Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
To R&D or not to R&D?
Presented to GSK Business Projects Group
Wednesday, April 12, 2023
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
A Push for ChangeA Push for Change
“Pharma Faces Grim Prognosis" – WSJ 2007
“The Next Chinese Outsourcing Wave: Drug Development” – IBD 2007
“Big Pharma Spends More On Advertising Than Research
And Development, Study Finds” – ScienceDaily 2008
“Investor chief questions role of Big Pharma in development of
medicines” – The Times 2008
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Modify the model Modify the model
PROS
+CONS
-
How would you analyze this proposal for GSK?
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Big PharmaBig PharmaGlobal Pharmaceutical Leaders
Twelve Months Ended December 31, 2007
In $ Millions
(Source Company Annual Reports)
Company Revenue R&D
Pfizer 48,418 8,089GlaxoSmithKline 38,466 6,645
Sanofi-Aventis 38,452 6,219Roche 32,402 6,339
AstraZeneca 29,559 5,162Novartis 25,477 6,430
Johnson & Johnson 24,866 7,680Merck 24,197 4,883Wyeth 22,400 3,257
Bristol-Myers Squibb 19,348 3,282Eli Lily 18,634 3,487
TOTALS 322,219$ $61,473
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
RevenuesRevenues
2007 Revenues: $712 Billion
Revenues 2007 - In $ Millions
Rest of the
Industry
$389,781
55%
Big Pharma
$322,219
45%
$712 Billion in Global Revenues
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Research and DevelopmentResearch and Development
2007 R&D Spend: $95 Billion
R&D 2007 - In $ Millions
Rest of the
Industry
$33,580
35%
Big Pharma
$61,473
65%
$95 Billion in Global R&D Spend
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Cross Roads Cross Roads
• Organic vs. Inorganic Growth
• Management Changes
• Patent Cliff
• Increases in efficiency
• Appease all stakeholders
Does a silver bullet exist that will fix Big Pharma?Does a silver bullet exist that will fix Big Pharma?
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Big Pharma – 21Big Pharma – 21stst Century Dynamics Century Dynamics
DriversDriversDemographicsBiotechnologyEmerging MarketsInnovation
ResistorsResistorsDrug DiscoveryPatent ExpirationsGenerics
OpportunitiesOpportunitiesTherapy NichesLifestyle DiseasesUnmet NeedsOutsourcing
ConcernsConcernsDrug SafetyDrug PricesIndustry Credibility
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Back to the HeadlinesBack to the Headlines
“Pharma Faces Grim Prognosis" – WSJ 2007
• Lengthy process to develop a new chemical entity• High R&D costs• Decreasing productivity• Inexperienced decision makers• Nightmare of complexity
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Back to the HeadlinesBack to the Headlines
“The Next Chinese Outsourcing Wave: Drug Development” – IBD 2007
• R&D outsourcing of $24 Billion in 2007
R&D vs. R&D Outsourcing(In USD Millions)
24,000 27,600 31,740 36,50141,976
48,273
95,000 98,800 102,752 106,862 111,137 115,582
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2007 2008 2009 2010 2011 2012Year
R&DOutsourcing
R&D
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Back to the HeadlinesBack to the Headlines
“Big Pharma Spends More On Advertising Than Research And
Development, Study Finds” – Science Daily 2008
• US Pharmaceutical companies spent $57.4 Billion on marketing of products
• US Pharmaceutical companies spent $31.5 Billion on developing products
24.4% vs. 13.4%
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Back to the HeadlinesBack to the Headlines
“Investor chief questions role of Big Pharma in development of medicines”
– The Times 2008
Q: Do you have economies of scale in R&D?
A: It's not clear but one of the fundamental ways that companies create value for shareholders is strong R&D.
Q: Is bigger better?
A: Maybe you have to split it up into smaller parts.
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Drug Development ProcessDrug Development Process
SOURCE: PhRMA Industry Profile 2008
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
The Cost of a BlockbusterThe Cost of a Blockbuster
Source: Bain Drug Economics Model 2003
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
R&D Productivity DecreasingR&D Productivity Decreasing
New Drug Applications (FDA)
0
20
40
60
80
100
120
140
160
1990
1991
1992
1993
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Year
NDAs Approved
New Molecular Entities
NDAs Rec'd
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Does GSK need to worry?Does GSK need to worry?
• Advair Patent Expiry 2010
• 34 product opportunities in Phase III or registration
• 157 projects in clinical development
• Avandia sales decline
GlaxoSmithKline2007 Sales by Therapeutic Category
Respiratory 26%Central Nervous System 18%Anivirals 16%Metabolic 8%Vaccines 10%Cardiovascular & Urogenital 8%Antibacterials 7%Oncology & Emesis 2%Other 5%
Total 100%
Yes!
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Forcing ChangeForcing Change
“Shake-up at GSK aims to speed new medicines” – FT 2007
• Expand external partnerships • Reduce the number of experiments it applies during drug
development• Cheaper and faster• Smaller is better
ABN AMRO - Research Report 2008
• Called for reform of R&D function • Questioned effectiveness of the Centers of Excellence in Drug
Discovery (CEEDD ) formed in 2001
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
Five Forces Analysis – Big PharmaFive Forces Analysis – Big Pharma
Competitive Rivalry
• First mover advantage with patented drugs• Economies of Scale
HIGH
Power of Buyers
• High switching costs• Substitutes increasing• Price sensitive
MEDIUM
Power of Suppliers
• Low costs of inputs• Presence of many substitute inputs• Low switching costs
LOW
Threat of Substitutes
• Generics• Biotechnology• Focus on Prevention
MEDIUM
Barriers to Entry
• High R&D, Manufacturing & Marketing Costs• Patent protection
HIGH
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
SWOT - GSKSWOT - GSK
StrengthsStrengths
Marketing strength in major geographical and
therapeutic areas Financial Strength – Strong Cash and Asset Position, and Access to Debt/Equity Instruments R&D expertise with broad therapeutic coverage New management Growing consumer products business
WeaknessesWeaknesses
Large size Discontinuation of products in later stages of
development Patent Expirations Decline in revenues Geographic focus
OpportunitiesOpportunities
Decreasing development time through favorable R&D
collaborations and internal efforts Co-marketing and partnership agreements Outsourcing of R&D and manufacturing Eliminating redundancies Demographics
ThreatsThreats
Regulation Litigation Rising R&D costs Generics Competition from Chinese and Indian companies
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
If the change is made?If the change is made?
PROS
• 100% focus on profit generation
• Significant cost reductions
• Quickly change strategies
• Increased transparency
• Reduced regulatory burdens
• Higher returns to the shareholder
• Expansion of partnerships
CONS
• Increased reliance on others
• Reduction of potential future revenue streams
• More cyclicality
• Innovation removed
• Socio-Political backlash
• Sense of failure
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
A Path for GSKA Path for GSK
• Focusing R&D efforts and commercial capabilities towards a common goal
• Moving away from a fully integrated business model
• Emphasizing customer
solutions
• Making business units accountable for their actions
Sachin Patel – GSK Business Projects Presentation Wednesday, April 12, 2023
QuestionsQuestions
??
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