On the strategic issues involved in the biopharma convergence

For the biotech companies, the real strategic issue is basically growth and sustainability. Most of the biotechs are still not very large and the ones that are large and believed to be sustainable can be counted on two hands – like Amgen, Genentech, Genzyme, Biogen Idec, Organon etc. Many are still living on relatively short time frames. So strategically for them, the issue is to be ensured of long-term sustainability. So either they should have a rich pipeline and good cell technologies, or they need to get allied with larger pharma companies that can basically fund them to move forward. A lot of the start-ups don’t do these alliances or funding because if there is a success, they want to cash in.

Typically, the pharma companies are very, very greedy, That’s why you see a lot of smaller biotechs before you just get funding from venture capital firms to go on their own for long. But strategically, once they have products which are even half decent, they really need the pharma companies to get access to the market, because the pharma companies have big sales force, big regulatory agency departments etc., and all the infrastructure that allows really to maximize the value of the products into the market.

Gilead is an interesting example. It is based in the US and is basically focused on the HIV sector and has been able to do a lot of things by itself but I would say that is one of the fewer success stories. In general, the strategic challenge is to be able to get the critical mass and after this, if you have the right product it makes a lot of sense to out license or ally with the pharma company. For the pharmaceutical companies the strategic issues are pretty obvious. You want to find as many of these strategic alliances as possible, you want to source as many products as possible from these companies and by and large I would say the biotech companies don’t really like pharma companies because they just see them as companies which have not been much productive in their own pipelines and simply want to exploit the biotech companies.

The traditional distinctions between large pharma and large biotech companies are fast blurring. What we see now is a convergence of the therapeutic platforms that each group is pursuing and that, in turn, has prompted a convergence of therapeutic areas that each group targets. That translates as increased competition.

The key strategic issues facing biopharma companies, moving forward, are likely to be the following:

· Product differentiation and ways to optimise commercialisation of their products
· Alliances, mergers and acquisitions -- as a core strategy for growth, rather than as a supplemental effort
· Need to establish themselves as integrated health-care solution providers as distinct from focus on individual product development
· Establishment of strategic alliances that are more differentiated by disease, by therapy, and by defined knowledge area.

On the impact the emerging biopharmaceutical sector has on the chemical formulations segment