Market Report Source

Overview

Introduction

Datamonitor has identified the key trends and events that impacted the pharmaceutical market on a macro-environmental and corporate strategy level in 2006. These range from the continuation of long term trends such as the focus on cost containment to more recent impacts such as the effects of Medicare Part D and the increasing power of the Democratic part in the US.

Scope

Overview of the key macro-environmental trends driving industry change in 2006 and going forward into 2007 Review of major M&A deals in the pharma, biotech and generic sector in 2006 Analysis of the corporate strategies that companies in the pharmaceutical market are using to counter the challenges that they face

Highlights

To overcome the poor R&D productivity that has characterized the pharmaceutical industry over the last few years, companies are being forced to re-evaluate R&D strategies. Companies are continuing to use licensing and acquisitions along with better prioritised spending and more structured decision making in an effort to deliver improved returns. Pharma companies turned to a range of inorganic growth strategies in 2006 to improve sales and profit. This has allowed branded companies to expand their geographical presence, while enhancing the strength of their pipelines, frequently with the acquisition of small Pharma and biotechs providing additional products and supplementary technologies. The role of emerging markets in the pharmaceutical industry is changing: not only do markets such as India and China represent significant targets for growth because of their rapid economic expansion, but with the globalization of the industry, manufacturers are increasingly outsourcing and offshoring numerous functions there.

Reasons to Purchase

Identify the key trends that have shaped the pharmaceutical industry in 2006 Weigh up which factors are likely to have a significant impact on the industry going forward into 2007 Understand how these factors will impact drug developers

Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY

Scope of the report

Key findings

Key macro-environmental trends triggering industry changes

Corporate strategy trends shaping the way that drug developers will increase cost savings

Trends shaping the way that drug developers will drive revenue growth

CHAPTER 2 KEY MACRO-ENVIRONMENTAL TRENDS TRIGGERING INDUSTRY CHANGES

Datamonitor believes there are three key macro-environmental factors that drove industry change in 2006

Reference pricing is an increasingly dominant cost containment tool in Western markets

Reference pricing extends into new geographical markets and new drug markets

Reference pricing is set to become increasingly restrictive in Europe and play a more significant role in the US

Price cuts remain a key tool in containing pharmaceutical spending across Europe and Japan

A range of price cuts were extensively used in both the European markets and Japan in 2006 to contain costs

Price cuts are set to remain a leading cost containment tool in Japan and Europe going forward

Political/legislative events continue to significantly impact the healthcare industry

A number of political/legislative events have impacted pharmaceutical market dynamics in 2006

By securing majorities in the House of Representatives and the Senate, the Democrats are set to have a more significant impact on healthcare in the US

With the implementation of Part D, Medicare patients received outpatient drug coverage for the first time in 2006

The 2006 healthcare reform in Spain increases the government’s focus on cost containment

The introduction of the AVWG prioritizes cost containment in the German pharmaceutical market

The Médecin Traitant scheme impacts healthcare provision in France

The introduction of rules and guidelines for DTC advertising in the US

Generic usage is being increasingly incentivized

Globally, a number of initiatives were used to boost generic uptake in 2006

The introduction of biosimilars offers new opportunities for savings in the biologics market

2006 saw the first biosimilars launched in Europe and the US

In Europe, the biosimilars environment is relatively advanced

The development of biosimilars is further behind in the US

Europe is set to lead the biosimilars market

European and US healthcare markets are becoming increasingly fragmented

Devolution in Europe, together with continued fragmentation in the US increase the complexity of the major healthcare markets

Drug companies need to devote greater resources to targeting the correct stakeholders to ensure strong profit margins and market penetration

CHAPTER 3 CORPORATE STRATEGY TRENDS SHAPING THE WAY THAT DRUG DEVELOPERS WILL DRIVE COST SAVINGS

Changes to the R&D strategy will help drive up productivity

The need to develop efficacious innovative drugs prioritizes R&D spending as the industry transitions away from blockbuster development

More structured decision making in R&D is being introduced

Prioritizing pricing and reimbursement in clinical trial design will help rationalize and improve the drug development process

Licensing and alliance strategies have evolved for early-stage R&D

GSK’s CEDDs and CEEDD have helped to build up the company’s early-stage pipeline

Companies are set to improve internal infrastructure to better segregate and prioritize important functionalities and improve communication within the company

Increased globalization in the pharmaceutical and biotech markets in 2006 is set to continue

India – the partner of choice for contracting out manufacturing and research activities by Western manufacturers

China – a key country in which multinational pharmaceutical players are performing drug discovery

CHAPTER 4 CORPORATE STRATEGY TRENDS SHAPING THE WAY THAT DRUG DEVELOPERS WILL DRIVE REVENUE GROWTH

Inorganic growth through M&A set to continue throughout 2007 and beyond

A number of types of M&A are used to allow drug developers to evolve

Big Pharma mergers: is the time for mega mergers over?

Mid-Pharma showing evidence of the next wave of consolidation

Pharma-Biotech mergers allow Big Pharma to capture greater innovation and revenue growth potential

Pharma turns to acquisitions of generics companies to support sales and buy into generics market growth

Pharma-Non-Pharma mergers: still rare, but may represent an alternative profit growth strategy in the future

Biotech-Biotech mergers help smaller-scale biotech companies achieve greater stability and give Big Biotech stronger pipelines

Generic-Generic mergers increase market consolidation

Increasing complexity of supplementary technology helps drug manufacturers stay ahead of the competition

New technologies make it easier to demonstrate comparability of biosimilars

Directed molecular evolution: lifecycle management for biologics

Novel diagnostics drive clearer market segmentation, and personalized medication in the future

Increasing impact of emerging markets on revenue growth in the Pharma industry

China is set to become the largest pharmaceutical market by 2050

India is increasingly becoming an important source of Pharma revenue

Other emerging markets are also likely targets for global manufacturers in the future

Biosimilars and the emerging markets

Increased brand protection is essential in protecting future revenues

Merck’s Zocor novel brand protection

The failure of a follow-on drug to support revenues: Pfizer’s torcetrapib discontinued

Know your patent situation and don’t make assumptions: BMS’s patent problems with Plavix

Counterfeit medicines continue to threaten branded revenues

CHAPTER 5 BIBLIOGRAPHY

Publications and online articles

Conference literature

Datamonitor resources

Suggested reading

CHAPTER 6 GLOSSARY

Glossary of terms

List of Tables

Table 1: Forecast sales for specific pharmaceutical and biotechnology peer sets, 2005-2011

Table 2: Key Biotech-Biotech deals in 2006

Table 3: Key Generic-Generic deals in 2006

Table 4: Brand strategy selection – pros and cons

List of Figures

Figure 1: Seven factors triggering industry changes can be grouped into three key trends

Figure 2: Driving cost savings, 2006 and beyond

Figure 3: Pros and cons of drug discovery and clinical trials in China

Figure 4: Positioning of emerging markets in terms of their outsourcing/offshoring potential, 2006

Figure 5: Driving revenue growth, 2006 and beyond

Figure 6: Summary of M&A in the Pharma, Biotech and Non-Pharma sectors in 2006

Figure 7: Comparison of the major seven developed, and emerging pharmaceutical markets, 2001-05