Global Pharmaceutical Strategy

Strategic responsiveness of the survivors of Big Pharma companies Amit Rangnekar NMIMS-PhD-2004 DIIS Seminar, Copenhagen 2 nd October, 2006

Industry Brief Pharmacies Takeda Pharmacies , dyes Roche, Hoechst, Ciba, Sandoz Pharmacies , dyes Wyeth, BMS, Lilly , Merck, Pfizer, Origin Cost controls Price controls, non harmonisation Pricing, marketing, innovation,generics Drivers / resistors 11% 29% 44% Market share Dominant, 8 of the top 10, account for 75% of local sales More US sales (43%) than European (34%), except SanofiAventis Strong US sales (60%), but low Europe sales (25%) Local companies Pharma Takeda, Sankyo Chemicals,agro,dyes, drugs, OTC- Hoechst, Bayer, Ciba, Sandoz Pharma, healthcare Pfizer, Merck, Wyeth, J&J Traditional focus on Japan Europe US

Key Growth Elements In Top 10 Markets IMS-Health MIDAS, December, 2005 9.1 2.5 4.3 2.3 Average 5.7 2.3 1.8 1.6 2005 7.2 2.3 2.7 2.2 2004 10 2.6 4.5 2.9 2003 9.2 2.6 4.3 2.3 2002 13.4 2.8 8.1 2.5 2001 Total New Products Volumes Price Year

Dynamics of the 21st century pharma

Drivers

Demographics

Biologicals

Emerging markets

Innovation

Resistors

Drug discovery

Patent expiries

Generic onslaught

Attrition rates of new molecules

Opportunities

Therapy niches

Lifestyle diseases

Unmet needs

Outsourcing

Concerns

Drug safety

Drug prices

Industry credibility

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Big Pharma Marketshare (1995-2004) Strivers

Big Pharma v/s World Pharma Growth % World pharma growth (%) Big pharma growth (%) Big Pharma on an average, has grown at 67% more than the world pharma industry growth rate between 1995 and 2004

Big Pharma- Growing dominance

Rx oligopoly of the Top 10 Pharma companies

5 each from the US and EU

Occupy Top 2 positions in every key therapeutic segment

6500 sales force employed in the critical US market (average per Big Pharma)

Big Pharma driven strategic Shifts

1995

Fragmentation

R&D focus

Organic growth

Domestic dominance

Technology

Healthcare / Chemicals- focus

Prescription drugs

Ownership

2004

Consolidation

R&D Outsourcing

Inorganic growth

Global reach

Innovation

Pharma focus

Generics

Partnership

Big Pharma Survivors (In red)

Rank 1995

Merck

Glaxo

Bristol-Myers Squibb

Hoechst

Roche

SmithKlineBeecham

Pfizer

Ciba Geigy

Sandoz

Bayer

Rank 2004

Pfizer

GlaxoSmithKline

SanofiAventis

Johnson & Johnson

Merck

AstraZeneca

Roche

Novartis

Bristol-Myers Squibb

Wyeth

Big Pharma 2004- Market shares since 1997 Survivors of Big Pharma Other Big Pharma

Big Pharma Geographical Ranking 4 10 10 29 47 WMS % Novartis Pfizer Pfizer GSK GSK No 2 GSK Pfizer Latin America Novartis GSK Asia (minus Japan) Astellas Takeda Japan Novartis SanofiAventis Europe J&J Pfizer North America No 3 No 1 Region

Increasing Pharma Focus (%)

Bayer decreased focus, lost MS, confirming lack of focus results in MS decline

EU Big Pharma increased pharma focus thrice as much as the US companies

Strategies of Survivors Use of strategy: High +++ , Moderate ++ , Low + ++ ++ Strategic stake Novartis Roche GSK BMS Merck Pfizer + +++ ++ Eur +++ + + US +++ ++ +++ ++ Organic growth + + Co-promotion + + Eur ++ Eur + US ++ +++ US Alliances M&A Origin

Performance differentiators of Survivors Impact of strategy: Maximum +++ , Moderate ++ , Minimum + ++ +++ + +++ ++ Eur Novartis Eur Eur US US US Origin +++ ++ + ++ +++ Key segment presence ++ +++ + ++ +++ Block Busters + ++ +++ +++ +++ Patent threats +++ ++ Roche ++ +++ GSK + + BMS ++ ++ Merck + ++ Pfizer Lucrative Niche presence New Drugs