PhD Thesis Presentation

Longitudinal Study of the Strategic
Responsiveness of the Survivors of Big Pharma in
1995 and 2004, under conditions of consolidation
in the Global Pharmaceutical Market
Thesis Guide- Dr NM Kondap,
Vice Chancellor- NMIMS University

Presented by- Amit Rangnekar
PhD Scholar- 2004-05 Batch
SVKMs NMIMS University
Amit Rangnekar NMIMS-PhD2004

Presentation Flow







Research Objectives
Contribution
Scope of the study
Literature Review
Research Methodology
Research Findings
Conclusions
Further Research

Amit Rangnekar NMIMS-PhD2004

Research Objectives
• To study the emergence of Big Pharma
• To study the survivors of Big Pharma 1995, who
retained their positions in Big Pharma 2004, under
conditions of consolidation in the Global Pharma
Market
• To develop a framework to compare the strategic
responsiveness within the survivors and across
other categories in the Global Pharma Market, and
identify linkages

Amit Rangnekar NMIMS-PhD2004

Contribution to Pharmaceutical Strategic
Management
• Developed and applied the Pharmaceutical
Strategic Responsiveness framework to compare
strategic responsiveness across categories in the
Global Pharma Market, under conditions of
consolidation

Amit Rangnekar NMIMS-PhD2004

Contribution to Strategic Management
• Modified and applied the Ansoff’s Strategic
Responsiveness framework, a seminal work,
but with few applications, to arrive at the
outcomes of industry specific strategic
responsiveness

Amit Rangnekar NMIMS-PhD2004

Scope of the study
• Global Pharmaceutical Market Consolidation from
1995-2004
• Emergence and dominance of Big Pharma
• Compare the strategic responsiveness among
Global Pharma Market categories and identify
linkages

Amit Rangnekar NMIMS-PhD2004

Definition of Big Pharma
• The Top 10 companies by pharmaceutical
business sales in a particular year between
1995 and 2004
• Big Pharma dominates the Global Pharma
Market, functionally and operationally

%

Amit Rangnekar NMIMS-PhD2004

Strategic Shifts- Global Pharma Market
1995

2004

• Fragmentation

• Consolidation

• Organic growth

• Inorganic growth

• Ownership

• Partnership/Outsourci
ng

• Domestic dominance
• Healthcare/Chemicals
focus
• Big Pharma emergence

• Global reach
• Pharma focus
• Big Pharma
dominance

Amit Rangnekar NMIMS-PhD2004

Concept Map
Global
Economy

Global
Industry
Consolidation

Linkage
Strategic
s
Management

GPM
GPM Consolidation
Big Pharma 1995-2004

ASR Framework

Stayers
Fringers

Survivors

Followers
Amit Rangnekar NMIMS-PhD2004

Strategic
Responsiveness

Literature Review
Theorie Global
s
Industr
y
Global Economy
Dynamics
Consolidation
Strategic
Management
Strategic
Framework
Strategic
Many Studies
Response
Categories

Scarce
Few
Studies
Studies
Amit Rangnekar NMIMS-PhD2004

GPM

Big
Phar
ma

Strategy Typology
•Miles & Snow’s Strategy Typology 1978 outlines the
strategic organisation types emerging from similar
company strategies
•Prospectors innovate, take risks, seek out new
opportunities, grow
•Defenders desire stability &quality, develop internal
efficiencies
•Analyzers try to maintain stability but innovate at
the margins

•Reactors
respond
to environmental
happenings,
earch
is focused
on strategic
outcomes
than on at
the be
that moment
Amit Rangnekar
NMIMS-PhD-& processes of
•The typology describes
tendencies
2004

GPM Categories

ypology looks at outcomes of strategic responsiveness
a consolidating industry, hence classified in that fashi

Survivors

Stayers

Fringers

Firms
The
Firms
Firms in
in
The Top
Top 100
100
Firms
Big
common
Big Pharma
Pharma pharma
pharma firms
firms
common to
to
of
Big
for atleast
atleast 11
of 2004,
2004,
Big Pharma
Pharma for
year
1995
year between
between besides
besides the
the
1995 &
&
1995
2004
1995 &
& 2004
2004 survivors
survivors
2004
and
&
and still
still
& the
the
existing
stayers
existing
stayers
Amit Rangnekar NMIMS-PhD2004

Followers
Firms
Firms
outside
outside
the
the
Top
Top 100
100
pharma
pharma
firms
firms
of
of 2004
2004

Strategic Management Frameworks

• Bain’s ‘structure-conduct-performance’ model
(1956)- Industry structure determined firm conduct,
which determined economic performance
• Porter’s 5 forces model (1980)- Attributes of industry
structure & their influence on intensity of
competition
• The Delta model (Hax and Wilde, 2002)- Integrated
strategy formulation and execution, to adapt to a
dynamic environment
• A framework to include changing dynamics and
ff’s Strategic
Responsiveness framework (1971) looke
strategic response of the firms, lacking
ntal changes and the firm’s strategic response to thes
Amit Rangnekar NMIMS-PhD2004

Product
Obsolescence

Changes in
Product
Compositio
n

Changes
in
Product
Emergence
Technolog
of
y
Internation
al
Markets
Opportunitie
s to enter
new lines of
business
Changes in
legal and
social

Changes in
Market
Composition
Acquisition
of
other firms

Amit Rangnekar NMIMS-PhD2004

Divestment
from
parts
of
existing
business

Pharmaceutical Strategic Responsiveness (PSR)
Framework
Strategic

Dynamic
s

Product
Obsolesce
nce
Changes
in
Product
Technolog
Emergence
y
of
Internation
al
Markets
Opportunitie
s to enter
new lines of
business

Therapeut
ic
Categorie
s
NPD
Biotechnol
ogy
Geographi
es
Demograp
hics
Clusters
Niche
s
Generics

Changes in
legal and
social
constraints

Pricing
Drug
Safety
Lobbyin

Brands
Therapies
Promotion
Drug
Development
Globalisation
Emerging
Markets
Outsourcing
Regulations
M&A
Strategic
Acquisitions
Strategic
Alliances
Divestme
nts
Divestments

Amit Rangnekar NMIMS-PhD2004

Responsiven
ess
Changes in
Product
Compositio
n
Changes in
Market
Composition

Acquisition
of
other firms
Divestmen
t
from parts
of
existing

Research Map
Primary data

Secondary data

ocus Group Discussion Interviews
(7 respondents)
(7 respondents)
Ansoff’s SR Framework

ructured QuestionnaireIn-depth Interviews
(32 respondents)
(12 respondents)

Data Analysis
Hypothesis Testing
Development of PSR Framework

Amit Rangnekar NMIMS-PhDonclusions & Recommendations
2004

The Respondents
Survivors

Stayers

Fringers

Followers

Pfizer

SanofiAventis

Boehringer Ing.

Aurobindo

GSK

J&J

Merck (Ger)

Dr Reddys

Merck (US)

AstraZeneca

NovoNordisk

Taro

Roche

Wyeth

Lundbeck

Natco

Novartis

Eli Lilly

Ranbaxy

ViPharm

BMS

Schering Plough

Cipla

Blue Cross

Bayer

UCB

Beijing DC

Amit Rangnekar NMIMS-PhDAkzoNobel
2004

Pliva

Summary of Categories (Average)
Catego Age Employ Scale
ries
(Yrs) (000s)
$25b ($15b to $46b)
Survivo 68
77
Major R&D
rs

Scope
Global
Major therapies

Global sales

force

Rx-Speciality focus

Stayers

82

66

$16b ($5b to $31b)
Global
Major R&D
Multiple therapies
Global sales force Rx-Speciality focus

Fringer
s

131

18

$3b ($0.5b to $9b)
Partnered R&D
Multinational sales
force

Follow
ers

31

3

$0.3b (0.03b to $1b)
Partnered
Regional
Amit R&D
Rangnekar NMIMS-PhD2004sales force

MNC
Few therapies
Rx-GxSpeciality

MNC
Few therapies
Rx-GxSpeciality

Hypothesis
• Ho: There is no significant difference in percentage
response to the preferred strategy of the _________, from the
preferred strategy of the survivors, in response to _________.
• H1: There is a significant difference in percentage response
to the preferred strategy of the _________, from the
preferred strategy of the survivors, in response to _________.

Amit Rangnekar NMIMS-PhD2004

t-test values for the preferred strategies
Preferred Strategy of the Survivors

Survivors strategies
v/s
Fringers

Followers

S1

Presence in key segments & novel
drugs

0.569

0.129

S2

Bolstering US market share

-0.472

-0.194

S3

Focus on China as emerging market

0.475

0.551

S4

Licensing-in new products

0.952

1.056

S5

Launch extensions / isomers

5.645

0.511

S6

Growth strategies driving performance

0.133

-0.122

S7

Launching new products to drive
growth

0.566

0.808

S8

Divestment to fuel funds for new
0.251
0.082
projects
Similarity
S9 R&Dinthrough
strategic
responsiveness
Fringers & Followers,
to -0.227
Survivors
External
0.136
Amitpartner
RangnekarofNMIMS-PhDS1

2004 needs
Focus on unmet medical

0.836

0.304

Strategic Responsiveness across Categories
Preferred Strategy of the
Survivors

Survivors Strategies v/s
Stayers

Fringers

Followe
rs

S1 Presence in key segments &
novel drugs

Similar

Different

Similar

S2 Bolstering US market share

Different

Similar

Similar

S3 Focus on China as emerging
market

Similar

Similar

Different

S4 Licensing-in new products

Similar

Different

Different

S5 Launch extensions / isomers

Similar

Similar

Similar

S6 Growth strategies driving
performance

Different

Different

Similar

S7 Launching new products to drive
growth

Similar

Different

Different

S8 Divestment to fuel funds for new
projects

Similar

Different

Similar

Strategic similarity between survivors and stayers
S9 R&D through External partner
Different
Similar
Different
No single preferred
strategy
exclusive
to
the
survivors
Amit Rangnekar NMIMS-PhDS1 Focus on
unmet medical
needs
Similar
Different
aunching
extensions
/ isomers
common
toDifferent
all the categorie
2004

Stayers 7/10
• 3 preferred strategies of stayers, differed from the survivors
• Stayers prefer to increase pharma business focus (bolster US
market share), rely on strategic alliances and acquisitions
(organic growth), and rely on own R&D (external partner)
• Fully integrated but smaller in scale wrt the survivors
• Similar strategy mix to that of survivors
• Adept at brand building and partnerships but lag behind the
survivors in new drugs, pipelines and sales force reach

Stayers focus on scale, while survivors focus on growth

Amit Rangnekar NMIMS-PhD2004

Fringers 4/10



Increasing differences in preferred strategies with survivors
Focus on volumes & acute therapies
Rely on own R&D, combinations
Partner the survivors in R&D but compete for new drugs
and generics
• Use M&A for geographical/regional dominance or
therapeutic reach, while survivors use M&A for economies/
therapeutic synergies/ bolstering pipelines

riven by volumes than value, more opportunistic than

Amit Rangnekar NMIMS-PhD2004

Followers 5/10
• Increasing differences in preferred strategies with
survivors
• Threats for survivors are opportunities for the followers
• World class capacities /capabilities, low operating costs
• Strategically positioned to deliver value to survivors in
generics, NDDS, CRAM and API
• Over reliance on a segment/product/speciality, hence
regulatory issues can threaten existence
• Shifting from high growth emerging to regulated markets
for value addition, even as survivors shift from mature
regulated markets to emerging markets for growth

ers sometimes co-operate but mostly compete with su

Amit Rangnekar NMIMS-PhD2004

Respondents Scale v/s Strategy

M&A+S
A+
Organi
c

Strateg
y

Followe
rs

Fringers
Ranbaxy

DrReddys

UCB
Pliva

Stayer
s

Surviv
ors
Pfize
GSK r
SanofiAventis

Roche
Novartis
BMS
AstraZeneca

Organi
c

SA+
Organi
c

B Ingelheim
J&J
ScheringPlough
Cipla
NovoNordisk
EliLilly
Beijing DCLundbeck Baye
Natc
Merck(US)
o
ViPharm
Aurobindo
r
Wyeth
Merck(Ger)
Taro
AkzoNobel

BlueCross

Map not to scale, indicative

<$1Amit
Bn Rangnekar
<$5
Bn
<$20 >$20
NMIMS-PhDBn
Bn
SA= Strategic Alliances & Acquisitions
2004
Scale

Strategy Mix
M&A
Organic
Growth

Divestmen
ts

Strategic
Alliances

Strategic
Acquisition
s
Amit Rangnekar NMIMS-PhD2004

Intra-Survivors Strategy Mix
Survivors

Pfizer

M&A

Pharmac SKB
iaWL
BW

GSK

Strategic
Stake
Strategic
Alliances
&
Acquisitio
ns

BI, Eisai,
Searle,
Vicuron,
Bioren,
Idun

Bayer
Roche
Affym
ax

Derm
Divestme Adam,
Women’ atnts
s Health ology

Merck

Roche

Novartis

BMS

Coranje

CibaSandoz

DuPont

Banyu

Genentec 30% in
h Chugai Roche,
Chiron

Astra
SGP
Rosseta
Aton
Lunbeck
Sanofi

Glaxo
Igen
Affymetri
x
Antisoma
Trimeris

Medco,
OTC
OTC,
Vitamins
CropEssences
protectio
n
Amit Rangnekar NMIMS-PhD2004

Enablex,
Idenix,
BASF Gx,
Hexal, Eon,
Hazal, Lek,
Regeneron

Imclone

Sanofi
Otsuka
Lipha
OncoThera

AgroChem Mead–
Nutrition
Johnson
Sante
Generics
Clairol
Zimmer

Strategic Responsiveness within the Survivors
Preferred strategy within the survivors

Agreement on the
preferred strategy
within the survivors

S5

Launch extensions / isomers

100%

Unanimous

S7

Launching new products to drive growth

100%

Unanimous

S1

Presence in key segments & novel
drugs

87.50%

Near Unanimous

S4

Licensing-in new products

87.50%

Near Unanimous

S10 Focus on unmet medical needs

87.50%

Near Unanimous

S3

Focus on China as emerging market

75%

Significant

S8

Divestment to fuel funds for new
projects

75%

Significant

S9

R&D through external partner

62.50%

Near Significant

S2

Bolstering US market share

50%

Divided

S6

Growth strategies driving performance

37.50%

Widely Divided

Similarity in strategic responsiveness
76.25%
Strategic similarity
(Average)
But reliance
a growth
strategy mix
Amiton
Rangnekar
NMIMS-PhDHigh level of2004
strategic adaptability evident

Survivors- The Differential
• Use strategy mix- ally, acquire, divest & integrate better
• Adept at partnerships; shepherding & marketing discoveries
of others
• Focus on dominant US and fast growing emerging markets
• High marketing spend, higher marketing effectiveness
• Physician proximity aids new drug approvals, superior reach
helps establish new drugs faster across geographies
• Operate & dominate in major segments with blockbusters
• Innovative patent extension and generic defense strategies
• Lobbying helps shape favourable policy

Amit Rangnekar NMIMS-PhD2004

Survivors- Golden Egg Strategy
• Survivors do not put all their eggs in one basket, use
a balanced combination of strategies, and manage to
build a golden egg every time
• As the environment changes, these strategic
responsiveness competencies are used, to create
another golden egg
• This helps spread risks and ensures survival
• The successful strategies are then used
by other categories, to retain
their positions

Amit Rangnekar NMIMS-PhD2004

Further Research
• Similarities in strategic responsiveness among GPM categoriesNew competencies & strategies that firms need to create to
survive
• Despite 150 years of GPM existence, leader has less than 9%
shareIs further consolidation and more fossilisation expected
• GPM consolidation has led to consolidation across allied
industriesWhich categories are driving this change
• Some strategic responsiveness traits are common to US & EU
firmsLink between strategic responsiveness and geographical origin
Amit Rangnekar NMIMS-PhD2004

Further Research
• Industry specific Pharmaceutical Strategic
Responsiveness framework to compare the
strategic responsiveness of Global Pharma
Market categories, under conditions of
consolidation
• Opens up the possibilities of creating industry
specific strategic responsiveness frameworks
for tracking the outcomes of strategic
behaviour of firms in industries under
consolidation

Amit Rangnekar NMIMS-PhD2004

Amit Rangnekar NMIMS-PhD2004

Related Work-1
• Henderson R, HBR, January-February, 1994
‘Managing Innovation in the Information Age’
• Pharma companies despite their age, size and
success have retained their flexibility and
responsiveness, which enabled them to solve
competitive challenges in the research arena that
companies in other industries are grappling with
• Pre-consolidation, does not consider newer
dynamics and strategies, R&D focus than strategy

Amit Rangnekar NMIMS-PhD2004

Related Work-2
• Agarwal et al, Mckinsey Quarterly, 2001, Issue
2 Unlocking the value in Big Pharma
• Split the top companies by size into 3 groups-super
heavy, heavy and middle weights and analysed the
challenges and the strategic responses.
• Concluded that size can deliver benefits across the
entire pharma business, but innovative approaches
to organization, decision making, and accountabilitycan manage the complexity that size brings
• Peri- consolidation, does not consider newer
dynamics and strategies, more future focussed
Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• Financial Times, Europe, Oct’06
• “Family owned middle pharma selling out,
acquired by fringers to consolidate geographically
or therapeutically, or get into allied areas like
biotech, generics”

Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• BCG, The New Global Challengers, May’06• “Highly competitive challengers from the RDE will
emerge on the world scene with strategic
decision making capabilities and world class
capacities. Only the incumbents, who can identify
the challengers and assess the opportunities and
threats they present, will survive”

Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004










IMS Intelligence 360, May’07Observations
Low income countries driving 27% of global pharma growth
Increasing regulations for risk and safety monitoring
Innovation skewed towards biotech and specialist driven
therapies
Rising academia licensing deals, increasing technology
acquisitions
Recommendations
Delivering demonstrable innovation is critical
Optimise sales force, increase launch effectiveness
Beef up the legal arm
Target specific products to specific markets

Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• Wood Mackenzie, Mar’07
• “The step-wise decline in market share post M&A
conveys restructuring inefficiencies , conflict of
culture/decision making styles, integration issues,
and that M&A were undertaken to solve a growth
problem”

Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• Datamonitor, Jul’06, Blockbusters to
Nichebusters
• “Blockbusters attract significant generic competition
and may also stifle R&D innovation. Small-scale
M&A deals harness innovation and provide access to
niche markets with a high unmet need”
• “Early-stage licensing and collaborations help
companies successfully capture R&D innovation"
• “Central to the nichebuster model development is
the raised importance of personalized therapies,
driven by the increased use of diagnostics. Critical
to a successful nichebuster model, is targeting
specialists to drive clinical trial progression,
approval and successful uptake”
Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• Goldman Sachs, Mar’06• “Key industry pressures are- US patent expiries,
drug safety scrutiny & litigation, pricing concerns,
R&D productivity, generic exposure cycle, and
“Giganticism” challenge
• Key industry positives are- US Medicare Drug
Benefit, Cost flexibility, Cash flow generation,
M&A/ strategic options/“Scale P&L”/Legacy CEOs”

Amit Rangnekar NMIMS-PhD2004

Pharma Strategy Research- Post 2004
• Pharmaceutical Licensing Strategies, Business
Insights, Nov’06
• “Alliances are based on Big Pharma’s reputation as a
partner of choice, and companies increasingly seek longterm, multi-product, multi-indication collaborations than
one-off deals”
• “Alliances succeed due to the ability to collaborate
effectively”
• “Value of licensing deals has risen markedly in the last 5
years, but volume of deals among top companies has
plateaued”
• “Large biotech companies now have the resources and
capabilities to develop lead drugs to later stages of
development and compete with Big Pharma for the best inlicensing deals”
Amit Rangnekar NMIMS-PhD2004

Strategic Responsiveness- Post 2004
Research
• Strategic responsiveness and Bowman's risk–
return paradox: Andersen, T., Denrell, J., and
Bettis, R. Source: Strategic Management Journal;
Apr2007, Vol. 28 Issue 4, p407-429,
• Formalizes a model of strategic conduct based on the
concept of strategic fit and the heterogeneity of firm
strategic capabilities. This model is shown
mathematically to yield the negative association of the
Bowman paradox. Furthermore, the model makes several
other testable predictions. To examine these predictions,
simulated data from the model are compared with a large
empirical study of 45 industries during 1991& 2000. The
predictions of the model are consistent with the empirical
data. One of the most enduring puzzles in the strategy
literature is the negative association between risk and
return known as the Bowman paradox.
Amit Rangnekar NMIMS-PhD2004

Strategic Responsiveness- Post 2004
Research
• A study of organizational learning culture,
strategic responsiveness and mass
customization capabilities of United States
manufacturing enterprises by Hudspeth,
Lonnie James, Ph.D., The University of
Toledo, 2004, 135 pages; AAT 3126107
• “An organizational learning culture enables the
strategic responsiveness and mass customization
capabilities that are necessary for achieving value
to customer performance”

Amit Rangnekar NMIMS-PhD2004

Consolidation- Dynamics & Strategies
Old but
important

Dynamics

Strategies

•Patent expiries
•Barren pipelines

•Launch extensions /isomers
•Focus on alliances

Old but not •Domestic policies
important
•Domestic dominance

New and
important

•Focus on organic growth
•Own R&D

•Partnerships across value
•Decreased
chain
productivity
•Focus on biotech, drug delivery
•Drug withdrawals
•Patent expiry erosions •Environmental management
•Regulatory monitoring •Increased marketing spend
•Tap emerging markets
•Generic incursions
•Focus on niches, versatile
•Cost containment
drugs
•Short Product lifecycle
•Pharma business focus
•Competitive intensity
Amit Rangnekar NMIMS-PhD•Strategy mix
2004

Post 2004 Strategic Responsiveness
Key dynamics

1995-2004 (Own research)

2004+ (Secondary data)

Patent expiry

Launch isomers

Authorised Generics

New drug launches

Co-marketing, blockbusters

Multi partner,nichebusters

Growth

Organic, M&A, Alliances Organic, Alliances

Drug discovery Own & partnered R&D

Acquired /licensed R&D

Innovation drive Biotech, primary care

Biotech, specialty, vaccines

M&A drivers

Big Pharma

Fringers

Drug withdrawals

Reactive

Proactive

Patents in EMs No NPL in EMs

NPL costly drugs in EMs

Demographics Geriatrics, adults

Young adults, women

Technology

Biotech

Biotech, Genomics, Nano

Promotion

Doctor centric

Doctor and patient centric

Sales force

Expand

Smart size

Corporate focus

Amit Rangnekar NMIMS-PhDLegal
R&D2004
& Marketing

& Regulatory

Biotech & Personal Medicine
Biotech
• Cover diverse segments- psoriasis, vaccines,
cancer, metabolism and virology
• Command a price premium, generics deterrent
due to their manufacturing complexities
• Not shown as a separate category, because intracategory comparison with non-biological
molecules becomes difficult
Personalised medicine
• Little evidence in 2004
• Issues of feasibility, safety, ethics & price
Amit Rangnekar NMIMS-PhD2004

PBM, HMO, Medical Insurance
• Outside the scope of this study
• Relevant only in US, more a healthcare issue than
pharma
• More relevant in US than Europe or globally
• Medical insurance in emerging markets catching
up but low penetration
• Health Maintenance Organisations (HMO) and
Pharmaceutical Benefit Management (PBM)
companies alter the dynamics of the US generics
market, largely through cost containment
measures like generic prescribing, brand
substitution, and reimbursement on the basis of
cheapest brand
Amit Rangnekar NMIMS-PhD2004

Amit Rangnekar NMIMS-PhD2004

Amit Rangnekar NMIMS-PhD2004

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