Third Annual Pharmaceuticals Roundtable

A.T. Kearney is proud to have recently served as a lead sponsor in one of the pharmaceutical industry's premier annual events, the Third Annual Pharmaceuticals Roundtable, presented by Economist Conferences. The roundtable, which took place in November 2003, mapped the industry's evolving landscape and explored what drug makers can do to jump start growth. Chris White, A.T. Kearney vice president, served as a guest speaker along with a roster of distinguished pharmaceutical industry executives. He described new approaches to success in a marketplace where blockbuster products are far less plentiful.

Blockbusters have driven growth in the pharmaceutical industry in recent years. Seventeen years ago, the industry entered the blockbuster era with its first $1billion product; today, 65 products enjoy this status. And these projects account for more than half of the industry's annual growth.

Is the blockbuster model the way of the future for the pharmaceutical industry? Perhaps not. Analysis of industry pipelines suggests far fewer blockbusters will be launched in the next few years. And this trend is not lost on investors, whose concerns over meager growth prospects have caused a sell-off of industry stocks.

Are these concerns justified? AT Kearney recently conducted an analysis of the growth prospects of the ten largest pharmaceutical companies in the US market. Their conclusion: investors expecting double-digit revenue growth in the near term are likely to be disappointed. Growth in the four to five percent range appears more likely; a far cry from the 12-15 percent seen in past years.

So how can the industry recapture the confidence of the investment community and the earnings multiples that go along with it? White presented three recommendations for pharmaceutical companies:

Get big: Find ways to capture scale in a consolidating industry. The industry's current level of fragmentation, together with investors' hunger for cost reductions, are likely to drive considerable consolidation in the coming three to five years.

Get flexible: Protect profit margins by reducing spending through greater outsourcing and more efficient use of sales and promotional dollars.

Get going!: Take a more pragmatic approach to clinical development, focusing on speed and simplicity. These changes will have a favorable impact on performance and help to recapture investors' confidence.

Please click here for a complete copy of A.T. Kearney's Roundtable presentation "Doing Business in a Post-Blockbuster Era".