost $16bn of revenue when its two blockbuster drugs Viagra and Lipitor went off patent. Many other drugs followed to reduce the annual revenue of the industry giant. Accordingly, in 2014, Pfizer launched a bold $120bn bid to acquire Astra Zeneca, in part to get access to its innovative oncology medicines but primarily to maintain revenue and global leadership. The deal was rejected for reasons related to tax inversion. Similarly, in 2016, Pfizer launched the creative ‘Pfizergen’ deal whereby Pfizer bid $150bn to acquire Allergen and co-locate its corporate HQ in Ireland where both companies have very significant infrastructure investment. The deal would have increased Pfizer’s annual revenue from $48bn to $70bn and increased its market value to $350bn. This was also rejected by authorities for reasons of tax inversion, prompting Ian Read, CEO of Pfizer to decline further initiatives until the rules of the game are defined.
Price Erosion and the Patent Cliff- drivers of Industry Change & Turf War
On the one hand Industry leaders have been accessing new technology to bolster their pipelines, while on the other hand they have been actively deploying survival tactics, even against other brand leaders. The most compelling examples are with Abbvie and Amgen for the blockbuster “Humira” product that treats rheumatoid arthritis. Humira has a value of $18bn for Abbvie but the FDA have approved Amgen to manufacture the generic version. After much legal dispute, Amgen have been given access to the European market for 2018 and the North American market for 2023. Abbvie, in the interim, like many other multinationals is challenged with finding the next blockbuster to fill it’s $18bn revenue gap.
For similar reasons, the leading industry giants Johnson & Johnson and Pfizer have become embroiled in legal dispute and controversy. “Remicade” is the $10bn anti-inflammatory blockbuster drug manufactured by Johnson & Johnson. Pfizer have received FDA approval for the Biosimilar version which is 15% cheaper. Pfizer who are anxious to fill the revenue gap from its blockbuster drugs that have gone off patent have accused Johnson & Johnson of delaying tactics.
Summary Conclusion
The industry is continuing to grow globally but the branded dollar market is being attacked by the growth of cheaper generics and biosimilar substitute products that have FDA approval and in many cases local government promotion. Traditional pharmaceutical branded drug companies are addressing this challenge of the Patent Cliff by looking to new emerging markets with high disposable incomes. The growing pipeline of Generics and more complex Biosimilar drugs is funding the ongoing growth of CDMOs and Contract Manufature Organisations (CMOs). Rather than switch to cheaper global manufacturing locations, the pharmaceutical industry is consolidating and investing in advanced technology and continuous production solutions in countries with proven quality capabilities. The main global exporting countries of Germany 15%, North America 12%, Switzerland 11%, France 8% and Ireland 7% will invest in Continuous Manufacturing, Internet of Things and Smart Factory technologies. The customer is now at the front of solution design and supply chains. Fulfilment networks will increasingly compete based on cost and service as Disintermediation, Direct to Client B2C solutions coupled with creative localisation and postponement solutions influence new business model designs and take hold within the supply chain. Serialisation and Blockchain will positively impact the Industry and potentially remove issues related to counterfeiting. 3PL providers will increase Earnings Before Interest & Tax (EBIT) by partnering strategically with clients and identifying creative opportunities to move up their respective value chains. As the industry continues to evolve and robotics and automation replace human labour, outsourced partners will need to embrace Big Data Analytics and make changes that justify partnership.
The Rocket is taking off ......... All on Board!
Brendan Ryan is a global logistics consultant with over 25 years of experience in designing and implementing end to end solutions. Brendan has worked in the pharmaceutical and technology sectors for global and leading edge companies such as Pfizers, IBM , Flex and Syncreon. A Thought Leader in Global Logistics, Brendan specialises in designing growth and route to market strategies, keeping clients abreast of game changing developments and technologies such as “Blockchain” and “Serialisation” and works with clients to translate conceptual ideas into specific sales and operations plans.
Brendan Ryan, Global Logistics Consultant
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