004: Necessary Insertion

Last time I finished up saying: "Next time: Eminentia and Trade, else WTO and rules.."

Truth is, however, that to do so immediately would put me ahead of myself and clear exposition in relation to that topic.

I have Perjjo to thank for this realisation. For during the week he called to "wonder" whether my last blog (003) had reached into the souls of US pharmaceutical industry and/or marketing to an extent of 'eminence lacking!'. Today.

To explain this he had been reading an article which revealed Pfizer buying into Boston academia's "eminence". That is to say buying basic research collaborations. To my mind and knowing pharma's potential for such matters it had hitherto been not so much pharma executive requirement as investors' ace-holding directive. On consideration - checking dates and a few other relevant things - I decided no, any soul change was down to others. Still, within a week of that particular publication kind of says I was both close to the mindset and in need of this insertion.

So.. further to 003.. was a genuine lack of pharma R&D evident? If so, where lay a sustainable future for its players.?

If the first then surely Ledford@Nature would have an indicative answer.

If the second then credence is given another finding to hand. In the matter of innovation which framed my question on the topic, the Federal Drug Administration(FDA) approvals of Big Pharma drugs between 1997 and 2008. Importantly, two thirds [ 2/3 ] of those were classified as "follow-ons". Quite possibly approval-seeking to shelve patent or patent-ready stock for sustaining future marketshares. Cashflows. A case of old wine, new bottles...

At best then, only one third [1/3] truly new chemicals or molecules or like processes. To perhaps truly earn eminence by innovation. Likewise per its long tradition that innovation justifies this industry's patented price premia.

So what gives now—if a net third innovative then a larger market leverage shall be applied.? for whom? How? Waitta minute..!

Costs..?

Why yes, we cannot overlook this since the Financial Times in London has made pretty clear recently all the M&A has really been about cost cutting. Rationalizations..chopping jobs and old manufacturing plant including labs(Sandwich, Kent, anyone! NY out, Groton in!) Yet even FT say term's up for cost cutting. Show us the growth!

Enter Heidi Ledford(above) who opens — "The agreement is the latest sign of a growing trend in the pharmaceutical industry, which is trying to cut costs and improve efficiency by outsourcing the earliest phases of drug discovery."

Which in its way says it all. For her cited parties.

And Perjjo tells me how the later phases will run cheap (and mebbe nasty) among multitudes in third world clinics. Where ethics are somewhat slacker. BAU. Besides, some will always rely on homo sapiens being all-for-one, with one for all ;-)

The leverage.. see?

Yet I now wonder about this. From here I'd say there was a firm investors' sense of which costs Big Pharma must keep. And despite Merck's(qv) talk of its own previous collaborations.

For investors the innovation tag is pretty vital. Corporates legitimizing premia prices. With overall profitability tumbling even lowered pricing would give them no show against lower-priced and already major long-term generics competition.

But of course with but one third [1/3] of FDA approval drugs novel what ratio of these are In-house? Or owned? Could it be that already the external and/or independent twosomes and threesomes in molecular and nano science and biopharmaceuticals, along with novel agents in such processes have tipped the balance away from Big Pharma control over patent holders' monopoly pricing.?

Example for the small independents lies well in IT app-builder business opportunities. A several year software development and web/net beta testing can see very significant buyouts by deeper pockets dependent on 'viral' growth and product streams. Goose, gander stuff, I mean to say.

Then not beyond the bounds of reason are that these deals or research buyouts amount to pharma-wrap of such knowledge and future-makers in secrecy. Serving only insiders. Hey there's a lot at stake.!

Bottom line: Contention has a mind of its own. And its very own people. Conditioning chronic convergence. Hence the need of vigilance and watching this space..

003: Bigger Pictures

At lunchtime today I learned from Radio New Zealand's Midday Report segment WorldWatch that IBM - International Business Machines - was 100 years old.

Occasion to remind me of several visits to what the 1980s termed IBM House in a cityside property along Oxford Terrace, Christchurch. I was to learn there how IBM had arisen from "business mergers" and earned its 'big blue' reputation.. and .. wasn't there a computer that could beat any brain anywhere at chess!

Sandwiched between a tree-lined and pretty River Avon at its front and commercial warehousing construction at the rear. Inside, several offices per floor with then fashionable large single rooms divided by multi-partitions whose workstations revealed the firm to have shifted from typewriters, cash registers and office machinery to computers. For them desktop times had arrived.

But, it should be said, IBM was then already behind the times. Technology, and IT, times. Thenceforth they would not catch up, and so far as I know from the radio commentary's conclusion of a present "reinvention" arrived at in ruthless cutting-off-the-past style, this will be insufficient to regain the BAU lead. Kindly put, a phrase to aptly characterize them would be slow followers.

In saying this I'd like to reiterate a term I'd come up with back then yet whose currency in the relevance of a bigger pictures take on the pharmaceutical industry(PI) today in relation to westernized medicine, is a good match.

That term: EMINENTIA.

And taken to mean not what Gould's might give to an anatomical protuberance in the inner ear or a ridge of heart chamber tissue, but a condition arising from eminence. A condition arising despite the best and/or worst efforts of all PI players in westernized medicine, whose 'golden years' were said by a wiki topic as being in the 1990s. A condition which unless recognised  - IMO 1980s - and robustly dealt to as it arises would set forth a rigidity from which so very few would escape. Until too late.

That eminentia is well-and-truly set today for let's say the U.S. pharmaceutical industry is discernible in the context of a Standard & Poors Valuation and Risk Strategies research group report recently made. The PI - and yes largely US-led in this respect - has been embarked on very substantial merger and acquisition programs as it sought also to restate itself in the Health Care business..

Latest data shows how for all business some 828 M&A deals @ ~$93B have taken place. Compared to 2007 - 905 deals @ ~$172B - decline is apparent. Yes, the global Recession in part responsible.

Again all business, when it comes to choice we find Europe taking 45% in 2011(cf 50% 2010); whereas M&A  shot up 85% in target deals around Africa and the Middle East. Whilst for Latin America and the Caribbean the figures were somewhat less.

So much for context. Now for the sectors. Real and vital pointers. For Health Care:

Year-on-year(yoy) @ 2011 Health Care M&A dived. Minus 28%.

We could say how Pfizer's Wyeth 2009 buyout - reportedly the "biggest ever" at $68B - was writing on the wall. Surely?

Perhaps more significant, however, was the nature of that acquisition — cash, shares, loans essential to make the stake. What else might remain in circulation for such activity..? And besides, vigorous take-up in M&A terms does not plenteous opportunity make. But, OTOH, serious - unbuyable - contenders.

Contenders and contention then. Replacing competition..? If yes, eminentia rules. If no, no one rules. Another possibility is the PI remainder stuck and waiting for  upturn in M&A and the industry's so-called leaders pitching their immediate futures in biopharmaceuticals.

Which brings me back to a like theme of the intro. News of a BBC production about 20 vaccines for the future of.. patients or megalo-eminentia?

Next time: Eminentia and Trade, else WTO and rules..