Globally the big pharmaceutical companies are set to be moving on to a new trend of acquisitions, mergers and partnering with emerging, small and medium level entrepreneurs to beat competition and to grab the greater market shares by penetrating into newer areas of specialization.
While delivering a lecture at Indian School of Business in Hyderabad, Dr Frank, chairman of the Board of Partners and vice-chairman of the Board of Directors of Merck EG, had revealed that though the future of pharmaceutical and biotech industry looks promising, there are growing challenges that need to be addressed to sustain the pharma business over a longer period of time.
He said that, with a large number drugs going off patents very soon and taking advantage of this, smaller and middle level companies will move in to produce low cost generic versions of leading and costly brands. This will soon impact on the overall annual revenues of bigger companies.
More over as the R&D costs are increasing but the production levels are decreasing, this is a big concern for the bigger pharmas as they are not only spending huge money on new innovation but the time taken to bring in newer products is too long as they will have to pass through different phases. Taking these into consideration many bigger companies are looking to partner with lower end companies and preferring to go for contract manufacturing rather to save money and time.
Quoting his own company’s example Frank said, “Though we are one of the oldest drug making companies in the world even today we are transforming and dynamically changing with time to sustain business. At present due to huge investment costs and less productivity we rather prefer to collaborate with companies in similar interests. As we are more into generics, we have recently collaborated with Dr Reddy’s to produce generics in India.”
With more and more pharma companies competing with each other to grab the great byte for their products in the global markets especially in the developing countries, companies like Merck, Pfizer, Bayer, and AstraZeneca etc. have been following the new trend too.
Even Merck which is a 344 year old drug manufacturer in the world has been dynamically transforming to sustain its business. It had been following the trends of mergers and acquisitions and had proved successful in expanding its business and penetrating newer markets across the globe.
In India, and in other Asian and Latin American countries there is a growing middle class population. Frank, the chairman board of directors of Merck EG had said that the future of small and medium pharma players in India and other countries across the globe will be at stake as bigger players will either acquire them or merge some of their businesses with the local players to grab a greater global market share.
Other important challenge is that there is a growing change in the developing markets especially with growing demand for healthcare products and services. Today, more than half of the people in countries like China, South Korea, Brazil, India, Russia, Turkey, Mexico and Indonesia are middle class consumers. There are growing numbers of middle-class consumers in at least 16 countries with emerging economies. They are home to nearly two billion people who spend a total of $6.9 trillion every year. In the next 10 years, 80 per cent of economic growth is expected to come from what is called “the emerging markets”.
To remain competitive, European companies are offering differentiated, highest-quality products and services in biotech and pharmaceutical industry. This may be the best way for European companies to go to global markets. While at the same time the Indian companies are trying to grab the global markets by offering affordable and cost effective healthcare products and giving a fierce competition to the global leaders.
Since 2005 these markets in India and China have grown remarkably well. For instance China which was at ninth place in 2005 has jumped to third place in 2011 while India which was at 15th place has jumped seven places up to eighth place during the same period. This has created a fear among the leading global players and adopting newer business trends to sustain their future growth and enter newer markets.