Wednesday, September 30, 2009

The $1000 Genome

Our esteemed colleague, Dr. Joel Studebaker writes today about The $1000 Genome

The $1000 genome, referring to the cost of sequencing all 3.2 billion bases in a human’s DNA, has long been the goal of new developments in sequencing technology. The cost per base pair for sequencing has been dropping rapidly, almost following a Moore’s Law for genetics. Many believe that the $1000 price will make it attractive to sequence the genomes of many people and that, with many more genome sequences available, analysts will be able to gain new insights into how sequence variations influence health and disease. A recent announcement from a laboratory at Stanford appears to have brought the cost for a human sequence below $50,000.

Since the human genome effort started, the hope has been that comparison of the genomes of patients with particular medical conditions to those of suitable control groups would provide several benefits to pharmaceutical therapy.

1. Genetic variations that occur in DNA coding for proteins or in DNA that regulates production of proteins will point to new targets for therapy.

2. The variations will identify subgroups of patients who would benefit from a drug that would not show a statistically significant effect in a more general population. As in the case of Herceptin, diagnostic tests would be necessary to find the members of these subgroups.

3. The variations will identify patients whose genetic makeup make them more susceptible to adverse side effects that might lead to discontinuation of development if those patients were part of a clinical trial population. The hypersensitivity reaction of patients with a particular HLA type to abacavir is an example. Again, diagnostic tests would identify these patients.

Points 2 and 3 are clearly aspects of personalized medicine, which is a double edged sword for the pharmaceutical industry in that it may lead to more narrowly defined markets as well as to approval of drugs that might not be approved otherwise.

These three considerations were among the reasons for the effort to identify the genetic variations known as single nucleotide polymorphisms (SNPs) in laboratories sponsored by the SNP consortium and in the more recent HapMap (Haplotype Map) project. Despite the availability of over three million SNPS that provide good coverage of the genome, correlation of SNP genotypes with disease conditions has not yet had a wide impact on pharmaceutical development. After several years of SNP studies, the view has emerged that many rare genetic variations may contribute to susceptibility to disease (or efficacy of therapy or to increased risk of adverse reactions). If that view is correct, complete DNA sequences represent a more efficient way than SNP assays to find multiple rare variations that have predictive value.

Wednesday, September 16, 2009

Why has Outsourcing Gone Mainstream in the Pharmaceutical-BioPharmaceutical Industry

Gil Roth the Editor of Contract Pharma magazine invited several people to comment about the outsourcing trends in the industry in honor of the magazine's 10th anniversary. I sent him my thoughts and wanted to share them here as well (along with a few additional details):

At a macro level, the largest changes in the last 10 years that have occurred in the Pharmaceutical/Bio-pharmaceutical outsourcing-contracting-consulting space is how it has become totally main stream and in many ways regarded as a necessity to being competitive in a world where the classic Pharmaceutical Industry model no longer works. Layer on top of that what Thomas Friedman of New York Times fame labeled as “The Flat World” and it is no wonder that the outsourcing band wagon is so much the order of the day.

The way Wall Street would put is that this trend is a result of a “secular change”. That change is rooted in failed pipelines, lower R&D productivity, the rapid ascent of generic drugs (over 70% of US prescriptions in 2008), increased government regulations, the acknowledgment about the effectiveness of the sales force, extraordinary expense profiles, a public who will not or cannot appreciate the value of the product, a hostile congress and the advent of significant health-care reform from the Obama administration. By the way, Wall Street has acknowledged these secular changes by stripping much of the "P/E premium" from large pharmaceuticals stock prices and turned them into relatively poor performers.

When you combine those challenges with the enormous advances in technology and communication that enable global research and development and supply chains, an outsourcing strategy is not only prudent, it is a requirement. It is indeed a very straightforward way to lower the costs of doing business. When one adds on the acknowledgment of the demand generated by the rising wealth and demand for health-care from very rapidly developing countries including India and China, the requisite of using outsourcing as a way to enter those markets is on the top agendas of many senior executives in the industry.

While the Pharmaceutical/Bio-pharmaceutical Industry has been a notoriously slow adapter of change (yes, there are lots of reasons, not the least of which are regulatory) compounded by risk adverse cultures, the one thing they are not is naive. Gone are the days of “top line revenue” is the only thing that is of concern of management. Today there is a focus on “The Bottom Line” which includes unit costs, effectiveness and efficiency among the tactics. Sure there are other strategies being deployed, for example we have identified two camps in the industry, the consolidation camp and the diversification camp. The “consolidators” would include the big pharma mega-mergers (Pfizer-Wyeth, Merck-ScheringPlough, etc.) and include even some of the consolidation seen by several large biotechs. When you couple a parallel path by the big CRO's, contract manufactures, consultants, etc., the appeal of awarding large pieces of business functions in either long term contracts and/or joint ventures becomes attractive. In a similar fashion, the “diversifiers” (Sanofi, Novartis, etc.) want to focus on their new business endeavors such as animal health, consumer pharmaceuticals or diagnostics and therefore are far more likely to look at an outsourcing strategy as a natural way to allow management focus to be aimed at their new strategies.

The outlook, in my opinion even more to come with innovative joint ventures, terms and conditions and capabilities which will aid the industry to continue its path toward attractive business results.

Monday, August 31, 2009

The Great US Healthcare Debate—Is There a Rational Solution?

While this blog normally discusses issues affecting the Pharmaceutical and allied industry sectors, I think that the health care reform being “discussed” in the US is worthy of some focus. It is quite unfortunate that at least to my mind, we in the US are in the midst of a most difficult debate that goes to the very core of what our country and our values are. What is very clear to me is that the “Health care Reform” effort by the Obama administration is an enormous challenge, coated with many mistruths by both sides, wrapped around powerful special interests who are dead set against it, layered with good intentions and poor management and execution. My point is to put a perspective on what I think is going on and what the potential benefits and problems are in solving this enormous problem.

As best as I can tell the following “facts” are known:

Healthcare is expensive consuming arguably between 17-20% of GDP
Healthcare costs are growing disproportionately higher than economic growth
Value for money received as measured against other countries is well below many developed and emerging countries
The quality of service is very uneven with a shortage of primary care physicians and a disproportionately higher concentration of providers (physicians and hospitals) in urban centers
There are over 650,000 doctors serving our population of about 300,000,000 people (1:460)
There are somewhere between 40-50 million uninsured people and several times that number who are underinsured.
Due to the litigious nature of our society, much “defensive” medicine is being practiced and insurance rates for practitioners are very, very expensive and contribute to high healthcare costs.
There is significant fraud and inefficiencies in our current healthcare systems
Healthcare will be rationed by a government based system and the government can't run anything efficiently and furthermore it's more “socialization” of our great country.
The pharmaceutical industry is viewed as gouging the public and making obscene profits
Most of the developed world has a “single payer” systems and while there are many horror stories, by and large the systems work “better” and are more cost effective
There is an enormous concern with the American people about losing existing benefits, excessive costs of a newer system and is it “fair” to provide healthcare to all on an equal basis.

Some issues to consider, at least in my opinion are:

While we vociferously argue about what healthcare is currently like and what it may be, there is no single proposal that is available for discussion.
As an ENT physician in Haymarket, VA said to me, who says that 17-20% is a bad number-if my practice bills $1 million/year, there is 4-5 times that created in goods and services including laboratory tests, hospital visits, diagnostics, etc. Isn't that a great way to stimulate the economy?
Assuming a way was found to include on a somewhat equal basis the 40-50,000,000 uninsured and the multiple of that in underinsured, how do we find the provider capacity (doctors, clinics, hospitals, testing facilities, etc.), the administrative capacity to process the additional workloads and the technology and smarts to manage all of these moving parts?
The thought that healthcare will be rationed is a red herring in that to a large extent, existing insurance companies are determining level and quality of care today. I wonder if they are any more effective and/or efficient than the government would be. By the way as I understand it, the government today does run a world class healthcare business called the Veteran's Administration (VA) which provides outstanding service and has implemented an excellent electronic patient record system (EPRS).
Notably absent from the discussions I have heard is the lack or absence of discussions about reforming malpractice suits and other associated legal issues-could that be because of the previous career choices of many of our Congress and Executive branch.
The Pharmaceutical Industry and its adjacent industry sub-sectors are in the rifle sites of congress, however as we have stated before, with 40-50 million new covered lives and an average spend of $800/year (even $500/year if there is the 40% reduction in spend many discuss), there are billions in incremental revenue available, and in my opinion actually enhanced by the Comparative Effectiveness Scheme.

Your thoughts are as always welcome at

Friday, July 31, 2009

Pharmaceutical Industry Shows Signs of Turning Around—Look at the Good News and Strategies Taking Place in July-PART 1

In my opinion, this past month or so marks somewhat of a turning point for the Pharmaceutical and Biotechnology Industries. Both macroeconomic and market conditions contributed to the optimism. Since there is much to say, I'll initially focus on some of the move by Big Pharma in Europe. In the next few days, we'll discuss the US based companies and then Biotechnology.

A headline grabbing contributor to the optimism from the Big Pharmaceutical players in Europe are the numerous reports about revenue enhancement resulting from Swine Flu Medicines (mostly Vaccines) resulting in billions of incremental revenue.

This trend was especially helpful to GlaxoSmithKline who are quoted in (July 23 by Andrew Jack) as “GlaxoSmithKline moved yesterday to become the pharmaceuticals company with the broadest range of products to tackle swine flu. The group unveiled plans to add masks and diagnostics to its vaccines and antiviral medicines business.” Interestingly enough, Andrew Witty, CEO of GSK had to make a public pronouncement about the company's ability to meet demand-certainly a different issue than the company had to deal with in the past. The UK company signaled a strong upsurge in demand from governments for its swine flu vaccine and Relenza, its antiviral drug, as the infection spreads, with plans to expand manufacturing capacity sharply.

Roche of Switzerland was also quite positive with JP Morgan indicating that additional sales of $4.3 billion for 600 million doses are being booked for its antiviral, Tamiflu and its pandemic vaccine. Reportedly, a further 340 million+ doses worth $2.6 billion are anticipated-quite a windfall. Roche threw the US Pharmaceutical Trade Group, The Pharmaceutical Research and Manufactures Association (PhRMA) into quite a tizzy as well by announcing it will drop out of that organization and aligning itself to another trade group, the Biotech Industry Organization (BIO). This was attributed to Roche's acquisition of Genentech and the acknowledgment that most of Roche's Pipeline was coming out of Genentech.

Sanofi-Aventis (SNY) was making good on CEO Chris Viehbacher's announced strategies. In rapid succession, he announced that preclinical research may be dropped in half and use the money to partner with smaller companies in early stage development. He was quoted earlier in the Health Blog as saying: “Part of the reason the Pharma model didn’t work is we just kept throwing money at things and hoping the next blockbuster would come along.” SNY also announced a major restructuring (closing down and consolidation) of its R&D operations. Sanofi continues to be the leader in Flu Vaccine accounting for between 25-33% of worldwide supply and certainly stands to have significant revenue and profit increases from Swine Flu Pandemic Vaccine sales. Additionally, this week Sanofi made a major acquisition to buy out the other 50% of Merial the animal health business that it jointly owns with Merck. It also acquired a $9.25 billion call option to combine Merck's new animal health business when it acquires Schering Plough in the 4th quarter. But wait, it doesn't stop there, as previously stated by Viehbacher, Sanofi wants to go further into vaccines and emerging markets, well the company started that in a big way by buying a 78% share of Indian Vaccine maker Shantha Biotechics for $615 million. What is particularly noteworthy is that unlike other big pharmaceutical companies, Sanofi chose to buy rather than partner- a strategy we believe that will pay large dividends.


Monday, July 27, 2009

A Step Forward for Personalized Medicine--First Annual BioIT Alliance Meeting and Conference

Although a bit afield of our normal focus area, we thought the following might be of some interest as we start to see more active convergence of biopharmaceuticals and technology companies-especially around Personalized Medicine. We think Microsoft has some vision with this sponsorship.

Microsoft Announces Call for Presentations for First Annual BioIT Alliance Meeting and Conference

Life sciences influencers and member companies to come together to accelerate realization of personalized medicine.

REDMOND, Wash. — July 16, 2009 — Microsoft Corp. today announced a call for presentations for the first annual 2009 BioIT Alliance Meeting and Conference, where member companies will come together to share best practices and discuss the shared vision of driving collaboration, integration and interoperability among organizations to shorten the time between the discovery of new biological data and its application to human health. The meeting will be held at the Microsoft New England Research and Development Center in Cambridge, Mass., on Oct. 8 and 9.

The BioIT Alliance is an industry consortium of pharmaceutical, biotechnology, medical device, laboratory, diagnostics, hardware and software companies working together to realize the promise of personalized medicine. Presentations, accepted from member companies, will focus on case studies demonstrating collaboration and integration among members and new and innovative technologies that relate to the Alliance’s shared vision.

“With most drug discovery organizations relying on paper and nothing electronic and sharable outside the small lab workgroup, the BioIT Alliance formed with the vision of promoting integration and collaboration between these organizations to accelerate the realization of personalized medicine,” said Les Jordan, U.S. life sciences industry chief technology strategist at Microsoft and executive director of the BioIT Alliance. “With more than 100 member companies today, the Alliance has made great strides in promoting this vision, and our first annual conference will serve as an opportunity to share best practices and discuss the state of the industry.”

The call for presentations will close Aug. 28. More information, including details about deadlines and eligibility, is available at

Also at the conference, members will vote on the 2009 BioIT Alliance board of directors. In June, the BioIT Alliance announced the formation of the board of directors, made up of seven individuals representing vendors, the biopharmaceutical industry and related industry standard boards. Led by Executive Director Les Jordan, the board of directors will provide guidance and direction to help the BioIT Alliance fulfill its vision.

Thursday, June 25, 2009

Venture Capital – Anything Happening?

If you’ve been following this blog (and, if you haven’t, you’re welcome to check out our archives) then you know how Larry and I feel about Big Pharma. We believe that they’re in more trouble than they or their supporters are letting on and will eventually follow many other large American companies that were once beacons to the free world of what capitalism could be and are now embarrassments. General Motors (GM), Citibank (C), General Electric (GE), and Merrill Lynch are just a few examples.

OK, that’s the bad news. But, what happens next. I’ve never felt that we’d all end up back in the caves fighting over the scraps of past glories in some sort of a post-apocalyptic future. (Apologies to Winston Churchill.) And, yes, I know this is how Larry sometimes describes consulting before he retired. But, stay with me here people, I’m talking on a grander scale. If Big Pharma tanks then where do our drugs come from? Who will the generics knock off from? Get the picture?

This is where the venture capitalists come in. Earlier, I had predicted that private capital would be a major player in the healthcare industry. Then, 2008 happened and I began to wonder about that. What with Cerberus tied up with Chrysler and everything else, I was wondering what next?

I came across an article in BusinessWeek’s June 1, 2009 edition, These Angels Go Where Others Fear to Tread, about the current state of venture capital written by Spencer E. Ante. The article focuses on venture capital (VC) and the technology industry but since bio-tech is a component of the technology sector and has always been close to the VC gang I thought that it would give me some guidance about what we may see in the bio-tech sector.

Ante’s premise is that the traditional, larger VC firms such as Sequoia Capital and Kleiners Perkins Caufield & Byers are caught in their earlier investments and are forced to curtail new investments. He cites VC investment as being off by 61% in the first quarter of this year with only a small portion of that being for first stage seed money.

The author sees a return to the early roots of VC investing with a focus on truly small startups that are getting lost in the shuffle of the bigger firms. He cites firms such as First Round, Baseline Ventures, Maples Investments, and Felicis Ventures as examples of this new trend, or, is it part of the retro fad currently underway?

Now, again, I want to caution everyone because I’m making a stretch here that these companies will be looking at bio-tech and other healthcare startups. Over the next few months, I’ll be reaching out to see what’s happening here and is this a trend for the healthcare sector as well.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, June 23, 2009

Big Pharma – First Cracks Appearing?

Larry and I have been blogging for a while about the health (no pun intended) of Big Pharma. Earlier, we had even drawn comparisons to Big Auto. We’d left the theme for a while – there’s never a shortage of stories about this industry. But, a couple of weeks ago, I came across an interesting article in Barron’s and I felt that I was no longer a lonely voice crying in the desert. There may actually be fellow travelers!

In the June 1, 2009 issue of Barron’s, Vito J. Racanelli in his column, The Trader, questioned the supposedly solid financial results of the pharmaceutical industry. He cited analytical work done at First Global by Kavita Thomas which reported that the superior return on equity (ROE) recently at large pharmaceutical companies was not a result of improved operating results but of also of charges to equity and stock buybacks. The types of charges noted arose from foreign exchange losses and pensions. Vito cited examples of Pfizer (PFE), Eli Lilly (ELI), Johnson & Johnson (JNJ) and Merck (MRK) where these activities took place.

Vito cites Kavita’s work as a potential leading indicator for the health of the pharmaceutical industry. He’s right. While I’ve been blogging about product pipelines and government intervention, Kavita has supplied the financial analysis that can be used to see where the industry is going. Interestingly, Vito comments on pharmaceuticals’ debt levels implying that they are not excessive although debt ratios are rising, again, because of falling equity numbers.

Both Thomas and Racanelli ask how long will the pharmaceuticals use creative financing and expense reductions to support their earnings. As we’ve seen in other industries as of late, it won’t last.

So, what next? I expect that we’ll probably see more creative accounting and attempts to reduce costs. But, it’s a zero sum game. Many of the pharmaceutical companies are sitting on large cash reserves and probably have access to other sources of funding. There won’t be a dramatic deterioration overnight in the financial situation of Big Pharma overnight. Possibly, some of the vendors supplying outsourcing and similar services may have a temporary surge until the money lasts and all cost cutting avenues have been exhausted.

One final word, watch those cash reserves at Big Pharma. Ford (F) is still alive, barely, but alive, because it had the foresight to arrange for lines of credit before they needed them. General Motors (GM) and Chrysler didn’t and had to go cap in hand to Washington looking for money. If the Obama administration succeeds in reducing drug costs in this country then Big Pharma may be having to follow the same path. Hopefully, they’ll leave their corporate jets at home.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Monday, June 22, 2009

The Pharmaceutical Industry Gives the Obama Health Care Initiative $80 Billion and Can Come Out with a Bigger Prize—Who are the Winners??

The Obama administration's push to drive healthcare costs down may not be all bad news for the Biopharmaceutical Industry. While the industry today announced/agreed an $80 billion reduction over 10 years ($8 billion/year) in cost reductions to Medicare, they may be able to recoup a piece of that assuming the uninsured population become covered under a plan that encompasses prescription drug costs.

Incremental revenues could jump by $6-50 billion/year based on the assumptions one uses in per capita spend on pharmaceuticals and number of people whom would actually be covered under the plan. Taking a very conservative midpoint of 20 million incremental increase in covered people and a midpoint spend of $750/year per consumer on pharmaceuticals yields an additional $15 billion per year in revenues which equates to $150 billion over the 10 year life of the program that the industry (generously?) proposed.

Predicting he winners in such a scenario becomes an interesting exercise. As generic drugs account for about 2/3 of total prescriptions (by volume) and have growth rates in the 14-15% range in the US (versus flat or perhaps slightly negative growth of branded pharmaceuticals), one immediately has to focus on them both as a pure play and as part of the diversification strategy of large pharmaceutical companies.

On top of my list would Teva (NASDAQ:TEVA) followed by Mylan (NASDAQ:MYL) and Watson (NYSE:WPI) as near pure play generic manufacturers.

TEVA is rumored to be looking for additional acquisitions in both generics and specialty pharmaceuticals, is extremely well managed and positioned for growth both in the US and globally. Watson's recently agreed acquisition of Arrow Group which gives it a more global reach at a good price.

In the traditional large pharmaceutical space, my top pick would be Novartis (NYSE:NVS)-through its Sandoz unit as well as numerous European and emerging market generic initiatives and a strong piepline. We would then suggest that to a lesser extent, GlaxoSmithKline (NYSE:GSK) -with its numerous acquisitions, especially Ranbaxy agreement recently announced and Sanofi-Aventis (NYSE:SNY) with its broad base, generic and emerging market strategies are likely to thrive in this highly cost controlled, regulated, competitive environment.

We would be remiss to leave out Johnson & Johnson (NYSE:JNJ), not for its generic capabilities (near zero) or its eroding pharmaceutical product base, but more for its business model based on enormous diversification broadly across healthcare including branded pharmaceuticals, biotechnology, medical devices, diagnostics, consumer health and health informatics suggests that it is well positioned for the future. Finally, Shire (NASDAQ:SHPGY) is intriguing based on its business model of being a “virtual” pharmaceutical business that has decoupled itself from many of the overheads of R&D.

Friday, May 29, 2009

Comparative Effectiveness Research--Blessing or Curse for Life Sciences Industry?

We welcome a new author to our blog, Dr. Joel Studebaker who discusses an issue that is certain to have an impact on the entire Life Sciences Industry assuming the Obama administration is able to get this legislation passed. Joel's biography is appended the end of this article.

Comparative Effectiveness Research:

The $1.1 billion in funding for comparative effectiveness research (CER) in the federal stimulus plan has considerable significance for the pharmaceutical and medical device industries. This funding will support studies of the effectiveness of alternative therapies – pharmaceutical, device, or medical procedure – for particular medical conditions. The studies will focus on outcomes like improvements in patient status or adverse effects but they will not currently consider the costs of treatment. Proponents of CER assert that it provides opportunities to control health care costs without sacrificing quality and to give physicians systematic, unbiased data about outcomes for competing therapies. Opponents believe the results will determine which therapies receive reimbursement from government and private insurance and thus effectively dictate medical decisions to physicians. In addition, there is concern that CER studies may lead to studies that do consider cost, with the result that treatments that are effective but relatively expensive will not qualify for reimbursement. In the United Kingdom, the effectiveness studies of the National Institute for Health (NIH) and Clinical Excellence (NICE) currently take cost into account.

Clinical trials represent the most rigorous approach to CER, and pharmaceutical companies sometimes publish the results of trials demonstrating that their products produce better outcomes than competing alternatives. The expense of clinical trials limits the number of patients they can include and the length of time they can cover, however. A second approach is to compare the reported results of clinical trials of products aimed at the same clinical condition. The major challenges in this approach are that different studies may use different methods and significantly different patient populations. A third approach is to analyze data available in medical and pharmacy claims. The data in medical claims submitted to insurers, managed care organizations, and government programs includes codes identifying the patient’s diagnoses, the procedures carried out, and the provider for each claim. Pharmacy claims submitted to pharmacy benefit managers provide data on drugs a patient is taking. Some private plans and government programs cover millions of members, and thus they have data on larger populations than a clinical trial can enroll. When membership in these programs is relatively stable over time, it’s possible to study long term effects. Large populations also make it possible to study sub-populations, preserving a measure of personalized medicine in CER.

Referring to studies based on claim records, a 2007 paper from the Congressional Budget Office noted that “A central difficulty in such studies, however, is accounting for the differences in patients’ health status that play a role in determining which treatment they get… Insurance claims typically do not include any information about health status.” To overcome this difficulty, one may use a software package that classifies individuals by health status on the basis of their claims. One should recognize, however, that there are limitations to using claims for CER. Unlike a clinical trial, a study of claim data lacks demographic data beyond age and gender, results from laboratory tests (though diagnoses may reflect laboratory results), or medical charts. Precedents for using claim data in comparative research include a Lilly study of cost effectiveness for the antipsychotic olanzapine and a Pfizer study comparing patients taking Lipitor® to patients taking Merck’s Zocor.

Currently, it’s not clear what new insights future CER activity will produce or what impact they will have on health care. It is possible that a body similar to NICE will come into existence in the US or that the FDA will begin to consider CER comparing products submitted for approval to products already on the market. One observer has suggested that CER results may eventually be the only way for a particular product to succeed in the marketplace in competition with less expensive alternatives.

Dr. Joel Studebaker's – Biography

After finishing graduate school, Joel Studebaker began his career at the IBM Watson Research Center in Yorktown Heights, NY. He then moved to IBM Biomedical Systems, a small division that made centrifuges for separating blood into components, where he established the laboratory for chemistry and hematology. After IBM sold that division, he worked on an IBM project at Princeton University for three years and then worked with Larry Rothman at the IBM Engineering/Scientific support center and the Pharmaceutical Industry Center.

Since leaving IBM in 1992, he has worked as a developer and project manager in databases and software development for several small systems integration firms. His pharmaceutical/biotech experience has included two tours of duty with the American Red Cross Blood Banks, an assignment managing the discovery software support group at J&J PRD in Raritan, NJ, and a position as Associate Director of Informatics at Orchid BioSciences. More recently, he has worked in medical and pharmacy claim analysis at CareAdvantage and Integr-eCare.

His current interests include comparative effectiveness research and single nucleotide polymorphisms in personalized medicine. He holds a BS in chemistry from Stanford and a PhD in chemical physics from Harvard.

Wednesday, May 27, 2009

Medtronic – Harbinger for the Industry?

These days, I enjoy blogging because there’s a lot going on. First, the global economy is in a tailspin which only recently has been showing signs of pulling out. Next, the financial services industry which holds the global economy together is under strains not seem since the Great Depression while causing the US’s dominant global financial position to be called into question. Finally, potentially seismic changes in the US healthcare system arising from a new administration in Washington, D.C. and an American public simultaneously becoming increasingly more fearful and angry about the cost of healthcare poses serious challenges to the long, dominant healthcare industry, again, particularly in the US.

With this in mind, I read a recent article in the May 18, 2009 edition of Barron’s written by Neil A. Martin about Medtronic (MDT), the medical device manufacturer. The article is well written and fairly balanced. Neil goes over the issues facing the company and what its chances are going forward. He quotes several analysts who follow the company and who seem favorable. Although, I had a feeling of déjà vu reading their comments. We’ve heard it all before from other commentators for other companies. What’s different this time? We don’t get into the fundamentals. New products are good. But, will there be a risk of more recalls? How will these be paid for? Will patients continue to postpone surgeries judging it elective if they can’t afford it?

My purpose in this blog is not to hammer Medtronic or Neil A. Martin. What I’m about is how the fundamental issues seem to be being missed here. The financial industry is looking at healthcare companies like it has for years. Like it used to look at the US automobile industry for years. The proverbial ostrich with its head in the sand.

I want to go back to one of my recurring themes, the overcapacity in the US healthcare industry. Martin’s article contains a chart listing Medtronic with its major competitors, St. Jude Medical (STJ), Boston Scientific (BSX), Johnson & Johnson (JNJ), and Abbott Laboratories (ABT). I’ve blogged about the latter earlier this year. I think enough has already been said about the long suffering Boston Scientific. And, the remaining two go about their business. This is my point.

If I stick my neck out and forecast President Obama being reelected in 2012 then the world we’ll all inhabit when he finally leaves office in 2017 will be very different than the one we live in today. It has to be. The economic and social problems that we’re currently experiencing will only get worse with outside help (OK, OK, I’m really not a laissez-faire kind of guy, so, sue me). Also, I tend to be an optimist, things will get better. So, today’s players need to change, or, they will be changed. Now, the question is what will those changes be? Stay tuned, Larry and I hope to explore those changes.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, May 26, 2009

Coincidental Indicators

Lately, I’ve been wondering about where we are in the economy and its long expected recovery. We all know it’s going to come back, it’s just a matter of when. Big Pharma has more reason than most to wonder when the turnaround will occur. For them, the question is do they get their legs under them before the Obama administration pulls the carpet again.

As I’ve been noting in the business press there appear to be signs of continual slowing down for Big Pharma. The most recent indicator was in the May 25, 2009 issue of Barron’s. The staff writer, Michael Santoli penned a piece on Thermo Fisher Scientific (TMO), a leading manufacturer of laboratory equipment and supplies. While reviewing the economy’s negative impact on Thermo Fischer’s operating results, he noted that the consolidation underway in the pharmaceutical industry could reduce spending for research materials. Although, he didn’t expect this to be a major consideration for Thermo Fischer. But, this got me thinking. If the drug companies are cutting back on their expendables what’s going on? Yes, one reason for these mergers is to leverage purchasing power and unnecessary facilities. But, I doubt that all of these research and development programs are pursuing the same drugs. Are we beginning to see the long heralded cutback in pure research by pharmaceutical companies?

Another article that I came across recently in this same vein was in the May 25, 2009 issue of BusinessWeek. In Michael Mandel’s column, Mandel on Economics, he writes about the increasing productivity being experienced by US industry which could negatively affect future growth. One statistic caught my attention. Michael (beats me why all these guys are called Michael) noted an 11% decrease in research and development at Johnson & Johnson (JNJ).

Now, when I think about Big Pharma’s pipeline problems, I see what I think are coincidental indicators of cutbacks in new drug development. If they’re buying fewer research supplies and cutting back in professional staffs as Mandel implied in his article, then what is the future for these companies? How much overcapacity is there in the industry?

Larry and I have blogged about this theme before and drawn parallels with Big Auto. Now, today, this may seem a bit extreme. But, how long ago were General Motors (GM), Chrysler, and Ford (F) considered viable investments? For that matter, anyone remember American Motors Corporation?

We would be interested in hearing from our readers about what coincidental indicators they are seeing in the healthcare industry or which ones we should be watching. We’ll follow up on these in future blogs.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Wednesday, April 8, 2009

Another Sign of Big Pharma’s Demise?

I couldn’t let this one go by. Andrew Jack wrote an article in the February 6, 2009 edition of the Financial Times about how scientists don’t lead pharmaceutical companies anymore. Andrew pointed out that only Lilly’s (NYSE: LLY) CEO, John Lechleiter, had trained as a scientist. He did note that Daniel Vasella, Novartis’ (NYSE: NVS) CEO had been a doctor.

Now, am I the only one who’s drawing a connection between the dwindling pipelines of large pharmaceutical companies? After all, what are professional managers all about? Optimal solutions. Squeeze every cent out of everything that you’ve got and don’t a cent anywhere else unless you have to. Doesn’t lend itself to developing many new drugs does it?

Remember Jack Welch? Hopefully, it hasn’t been that long. And, while I’m not a complete fan of the man, give the devil his due, he knew how to get results. Anyone care to remember Jack’s academic background? A doctorate in chemical engineering from the University of Illinois. Doesn’t sound very sexy does it? But, Jack sure got his money’s worth when he rose to head GE Plastics and made his career there. The rest is history as they say.

I believe that there are two things at work here. First, only scientists can truly appreciate pure research and development and understand what can be done. Next, only scientists can understand the values that pure science can bring to society. This is my opinion, I have no empirical data to back this up. If anyone from the Harvard Business School is reading this, they’re cringing. Now, I know what everyone is saying, Guy’s a Marxist. He’s going soft on capitalism. But, wait, just hear me out.

Anyone remember Bell Labs? When it was a true scientific establishment and developed things like lasers and transistors? Or, how about when Big Auto was run by engineers and designers and hung around with manufacturing types? Bill Gates was a college drop out. (OK, it was from Harvard, but, you get my point.)

The Industrial Revolution wasn’t started by a bunch of quant’s from business schools. They didn’t even graduate from high school! Some were even home schooled! It was all about a bunch of guys, sorry ladies, this was a long time ago, who saw that things could be done better and did something about it.

OK, the baton had to be passed. Even Edison could only go so far without calculus. Pure science and research was made possible funded by the early successes. Somewhere along the way, we lost our way. No one solves problems anymore, no one stretches, and, that’s why Big Pharma will follow Big Auto onto the dustbin of history. (With apologies to Trotsky.)

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Sunday, April 5, 2009

Where’d Everybody Go?

I know that I’ve been a little distracted lately and been off the wire a bit, but, when I resurfaced I was surprised at how quiet everything had suddenly become in the life sciences sector, Big Pharma especially. I e-mailed Larry asking where everybody had gone (except for Mike Huckman, who’s out in LA chasing a story on Dendreon. Check it out at .). He replied with his characteristic wit and insight asking that wasn’t this supposed to be my job? Larry did have a point.

A short while ago, everyone was talking about Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP), and Johnson & Johnson (NYSE: JNJ); Roche (SWX Europe: ROG) and Genentech (NYSE: DNA); Pfizer (NYSE: PFE) and Wyeth (NYSE: WYE); and, Abbott Laboratories (NYSE: ABT) and Celera (NYSE: CRA). Now, nothing.

OK, the wise guys out there may say, ‘Isn’t this enough?’ (I won’t get into that maybe it was too much. I’ve flogged that poor horse too much already.) One day, we’re all merging and going to dominate the industry. The next, there’s not enough players around for a pickup game of stick ball. Something’s up.

The media aren’t really covering these deals or other possible outcomes presently. Maybe the other news stories are pushing Big Pharma into the back pages, or, off altogether. I have to admit last Sunday’s purported story about President Obama calling General Motor’s (NYSE: GM) CEO, Rick Wagoner, at home and firing him made for a heck of lot better copy than the purported value of Schering-Plough’s pipeline. The stock market’s recent rally has certainly been another distraction, probably, also throwing some deals economics into question. Finally, Treasury Secretary Timothy Geithner’s plans for toxic bank debt haven’t hurt neither has his rock star boss’ concert tour of Europe.

My point, the markets and the media are digesting a lot of new news. Much of which will change the rules that Big Pharma had been playing by until recently. First, share prices will rise. Those deals won’t be looking so good to shareholders. Next, government is getting more involved with American business management. Industries and their companies should be expecting their own phone calls from Washington if they get into trouble. Or, maybe executives’ pay will just seem too exorbitant when politicians are just trying to make more drugs more affordable to more people who can’t afford them. Finally, Big Pharma has nothing new to say. As Larry and I have blogged repeatedly, this is an industry that could be the next Big Auto.

So, where has everybody gone? I believe that they’ve gone to ground looking for cover. First quarter earnings are due out soon. Annual shareholders’ meetings will be taking place. I still don’t think that there will be much good news. You can only get away with saying that you’re doing better than General Motors for so long.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Friday, March 27, 2009

Our Blog named to “The Top 50 Pharmaceutical News and Research Blogs”

We generally don't believe in self promotion of our blog, but were recently humbled to be named as one of “The Top 50 Pharmaceutical News and Research Blogs” by “The Pharm Tech Blog” ( ). It is indeed gratifying to be recognized as #9 in this category and to appear with some very well respected other blogs.

We suggest you take a look at their blog which takes the following perspective:

“The Pharm Tech Blog aims to enlighten readers to important information and resources related to medicine, health, and the pharmaceutical industry, from the perspective of a pharmacy technician. This blog serves as an open forum for the exchange of ideas, resources and information related to health, health care and medicine, so feel free to contact us with feedback, article submissions and ideas.”

We also thank them very much for the recognition and pledge to continue our efforts at putting together our independent view of this industry. Thanks go to our chief writer Guy de Lastin for his tireless efforts.

Thursday, March 19, 2009

Bio-tech - Is this the Life Science’s Innovation Engine?

Larry and I have been blogging a lot lately about the tsunami of mergers and acquisitions that has been rolling over the pharmaceutical industry recently. We’ve been amazed at how traditional Big Pharma has been collapsing its own excess capacity back on itself.

Let’s talk about two recently announced deals, Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP), (I won’t join the speculation about Johnson & Johnson (NYSE: JNJ) mixing it up with them) and Roche (SWX Europe: ROG) and Genentech (NYSE: DNA). (Regular readers can probably guess what I’m going to say next.) Which one of these deals makes the most sense from an investment perspective?

If you guessed Roche and Genentech then you’re correct! $46.8 billion is a nice piece of change for Genentech. The usual arguments of synergy, efficiency, etc. were given by management.

Roche gets the immediate benefits that come from such deals, improved revenues, earnings, and cashflow. But, what differs from a deal like Merck’s and Schering-Plough’s is that Roche is buying something new. (Alright, alright, I know that Roche already owned 56% of Genentech, but, at least they’re going in the right direction.) Bio-tech is the business differentiator here.

I haven’t had a chance yet to sit down and review the numbers between this deal and Merck’s but supposedly it’s more expensive. Given the future value of Genentech’s drugs, particularly the cancer treatments, that’s to be expected. The question is has Roche overpaid? I believe that’s it’s too soon to tell.

The hard part will now be making this deal work. Different cultures, national as well as corporate, and products are always hard to mesh together. Keeping key employees, particularly Genentech’s in this case, will be crucial. Given the amount of financing involved, Roche will be under significant pressure to produce results. Today’s markets are very unforgiving of missed expectations. Also, should this very expensive acquisition fail, what’s Roche’s chairman, Franz Humer going to do for his next trick? I’m assuming that Genentech’s chairman, Art Levinson, would be long gone by then.

Right now, the Roche and Genentech deal is the one to watch this year. This one’s the outlier. Something has to give in the pharmaceutical industry. The merging of companies with shrinking pipelines in an era of hostile government healthcare policies does not bode well as a good long term strategy for growth. Oh, for sure, there will a survivor. Just as in the auto industry, there will be a shakeout. I’m not ready to guess who that may be. But, I do feel confident that the bio-tech firms will be in a class by themselves. In the future, I’ll blog about why I believe bio-tech will be the engine driving innovation.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, March 17, 2009

Big Pharma’s Wanna-be’s

I’ve been blogging for awhile about the life sciences industry and things have started to get lively. Between the economy and its impact on the financial markets and the recent spate of mergers, Larry and I haven’t been lacking for blogging topics.

While following the industry and researching for my blogs, I’ve been noticing that the industry’s excess capacity is slowly merging itself away. A recent article in Barron’s described Bristol-Myers Squibb (NYSE: BMY) as a mid-sized pharmaceutical company. This got me thinking, who’s in Big Pharma now? Don’t worry, this blog won’t become a tedious list of company names designed to fill space. (BTW, I personally use CNBC’s Pharma Watch List at for those of you who really enjoy lists of company names.) Pfizer (NYSE: PFE) and Wyeth (NYSE: WYE) are merging. So too, are Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP), unless Johnson & Johnson (NYSE: JNJ) have something to say about it. Roche (SWX Europe: ROG) and Genentech (NYSE: DNA) are finally getting together. Jim Cramer of CNBC was speculating about Abbott Laboratories (NYSE: ABT) and
Celera (NYSE: CRA) getting together awhile back. (I wonder if I really need to say “Jim Cramer of CNBC”. Is there anybody on the planet who doesn’t know Jim especially after Jon Stewart got finished with him the other night? But, I digress.) Hey, wait a second, this is starting to turn into one of those tedious lists I was griping about several sentences ago.

Let’s pull out two of those names, Johnson & Johnson and Abbott Laboratories and talk about them for a few minutes. They get tossed in everybody’s list of Big Pharma companies but are they really pharmaceutical companies? Yes, they do research and development, market drugs, and go cap in hand to the FDA like the Merck’s, Pfizer’s, and Lilly’s. But, what about all those other things that they do?

First, both companies have significant businesses in the medical devices sector. Definitely healthcare related. Complicated products with healthy (no pun intended) gross margins, I’ll bet. But, don’t they have similarities to drugs? Insurance companies and Medicare pay for them. Hospitals and similar healthcare providers don’t want a lot of vendors’ similar products with just different enough procedures cluttering their storage rooms and confusing their staffs. Product risk? Remember heart defribulators? I’ll bet Boston Scientific does. That one made Vioxx look a sandlot stickball game.

Next, Johnson & Johnson has a consumer products business, mostly high end goods or their own highly respected brand name products. But, many businesses are finding that highly respected brands are not as recession proof as they once were. Then, there’s what I call the Wal-mart effect. Consumer products companies have been resigning themselves to having to deal with the likes of Wal-mart and the few other remaining retail distributors in this country. Also, consumer products have competitors, names like Proctor & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CL) which don’t normally appear in blogs like ours.

Finally, let’s talk about management. Johnson & Johnson has Bill Weldon and Abbott has Miles White. How do they manage the complexity and challenges of such disparate businesses? How are their successors developed and chosen? Anyone of the three business lines described require long careers to master and are different enough to be fairly brutal with newcomers who dabble. Anyone who doubts this should check with Bob Nardelli, formerly of Home Depot, who now works for $1 a year at Chrysler. (I can even get a better rate than that.)

Some argue that buying shares in companies like Johnson & Johnson and Abbott Laboratories is liking buying shares in a mutual fund. I don’t buy it. Mutual funds have administration fees and not the corporate overheads that these companies have. Investors thinking of investing in the life sciences sector should be looking at either specific stocks or actual mutual funds.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Monday, March 16, 2009

Pharmaceutical Industry Consolidation-And the Winner is Pfizer, Merck or Roche????

And the Winner is Pfizer, Merck or Roche????

We promised our view on the potential results of the 3 "super-mega-global-mergers" that have taken place in the last 60 days and we don't wish to disappoint. As we don't want to keep you in suspense, we think that Roche is getting the most “bang for the buck”, BUT it is highly dependent on the non-integration of Genentech.

Let's start with the contenders-first Pfizer-Wyeth. No surprise here, we think PFE vastly overpaid to get a potpourri of businesses with a dog's breakfast of vaccines, biotechs, consumers and some underwhelming pipeline potential. It seems to us that the major drive here is “synergy”, that is reducing workforce size by nearly 20,000 while plugging some of the $11-13 billion hole that Lipitor going off patent in 2011 creates. The stock market has not exactly been “irrationally exuberant” about Pfizer's 10 year $258 billion spending spree for Warner Lambert, Pharmacia and now Wyeth and has inversely rewarded share holders with a nearly 70% reduction in market capitalization from the day of the Warner Lambert deal close (Pfizer's market cap about $300 billion) to this week's $95 billion. Need we say more?

Merck strikes as a version of more of the same. Paying a 30%+ premium (about $41 billion) to combine 2 feeble pipelines and some redundancy (maybe another 20,000 people reduced), "diverse" and/or non-intersecting cultures doesn't strike us as “happy days are here again”. In fact while Pfizer-Wyeth pretends to be a “diversification” play as opposed to a "consolidation", Merck-ScheringPlough doesn't even try to excuse itself with such rhetoric. There is Dick Clark's (Merck's CEO) trying to convince us that Schering Plough is somewhat of an international powerhouse (try telling that to executives of any of Europe's Big 3 pharmaceutical houses), and that Remicade will drive sales of several billion more-can you spell J&J? The reverse acquisition route seems spurious at best-we're no lawyers but can't imagine the transparency of this shenanigan and how it may play with the legal eagles of J&J in New Brunswick. Can we forget about potential in fighting between Fred Hassan (Schering's CEO) and the aforementioned Mr. Clark?

So, back to Roche-Genentech. Sure $95 a share is rich and many a scientist in South San Francisco is going to feel more like a Microsoft Millionaire from the 1980's and therein may lie Roche's opportunity and challenge. Genentech's pipeline is deep and rich with well over two dozen promising candidates and more to come. Much of this has been attributed and rightly so to a combination of brilliant scientists and a laissez faire culture with heralded beer blasts, parties and freedom to explore favorite projects, some of which have become major drugs. The trick is whether Roche's CEO, Franz Humer and his merry band from Basel can convince Art Levinson and Genentech's San Francisco based minions that it's business as usual and that things can only get better from here. We're going to guess that while this is a classic consolidation play, the boys of Basel will do it right.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Larry Rothman

Sunday, March 15, 2009

Big Pharma’s Dividends – How Safe Are They?

Recently, several large companies, Pfizer (NYSE: PFE), General Electric (NYSE: GE), and PNC (NYSE: PNC) have cut their dividends. This got me wondering, what might happen to Big Pharma’s dividends? After all, their share prices have been slammed like everyone else’s lately. (Although, admittedly, not all to the same degree.) I’ve always been suspicious that Big Pharma are not early adopters but followers. And, why not here? All that cash going out to greedy shareholders could be kept in the coffers, and, what do you do with all that cash? Why, either buy somebody else’s company or buy back your own stock. I didn’t say that this would be logical.

The Dow Jones was down about 52% from its 2007 high before its recent comeback. Buying stocks now could produce double the dividend yield from just two years ago. I’ll bet many recent purchasers of Pfizer and General Electric felt that way. But what about companies like Merck (NYSE: MRK), Bristol-Myers Squibb (NYSE: BMY), or Johnson & Johnson (NYSE: JNJ)? Decent returns now, but what about tomorrow?

What impact will Merck’s announced takeover of Schering-Plough (NYSE: SGP) have on its future dividends? I haven’t read of any changes yet but this may only be a matter of time. The media are speculating about Johnson & Johnson making a counteroffer for Schering to preserve its interests with Remicade. What might that do to Johnson & Johnson’s longstanding, unbroken record of annual dividend increases? Or, for that matter, might they have to go back a few years?

Interestingly, after Standard & Poor’s March 12th downgrade of General Electric’s credit rating from AAA to AA+, of the five remaining U.S. companies retaining their coveted AAA rating, two are Big Pharma, Pfizer and Johnson & Johnson. And, Pfizer is on Standard & Poor’s watch list because of its forthcoming acquisition of Wyeth (NYSE: WYE). I’m always amused at the herd mentality exhibited by Big Pharma.

First, everybody went after blockbuster drugs followed by direct to consumer marketing (DTC). Acquisitions came along next, and, now dividend decreases may be the next fad. Lowered credit ratings are just the unintended consequences of doing this.

OK, where does this all lead, you may be asking. (If you own Big Pharma stocks, you’d better be.) Remember several themes that Larry and I have been hammering away at for awhile.

Drug pipelines are drying up. President Obama will do “something” to U.S. healthcare. (Maybe only something easy like authorizing Medicare to negotiate volume discounts on prescription medications.) Unemployment is rising and many of the newly unemployed are foregoing their COBRA plans and other medical expenses until they find new jobs. All of this means that revenues could soon begin to disappear. Cash flow contracts and, well, you get the idea.

For now, everyone’s dividends seem safe. But, so did Big Auto’s and General Electric’s shareholders.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Friday, March 13, 2009

The Pharmaceutical Industry Merger Mania-”The Consolidation Camp” vs. “The Diversification Camp”

The Pharmaceutical Industry Merger Mania-
”The Consolidation Camp” vs. “The Diversification Camp”

Consolidation in the Pharmaceutical and Biotechnology Industry has been grabbing headlines lately and of course we have a strong point of view about how this may shape or mis-shape the industry going forward. While the biggest headlines involve the Pfizer-Wyeth, the Merck-Schering Plough and Roche-Genentech consolidations, we feel compelled to discuss these and alternatives that may have been considered and the landscape that may develop as a result of these moves.

Let's look at some of the alternative strategies that can be deployed given that most CEO's would acknowledge that the combination of low ROI from R&D investments, patent expirations, demise of the blockbuster model, ineffectiveness of the sales force armies, excess manufacturing capacity, increased regulatory oversight, significant pricing pressures, and the lack of success (failure?) of large consolidations wreak havoc with long term direction.

Chris Viehbacher, the new CEO of Sanofi characterized two strategic camps in a recent interview with Bloomberg News-they are the “Consolidation Camp” and the “Diversification Camp”.

To us, Pfizer is the prime example of the Consolidation Campers with expenditures of nearly $200 billion in the last several years to acquire Warner Lambert and Pharmacia along with several other smaller acquisitions, only to have its stock market cap for the consolidated company reach under $100 billion despite loads of restructuring, re-engineering and synergy targets. It appears that once synergy targets are met (1-4 years), company values as measured by stock market capitalization seem to wane quickly and the quest/thirst for more consolidation continues at a frantic pace.

For us the leaders of the Diversification Campers are Johnson & Johnson and Abbott. Both companies have major lines of business outside traditional large molecule pharmaceuticals with significant and growing businesses in consumer healthcare and medical devices and diagnostics. Their acquisition strategy seems to be small to mid size chunks, notably J&J's $16 billion+ acquisition of Pfizer's Consumer Healthcare Businesses as well as numerous biotechnology companies, while Abbott has acquired Advanced Medical Optics (AMO), Guidant's Vascular Intervention and Endovascular businesses and Kos pharmaceuticals.

Both J&J and Abbott seem to have incremental “bite sized” acquisitions, all meant to provide a portfolio of “health care” lines albeit balanced among multiple sub segments of the industry. Both companies seem to have accelerated the success of these acquisitions by leveraging existing franchises and/or management and infrastructures. Notably one wonders why they haven't or if they might look at generic pharmaceuticals and/or animal health to round out their portfolios.

We will next discuss our opinions of the recent merger wave and who were the smart ones (could it be Pfizer, Merck or Roche??). Stay tuned and we will look at other alternatives we think may be developing.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Larry Rothman

Thursday, March 5, 2009

Hunter & Williams – Thoughts About Satyam, After Satyam (Pt. III)

Larry and I recently had an opportunity to talk with Randy Parks and Jim Harvey, attorneys at Hunton & Williams LLP and co-chairs of its Global Technology and Outsourcing practice about the impact of the Satyam affair on global outsourcing. Hunton & Williams has 1,000 attorneys in nineteen offices worldwide. The Black Book of Outsourcing ( ) ranks them as the number one outsourcing law firm in the world. Randy and Jim focus on the customer side of outsourcing deals although they have done some suppliers. This is the third and final of three blogs from this interview.

Jim said that there will be significant costs to add controls posing Indian outsourcers with a choice, either pass through the costs to their customers or reduce margins. A balance will have to be struck. I asked if the Indian outsourcers would be losing a key differentiator by adding these controls and their related costs. Jim reiterated that everything would be done with a balance. He didn’t feel that India would kill the golden goose.

With regard to immediate impact to Satyam, Jim pointed out that it has lost contracts with Caterpillar and State Farm. But, Satyam also wrote fifteen new outsourcing contracts during this past January. So, the jury may still be out on what their customers do. As Jim explained, the reasons for going to Indian outsourcers, labor arbitrage, expertise, and fantastic COE’s are still there.

We then asked Randy and Jim what a company should do if presented with a Satyam situation with its outsourcer. First, the customer should pull every operational risk mitigation lever in the contract. (Which assumes the customer had their attorneys include them in the first place.) Next, pay more attention to the deal in the early stages, send in a security team to review all key components of the contract. Do a triage, a risk adjusted decision process and identify what can be left, taken away, and what would it all cost. If there is no other way, then the customer should just buy its way out of the contract and move to existing providers.

Note that Randy’s and Jim’s advice is based on work that is done before. Another example of preparing in advance for outsourcer problems is the inclusion of financial covenants in outsourcing contracts. Examples of such provisions are change of control and deterioration in financial ratios covenants, the latter should be treated like high yield debt covenants. They indicated that vendors have been careful to avoid such covenants. Also, customers should build ongoing monitoring into future contracts.

As we wrapped up our interview with them, they summarized by saying that the Satyam affair would increase anxiety for sourcing relationships in the short term. There would be a broad brush taken temporarily and unfortunate conclusions drawn about geography and outsourcing in general. There are extremely talented resources at fairly competitive rates available in India. The value proposition is still in place. Specifically, Satyam could benefit from the economic timing. Business decision making is in paralysis right now. This matter could be finished for Satyam right now. A data point for when the markets recover. (Although, Satyam’s board of directors has announced a solicitation of bids for the company in the near future.) And, don’t forget those very high customer satisfaction scores that Satyam has consistently had.

Larry and I would like to thank Randy and Jim for taking the time to speak with us and appreciate their candid comments about the impact of Satyam on the outsourcing markets.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, March 3, 2009

We Talk with Some Renowned Attorneys about the Satyam Scandal, India and the Future of Outsourcing (Part II)

Larry and I recently had an opportunity to talk with Randy Parks and Jim Harvey, attorneys at Hunton & Williams LLP and co-chairs of its Global Technology and Outsourcing practice about the impact of the Satyam affair on global outsourcing. Hunton & Williams has 1,000 attorneys in nineteen offices worldwide. The Black Book of Outsourcing ( ) ranks them as the number one outsourcing law firm in the world. Randy and Jim focus on the customer side of outsourcing deals although they have done some suppliers. This is the second of three blogs from this interview.

Randy and Jim both emphasized that “serious deals need to be done seriously.” They noted that in the early days of outsourcing/offshoring deals there was a great deal of anxiety and tension along with less care than now. Satyam is a good reminder of the need for attention to detail and care.

Since also serves the interests of the consulting community supporting the life sciences industry, Larry and I naturally asked about their involvement in outsourcing transactions. Randy and Jim replied that for sophisticated transactions there is a role for both professional advisors and law firms. Communications between them should be open. Their roles are complementary. They felt that consultants have superior research facilities to do the empirical analysis.

We returned to the Satyam affair and asked if they thought that might be other occurrences in the future. “Who knows?” , they replied. Human nature being what it is, sure, recurrences are possible. The hope is that regulatory changes that will inevitably arise from this will prove effective. Satyam is regrettable but shouldn’t be repeated.

Randy and Jim declined to speculate on what other outsourcers may have problems in the future and were unaware of any such circumstances.

Jim noted that there were no public events that rise to the extent of what happened at Satyam. He added that moving data overseas exposes it to the risk of theft. But where data theft has occurred, it has been in the developed world, not in India or the Philippines. Jim was reluctant to feed the fear because these incidents are isolated not systemic with what we know today. He cited Enron as an example. Just because Enron had problems doesn’t mean that every energy company is run that way. Enron was only one company with many lessons learned. Similarly, Satyam will cause India to look at the regulatory oversight of its companies. Information security laws have already moved quickly because of the Satyam incident.

Larry asked about Indian regulatory impacts. Jim suggested that the interlocking boards of directors across Indian companies would be looked at. He speculated that as with the Enron aftermath, the regulatory reaction will be strong, swift, severe, and, perhaps, overdone.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Monday, March 2, 2009

The Impact of the Obama Health Plan on Pharmaceuticals-The Final Nail in the Coffin or a New Beginning-Our Thoughts

It seems as if the economic world is in collapse and the Pharmaceutical/Biotechnology Industry is not being spared. In fact the headlines suggest the industry is in for very rough sliding - witness the collapse of share prices for major Pharmaceutical and Biotechnology companies this week after President Obama unveiled his new health care initiatives. The President has proposed greater rebates to Medicare from Pharma which will significantly impact profitability (and by extension the incentives for R&D and new drugs). The administration is pushing for bio-equivalent biotechnology compounds to lower the costs to the consumer for these generally targeted, expensive compounds (and once again making the biotechnology companies far less attractive). Add to this the administration's proposal to make reimportation of drugs far easier (again to supposedly benefit the consumer) and layer on top of that the already existing problems of low pipeline productivity, the demise of the blockbuster model, decreased effectiveness of the sales force, excess manufacturing capacity, bloated administrative expenses and it is easy to conclude that the industry could be headed for disaster.

BUT WAIT, is it possible that despite these significant challenges, management may indeed have the opportunity for a classical transformation resulting in a leaner, more adaptive and focused business. While we don't want to be presumptuous and suggest this would be an easy move, several combination's of existing models and processes can be deployed to make the transition. Concepts such as the virtual company, focused R&D based on pharmaco-economics, better use of information management, highly targeted marketing and sales, rational out tasking, staff leasing, and/or global outsourcing and myriad more can be deployed for competitive advantage and profitability. The dilemma may very well be a management that is either too risk adverse, complacent or (hopefully not) incompetent.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Larry Rothman

Sunday, March 1, 2009

We Talk with Some Renowned Attorneys about the Satyam Scandal, India and the Future of Outsourcing

We have discussed our thoughts about the outsourcing business and its viability over the last few months and had a real opportunity to have two highly regarded attorneys discuss their point of view about the global outsourcing business in general and the impact of the Satyam financial scandal in particular.

Larry and I had a wide ranging discussion with Randy Parks and Jim Harvey, attorneys at Hunton & Williams LLP and co-chairs of its Global Technology and Outsourcing practice about the impact of the Satyam affair on global outsourcing. Hunton & Williams is a very large and well respected law firm with over 1,000 attorneys in nineteen offices worldwide. The Black Book of Outsourcing ( ) ranks them as the number one outsourcing law firm in the world. Randy and Jim focus on the customer side of outsourcing deals although they have done some suppliers. This is the first of three blogs from this interview.

We asked Randy’s and Jim’s about their impressions of the Satyam affair. Interestingly, Randy started by saying that he was disappointed by Satyam's behavior. Satyam had been a fantastic story, from nothing to a star in the globalization outsourcing market in ten to fifteen years and now to have to take a big black eye over this. He continued by saying that many Indian firms get higher customer satisfaction scores than firms based in the U.S. and emphasized that one bad apple doesn’t spoil the whole industry-he specifically pointed out that Enron was a single company disaster that did not permeate the entire energy industry.

We next moved onto what the warning signs were at Satyam, if any. First and foremost from our discussion was their reply that it would have been very difficult for a client to detect the fraud that was occurring-so we infer that best defense is a good offense-see their recommendations below. Jim stated that on a chronological time line (retrospectively) there were signs at a corporate level that some things were amiss. First, there had been rumors of a data breach at the World Bank, later found to be baseless, followed by the attempted sham real estate transaction. Randy also asked how they managed to keep $700 million in a bank without earning any interest and noted that the CFO deflected a reporter's query on this matter.

They explained to us that it wasn’t reasonable to expect customers to have the visibility to an outsourcer’s business to permit the type of transparency necessary to detect a fraud such as Satyam’s. Further, additional protection costs a significant amount of money and effort, and, then, would they work?

Randy and Jim agreed that developing a theoretical business model to protect against this type of situation would be an interesting intellectual exercise but wouldn’t be practical.

The next topic that we discussed was the lessons learned from the Satyam affair. Randy and Jim stressed operational execution of contract terms with outsourcers was and is the key to protecting a client from such issues, and even these are not entirely fool proof. They gave five recommendations that would be of use to our readers:

• Diversify the vendor pool-have a minimum of 3 suppliers.
• Take care of the data by offsite backups, assume catastrophic failure.
• Have source code drops.
• Manage the vendor relationships-enforce and exercise the contract terms.
• Take possession of dedicated machines.

Now, the caveat with these approaches is that they lower the anticipated savings expected from outsourcing deals. For example, the last point talks about dedicated machines which would cost more than shared machines. Randy and Jim noted that many contracts have these terms included but customers don’t exercise them. (I was polite and didn’t point out that such customers lose a second time because they’ve also paid their attorneys to draft such contracts and don’t use them properly.)


As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Thursday, February 26, 2009

Abbott Labs – Back to the Future

When I blogged recently about Abbott Laboratories (NYSE: ABT), I hadn’t expected to come back for a while. But, as I’m learning in the Blogosphere, things change.

Abbott is increasing its quarterly dividend 11%, its thirty-seventh annual increase ( ). This was an opportunity to return and blog some more. Miles D. White, Abbott’s CEO, was upholding Guy’s Eighth Rule of Being a CEO, when in trouble, talk about the dividend, better yet, increase it.

The old saw about those who do not remember the lessons of history being doomed to repeat will really come into play here. What we’re seeing here is another of the large pharmaceuticals (does Abbott really even qualify as Big Pharma?) trying to keep up the pretense that it’s business as usual. Unfortunately, I’m only reminded of those recently unemployed who struggle to maintain their standard of living in order to convince their families and neighbors that everything is alright. One has to ask are they only really kidding themselves.

Monies that will be needed in the future are being dispensed today to keep the shareholders complacent. I still don’t see any reasons why Abbott Labs, along with several other pharmaceutical companies, won’t be traipsing up to the Hill in Washington in a few years looking for a bailout. Finding someone to blame other than themselves could be hard, especially by then. Big Auto blamed the banks. The banks blamed their borrowers. Giving that the drug industry will looking to the government for help, I suspect that they won’t be blaming Washington. But, hey, dumber things have happened.

I keep harping on companies like Abbott and Pfizer and issues like acquisitions (i.e., Wyeth), pursuit of the next “blockbuster” drug, and dividend increases because these are all busted strategies. Other industries like Big Auto and financial services have tried some or all of these and have come to naught. Why should things be any different this time?

A friend of mine (contrary to what Larry says, I do have some) once said that the definition of insanity was doing the same thing over and over expecting a different result. Get the picture. I know that I’m using up my quota of clichés in this blog but isn’t that what they’re for, right?

We’re looking at an industry that’s on the cusp of changes that will be seismic in nature. There will be winners and losers. So far, I’ve been focusing on the behaviors that will signify the losers. Shortly, I’ll begin to blog about the characteristics of the winners. This is an industry in transition and we won’t be lacking things to blog about.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, February 24, 2009

Pharmacaeutical Outsourcing - Another Shot Across the Bow

I admit freely that I have been fascinated by the topic of outsourcing in the life sciences sector, especially the pharmaceutical group. (Larry actually thinks it’s unhealthy, but, I think he worries too much.) So, when the New York Times (NYT) recently published a report ( ) discussing an article ( ) in the latest issue of The New England Journal of Medicine (NEJM) about the outsourcing of clinical trials offshore and the issues that are raised by this.

The NEJM and the NYT focus more on the ethical and safety concerns raised by these practices. I won’t rehash what they wrote, Natasha Singer’s article in the latter is an excellent piece of reporting and when you have the time, read the original NEJM article. Despite being written by several medical academics at Duke University, it’s a very readable article for the layperson. (I offer myself as proof.)

I want to focus on the economic and business aspects of this practice. (OK, I admit it, I’m a capitalist.) While there are some questions about the statistics used, there is definitely a trend to move clinical trials offshore. Despite protests to the contrary, I suspect that pharmaceutical companies feel that there is less FDA oversight and other forms of government regulation when they move offshore. Also, some of the countries selected may prove to be somewhat less litigious than American trial lawyers tend to be.

Lower costs, the perennial reason for outsourcing and offshoring is certainly another good reason for doing so.

But, what are the long term implications for the US pharmaceutical industry? Once again, we see a key US business differentiator that contributed to past American supremacy in the global drug industry being packed up and sent offshore. Besides the jobs lost, the early access to innovative treatments lost to Americans and the potential to enhance these differentiators are gone.

The major long term consequence is that US pharmaceutical manufacturers are assisting in the development of future competitors. The FDA should also stop and think about this for a bit. Once the genie is out of the bottle and new drugs are being developed, tested, and marketed abroad in a big way, the FDA is not going to be able to control policy as they have in the past.

In my recent blogs, I’ve been talking about changes in the life sciences sector and their long term implications. In particular, I’ve been hammering Big Pharma about the similarities to Big Auto. We’re seeing more evidence with this NEJM article. By itself, it’s not earth shattering. But, taken with everything else that’s going on, the future doesn’t look good for Big Pharma.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Thursday, February 19, 2009

Pfizer-Wyeth Redux--We Can't Help It!

I’m back on the Pfizer-Wyeth again. I can’t help myself. I feel as if l’m in that dream we’ve all had of being in a slow motion crash again and again. Here’s why.

Let’s start with the overall economy. Since last autumn, we have CEO’s either being excoriated in the press or by Congress. Obviously, there have been some serious shortfalls in abilities here. Now, let me ask a question, just because Big Pharma hasn’t been dragged up to the Hill yet by Congress doesn’t mean that they won’t be. (Doesn’t mean that they will be either, but old Guy’s sticking his neck out again.) Honestly, there’s some good potential here. Have we seen anything yet from Big Pharma’s CEO’s to distinguish them from their colleagues in banking or automobiles? This is where I’d really like to get some reader feedback.

Next, let’s talk about sticking the collective heads in the sand and hoping that problems will go away. Let’s face it. Barack Obama has won the election. He took the oath of office (twice) and he’s now the President of the United States (POTUS for you acronym freaks out there). Despite some Republican protests, President Obama’s stimulus package has been passed and signed. So, anyone who doesn’t think healthcare reform isn’t coming soon to a hospital near you had better wake up and smell the coffee. Especially, if they’re in the drug or medical device businesses.

Another one of my favorite gripes about the healthcare industry, and most other industries as well, is it’s fascination with mergers and acquisitions. Don’t get me wrong in the right circumstances, with the right reasons and for the right price, these types of deals can make a lot of sense. But, please notice the qualifiers that I listed. There generally aren’t too many deals that meet those criteria and then, if there happens to be a bidding war then any value goes right out of the window. How many M&A deals over the last thirty years, in any industry, have lived up to their oft overhyped potential?

Finally, let’s get down to basics. Business is all about making things and then selling them. Good products and services with good customer service attract customers who pay their bills and come back to buy more. While you’re at it, hire good employees, treat them right, and improve your productivity as a consequence. But, Big Pharma seems to be ignoring this model. Many of them are moving to a portfolio model of buying new drugs, outsourcing everything that they can, and making their profits on the resulting margins. Not bad business if you can get it, but how many companies can be in that kind of a business. Possibly a few, but, certainly not as many as are in the pharmaceutical industry today.

Oh, and let me add that with few exceptions they are optimizing the "blockbuster" model that no longer works. And, has anyone explained the law of large numbers to these people--combining two multi -10's of billion dollars business into one, taking on "synergy targets" has been at best short on results albeit high on promises.

So, let’s see what happens this year. If I’m wrong, I think I’ll find out soon enough.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Tuesday, February 17, 2009

What Does Barron's See in Abbott that We Don't?

We’re well into the second month of the year, the world hasn’t fallen apart as some had predicted. But, then things haven’t taken off as others had hoped. Things are kind of, please excuse the technical term, blah.

Yet, some people are still back in the good old days, or, wish that they were. I found an example in this week’s Barron’s. Neil A. Martin penned an article about Abbott Laboratories (NYSE: ABT) entitled “Abbott Labs: a Prescription for Success”. He paints a very optimistic picture for Abbott. Yet, somehow, I couldn’t help but think that I’ve heard this all before.

Much is made of Abbott’s drug pipeline and how, unlike its competitors, they aren’t about to have any patents expire soon on their key products such as Humira, Niaspin, and Similac. OK, but, don’t patents eventually expire? (OK, I know some of you are snickering out there in the Blogosphere and saying to yourselves, “Not if you’ve got good lawyers.” I don’t buy that and will deal with you in a future blog.) They do. In some parts of the world, like India, they don’t care about your patents and if you try to introduce your products there, you’re going to run into the buzzsaw called ‘generics’.

Much is made of Xience, Abbott’s drug eluting stent acquired from the late Guidant Corporation. Between stents, drug eluting or otherwise, becoming a commodity and the risks from government healthcare reform, I’m not so sure that I’d get too excited about this.

Now, I don’t want to appear to be too critical. Neil does mention Wall Street’s concerns about Abbott’s growth being unsustainable. Though, he does try to minimize their arguments.

CEO Miles D. White is quoted as saying that Abbott if done with acquisitions for a while thereby violating Guy’s Third Rule of Being a CEO, always talk about the possibility of acquisitions. I suspect that White realizes that he can’t do acquisitions anymore for a variety of reasons ranging from financial to organizational.

Here’s why I’m harping on this article and poor Martin. Things have changed in the life sciences sector significantly over the last few years and will continue to do so. Pipelines come to an end. Companies without strong intellectual capital and lengthy track records of scientific achievement, not necessarily resulting in new products, cannot achieve these overnight. Companies with these assets are led by PhD’s in the sciences, MD’s, and similar credentials not MBA’s from Stanford University accomplished in the legerdemain of corporate finance.

The recent lessons from Wall Street and the American banking industry should be sufficient proof that there’s more to running to running a successful business than just a mindless shell game of assets shuffling.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Wednesday, February 11, 2009

Healthcare Reform – Will Big Pharma Get a Reprieve?

Has Big Pharma gotten a temporary reprieve from threatened reforms from President Obama? Last week’s withdrawal by Tom Daschle from consideration as the Secretary of Health, Education, and Welfare and his office’s admission that there was no immediate replacement doesn’t bode well for quick reform.

Also, given the problems President Obama is having gaining bipartisan support for a stimulus package that everyone agrees is needed, think what will happen when he tries to push healthcare reform through the Houses of Congress.

A cynic might say that Treasury Secretary Timothy Geithner was approved despite his tax problems because everyone felt that he was the man and this was his moment. The same cynic might also say that Tom Daschle knew that Congress wasn’t ready for him and this was certainly not his moment.

What does this mean for Big Pharma? One pending issue that some of us have been writing about is what happens when President Obama gives the go ahead to Medicare to negotiate volume purchase discounts for prescription drugs with the pharmaceutical companies. Revenues will certainly contract. I don’t think volume increases will offset the price decreases unless there is a new, national commitment to really overmedicating the country.

Now, if the Obama Administration is too distracted to go after healthcare reform then Big Pharma may get a temporary reprieve this year. This will be a good thing for Big Pharma. Many drug companies have major patents expiring this year and their replacements are not exactly setting the world on fire. Getting pounded on their remaining products would not have been a good thing.

I’m going to stick my neck out and say that this year’s, 2009’s, revenues will probably be safe from Federal tinkering. Going a little further out, 2010 and beyond, I think the risks increase significantly. Here’s why. First, the economy is not going to improve any time soon. The Republicans are on the defensive and when their constituents start screaming about government assistance because they’ve lost their jobs, homes, savings, etc. then we will really start to see bipartisan support. Especially, as we start to draw closer to the midterm elections in 2010. Next, once the Federal government really lets loose and starts to spend, someone’s going to realize that we’re spending too much. That means other someone’s are going to start finding places to save money. Medicare spending for prescription drugs is a great place to start. Even John McCain hates Big Pharma. I recently saw an article which indicated that the Obama Administration is reviewing the U.S. nuclear arsenal. They’re getting serious. The sacred cows are going to be gored.

Big Pharma’s going to have a tough year in 2009. President Obama’s current troubles may buy them a little time but it will come back with a vengeance next year.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Sunday, February 8, 2009

Wow - What a Week for Pharma M&A and Our Opinions on What's What

Larry and I have been blogging a lot recently about the Pfizer/Wyeth merger and some other possibilities. I want to spend a little more time because I think that it’s fundamental to what’s happening in Big Pharma right now. Also, with Tom Daschle dropping out of consideration for a Cabinet post, President Obama won’t be able to start his agenda for U.S. healthcare policy for a while, so we have some time to focus on M&A activity in the BioPharmaceutical Sector.

While I’m still not a big believer in the sense or economics of mergers in the drug industry, they sure generate a lot of ink in the press. (Or, are they are electrons in the age of blogs? I’m having a difficult time adapting my metaphors to the Internet age.) I get the reasons, falling stock prices, lots of cash on drug company balance sheets, and CEO’s desperate to do anything to appear to be adding growth to the top line. Also, the lack of any real news seems to engender a lot of wishful thinking out there in the media.

Here’s one example. Jim Cramer over at CNBC recently blogged ( ) about the possibility of a merger between Abbott Laboratories (NYSE: ABT) and Celera (NYSE: CRA). Seems that Abbott’s CEO, Miles White, has been talking about the possibility of acquisitions (But then don’t CEO’s always talk about this? This is Guy’s Third Rule of Being a CEO.), and they are both already working together in the area of personalized medicine. Jim admits freely that he is only speculating here, but, given the article in Barron’s which came out today chiding him about his track record in making predictions, I don’t think I’ll put much into this one. I did find Jim’s summary of personalized medicine interesting and I’ll return to this in a future blog.

Meanwhile, Mike Huckman is keeping hopes alive over at his blog ( ) about the possibility of Roche (SWX Europe: ROG) acquiring Genentech (NYSE: DNA) in a hostile takeover. This was his second prediction for the pharmaceutical industry in 2009. Now, I’m not picking on Mike. I have a lot of respect for him. But, looking at his photo on his blog, I think I can safely say that I’m a few years older than him. OK, maybe more than a few years. Anyway, my point is that since 1976 when Robert Swanson and Dr. Herbert Boyer launched Genentech, I’ve been hearing people talk about a hostile takeover. It’s a perennial. Also, as I’ve blogged before, this kind of deal doesn’t make sense to me.

This week, Merck's (NYSE: MRK) CEO, Richard Clark stepped back from their long standing high and mighty point of view against mergers and "hinted" ( ) by saying “I don’t think any CEO in this environment can categorically rule out any transaction,” Clark said, according to Dow Jones Newswires. “There are opportunities across the whole spectrum we would look at.” We're not that clear on the position Andrew Witty, Glaxo's new CEO is taking first saying that there will be no acquisitions, and then suggesting "bolt-ons" and then suggesting that acquisitions will take a prominent role as Glaxo looks to back away from the traditional big pharma "Blockbuster" model and move further into consumer, vaccine and emerging markets ( ). It may be of some interest that almost simultaneously and representing only about 1% of the value of the Pfizer-Wyeth deal, Glaxo acquired UCB's emerging market business for $687 million. In the meanwhile, Astellas launched a $1 billion hostile tender for CV Therapeutics ( and rumors continue to abound about a potential BristolMyers-Squibb-Sanofi hook up. Quite a week!

Other possibilities exist including Carl Icahn's continuing pursuit of "enhancing shareholder value" (e.g. sale to a Big Pharma company) at Biogen-Idec . That’s the fun thing about this kind of market, anyone can speculate about anything, even me. Let’s see what happens, I think that this is going to be a very interesting year.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin