Workforce Trends: Research and Development Investment

The brand name pharmaceutical manufacturers in the United States are currently experiencing a change in the workforce. Due to the patent cliff In 2011, major companies have lost autonomy on the blockbuster drugs. This means that the generic pharmaceutical manufacturers can begin to produce similar drugs. This poses a threat to the brand name pharmaceuticals as they are at a price disadvantage. One way to retain profits and allow the industry to grow is through research and development investment. According to IBIS World US, there is a correlation between research and development investment and the number of new drugs (2012). If this statement is taken as a premise, then the follow up question would be, where is the best place to invest in research and development? Should the company invest internally in their own labs or should they outsource to countries such as India? This is subjective to the company because as stated earlier in the IBIS world US report, the brand name pharmaceuticals are generating profits by reducing operating costs and employment. This can be viewed as the industry not growing but adapting to economic conditions, yet as we begin to emerge from the recession, there must be this shift in business objectives from survival through cost cutting to innovation that leads to growth. Should the companies choose to invest internally to the research and development departments within their firms, than that should increase employment in the industry. However, this would provide its own set of pros and cons. The cons of this would be that costs will increase as their workforce increases, whereas outsourcing to India would prove to be less expensive. This is positive as the less expensive it is to research and develop the new drugs the more price competitive it will be against future similar generic drugs. According to IBISWorld, India is expected to contain 8.0% of the worlds clinical trials by 2016. Especially, since most drugs cannot generate as much profit as the amount of money invested in its research and development, all opportunities for more cost effective research and development are crucial to industry growth through product differentiation and diversification in the Ansoff Matrix.  In order to benefit from this information the next step would be to assess whether the companies provided will be able to best address research and development.  Abbott Laboratories recently invested in research and development,  it should be investigated whether it was internally or outsourced and what are the projected expectations from that research, should the information be attainable.

Resources:

IBISWorld US reports: Brand Name Pharmaceutical Manufacturers in the US. (2012).       

             As retrieved from: http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=487  

Blog #5 Industry Structure

For the pharmaceutical industry, it varies on every company on how they structure themselves, but most of the time they structure themselves on their products. In general, the structure of a product defines the tasks that must be completed to deliver a product to end-users. An industry’s structure emerges from the various ways firms organize themselves to complete those tasks. Some firms structure themselves to have the product production go straight from start to finish, while others divide the tasks and collaborate on how to produce the product to the consumers. Companies do end up having similar questions on the decision on what their products should be, generic or brand. If gone in either way, the division of tasks is modified to fit that product. Sometimes there is an interpersonal faction to the companies that cater the product to the consumer’s need, like costumer service, only indirectly. But the majority of any company’s workforce may be their R&D (research and development) department. The R&D department basically creates and product and determines it usage, while the rest of the work force, decide where it goes. Because of more competition in recent years resulting from a lot of drugs coming off patent, companies have expanded their R&D departments to develop similar or enhanced versions of already popular drugs. R&D is vastly the most important part of any pharmaceutical company at this point of the industry.

Anderson, Scott John. "Georgetown University." Georgetown University. (2003): n. page. Web. 19 Nov. 2012. <http://cct.georgetown.edu/research/thesisdatabase/ScottAnderson.pdf>.

Marron, Donald. "CBO." CBO. (2006): n. page. Web. 19 Nov. 2012. <http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7615/10-02-drugr-d.pdf>.

Influential Leaders of the Pharmaceutical Industry

The pharmaceutical industry has experienced major growth in the past few decades, as research and development has greatly improved. The industry’s technological advances have brought our society a variety of new and specialized products. However, these advances did not happen on their own; innovative leaders were needed to lead these developments. For innovation and science discovery, a notable leader of the industry is recent Nobel Prize winner and biologist Sir Martin Evans. Evans is noted for his work and research, along with biologist Matthew Kaufmann, on embryonic stem cell isolation in 1980. In 2008, he, along with Mario Capecchi and Oliver Smithies, were awarded for their discoveries in genetic modification by inserting re-modified cells into female mice in order to create offspring with explicit gene modifications. His contributions have led to further research in treatment for genetic disorders (Evans). Another influential leader in the pharmaceutical industry is geneticist Doctor Francis Collins. Collins’ role has spurred some debate amongst some scientists, as Collins is a practicing Christian, which seems to conflict with the duties and morals of a scientist.  However, his work has led him to become the current director of the National Institutes of Health, sworn in in 2009 (Collins). While these discoveries greatly improved R&D, another important aspect of the pharmaceutical industry is philanthropy, or meaningful ways of improving the community and environment by performing charitable efforts. Some of the most well-known leaders of this are Bill and Melinda Gates, founders of the Bill and Melinda Gates Foundation. This foundation was created in order to promote world health, along with education and community giving. Recently, this foundation has worked to improve ways for developing countries to access vaccines (Gates Foundation). From researching leaders in the pharmaceutical industry, it has become evident that many prominent leaders of the industry do not just come from scientific research and innovation, but also from philanthropy and business.

Collins. Francis Collins – The 25 most influential people in biopharma today. Retrieved from
http://www.fiercebiotech.com/special-reports/25-most-influential-people-biopharma- today/francis-collins-25-most-influential-peopl.
Evans. Superstars of Science- Sir Martin J. Evans. Retrieved from
http://superstarsofscience.com/scientist/sir-martin-j-evans.
Gates Foundation. Vaccine-Preventable Diseases Overview. Retrieved from
http://www.gatesfoundation.org/vaccines/Pages/overview.aspx.

Innovation In Pharmaceuticals

In the past pharmaceutical innovation was about new discovery in medicines and inventing new products for common diseases. This is a problem because this kind of innovation is not common and is very variable. Data collected by CMR International1 indicate that projects based on new targets have significantly lower success rates than those based on established targets in every phase of the discovery process. CMR International data also show that projects on new targets typically take 16 months longer to deliver a drug candidate into preclinical development than projects on established targets (Journal of Commercial Biotechnology). There is a new trend of innovation in pharmaceutical R&D. This is how fast and productivity the companies can get out their products. Companies that focus large amounts of discovery investment on new targets risk being slower and less successful at getting products into development, and therefore onto the market (Journal of Commercial Biotechnology). The very successful company, Pfizer is focusing heavily on R&D and new ways to improve on it. The pharmaceutical industry can focus on innovating throughout the value chain, to differentiate products, for the increasing demands of regulators and payers, and increasing the speed to market (Journal of Commercial Biotechnology). This is because in the pharmaceutical industry, there are so many products to sell, so there is always a replacement product. Marketing groups must work closely with R&D, by trying to innovate the way you sell products, the companies can sell what they already have and the sales of other substitute products will go done. This new differentiation can also be achieved through owning innovative chemical scaffolds, developing new approaches in medicinal, and creating clinical strategies focused specifically on demonstrating differentiation (Journal of Commercial Biotechnology). Pfizer has a strong R&D plan and also has a new spin on marketing products. They are very customer oriented and ethical. This could be an innovative way to sell products because there have been scandals in the pharmaceutical industry about unethical testing and practices.

Rethinking innovation in pharmaceutical R&D: Research and Regulation (2005). Retrieved from:

http://proxyau.wrlc.org/login?url=http://search.proquest.com/docview/232912307?accountid=8285

Blog #5: Entrepreneurs in the Pharmaceutical Industry

Entrepreneurs in the pharmaceutical industry have greatly changed the competitive landscape. Entrepreneurs are becoming more and more crucial in pharmaceuticals mostly because of the creation of generics. Most of the entrepreneurs found in the pharmaceutical industry are generic drug companies. There is really not much else available for entrepreneurs. Entrepreneurs are about creation and growth (Isenberg 2012). That is why they are such competition for the big pharmaceutical companies. The big companies are making the products, but the entrepreneurs are making generics of those products, advertising them well, and doing most of the research and development work. Most of the research and development in the pharmaceutical industry is done by the entrepreneurs. This gives the entrepreneurs another competitive advantage because since they do the research, they know about all the current trends and opportunities in the industry. They get to act on it first and become more successful. Daniel Isenberg of Babson Global reports that "generic pharmaceutical entrepreneurs create economic and social value around the world - without innovation" (Isenberg 2012). This shows that even around the world pharmaceutical entrepreneurs are valued, and the fact that they are valued economically and socially means that they are very successful. The big companies in pharmaceuticals have a lot to compete with in this industry. It looks like entrepreneurs have the competitive advantage right now, and it makes me very curious to see how this plays out in the future. The big pharmaceutical companies really have to start doing some more work to compete with the entrepreneurs. They need to do more research and development as well as keep patents on thier drugs so generics do not steal them. It takes more than just being a multi-million dollar company and releasing a few big drugs. Now that the entrepreneurs are really getting themselves into the industry, the big name companies have to step it up a notch.

Isenberg, Daniel (2012). Entrepreneurship Outperforms Innovation. Retrieved from http://www.businessweek.com/debateroom/archives/2012/02/entrepreneurship_outperforms_innovation.html#share

Blog 4: Financial Reporting in the Pharmaceutical Industry

In the Pharmaceutical industry, several companies are doing well in their financial reporting, illustrating that these companies have been expanding their profits and growing in the industry. While my company Teva Pharmaceutical’s total assets this year decreased slightly from $50,142 million to $48,881 million, Teva assets in general have increased over the past few years. From 2008 to 2010, Teva grew over $12 million in assets. Also, last year, Teva completed an acquisition with Japanese company Taiyo, the third largest generic company in Japan, which has expanded their coverage and has more accessibility to more generic research (Teva 2012). Novo Nordisk is doing spectacular and is has continued to progressively increase their sales and profits. Novo Nordisk saw an 18% sale increase the first nine months of this year from 48,226 to 57,064 million. Also, their operating profit expanded from $16.3 to 21.9 million, a 34% increase (Novo Nordisk 2012). Abbott Laboratories is also experiencing an increasing amount of sales; from 2009 to 2011, Abbott Laboratories’ sales increased from $30.7 to $38.8 million, a well improvement. From 2010 to 2011, their net earnings increase from $4.6 to 4.7 million (Abbott 2011). While these companies have been doing well, others have not had the same experience. Large company Pfizer has continued to lose profits. Pfizer’s third-quarter reported revenues of this year have decreased from about $16.6 million (2011) to nearly $14 million, a 16% decrease in revenue (Pfizer 2012). Pfizer is one of the largest companies in the Pharmaceutical industry, but it is interesting to see their decrease in profits. AstraZeneca has also lost revenue. From 2010 to 2011, AstraZeneca’s assets have decreased from $56.1 to 52.8 million (AstraZeneca 2012).

Abbotts Laboratories (2011). Annual Reports. Retrieved from
http://www.abbottinvestor.com/phoenix.zhtml?c=94004&p=irol- proxy&cid=re_annualreprts2011_Reportsandfinancialscontent_abbottinvestors.
AstraZeneca (2012). AstraZeneca Annual Report 2011. Retrieved from
http://www.astrazeneca- annualreports.com/2011/documents/pdfs/annual_report_pdf_entire.pdf.
Novo Nordisk (2012). Financial Report for the Period 1 January 2012 to 30 September 2012. Retrieved from
http://webmedia.novonordisk.com/nncom/images/investors/investor_presentations/2012/I nterim_report/PR121031_Q3_2012_UK.pdf.
Pfizer (2012). Pfizer Reports Third-Quarter 2012 Results. Retrieved from
http://www.pfizer.com/files/investors/presentations/q3performance_110112.pdf
Teva (2012). Financial Fundamentals. Retrieved from
http://ir.tevapharm.com/phoenix.zhtml?c=73925&p=irol-financials.

Profitability of Abbott Laboratories

My company is Abbott Laboratories and the latest annual reports are from the previous year of 2011.  I downloaded the consolidated statement of earnings directly from the companies website.  The statistics in the statement are shown in dollars and shares in thousands except per share data. According to the statement net sales have increased to $38,851,259 which is an increase of $3,684538 from the previous year of 2010, this is indicative to the scope of the business if they are able to generate that much net sales, however that alone is not indicative of whether or not they are the most recommended to invest in due to the remaining question of net profit.  It is shown that the net earnings have increased from $4,626,172 in 2010 to $4,728,449 in 2011 to equate to an increase of $102,277. This in turn raises the basic earnings per common share from $2.98 in 2010 to $3.03 in 2011 by an average of 1.7%. Although these statistics look promising they alone do not build a sufficient case to the possible investment in Abbott Laboratories. Does the information provided regarding their profitability ensure maximum return for the investor? Are the costs being managed efficiently to provide maximum profitability?  It should also be noted that although in the past years the profitability has increased it is still a decline considering the $5,745,838 in profit in 2009. However, taking external factors into account such as the business cycle that would explain the decline in profits to a certain extent. However, it would be recommended that the investors make themselves acquainted with the company’s survival strategies during a negative external business environment before investing. A major industry trend is research and development and it is seen that Abbott has spent $4,129,414 in 2011, which is an increase of  $404,990 from 2010. This partially explains the costs of the business and why it has not reached maximum profitability, however it if executed correctly could have a positive impact on profits. Therefore it is recommended to the investors to ask to view the research and development strategy of Abbott Laboratories. Although research and development only increased costs by $4,129,414 the total operating costs rose by $4,020,171 in the past year. This indicates that cost of products sold increased and it is recommended to the investors to view the production strategy to reduce costs, or for Abbott Laboratories to change there production process. Administrative costs are also high which indicate a wastefulness of resources, so this should be further investigated by Abbott Laboratories and the solution should be presented to the investors to ensure them of the companies vision. A possible solution would be to begin to transform the company into an environment friendly company as it has been shown to show a reduction in overall costs over time that should ensure that the investors receive a return on their investment. The issues discussed should be further investigated, yet Abbott Laboratories still appears to be a viable candidate for future investment.

Resources:

Abbott Laboratories. (2011). Consolidated Statement of Earnings. As retrieved from:

http://abbott.com/static/content/microsite/annual_report/2011/01_earnings_statement.php

Blog #4 Current Events

For current events in the Pharmaceutical industry, the issue of high cholesterol and drugs used to manage it have been under the spotlight recently. Pfizer’s Lipitor, a very popular statin drug used to treat high cholesterol finally came off its patent a year ago, resulting in other pharmaceuticals developing their own version of cholesterol management. Lipitor was the biggest selling drug ever and gave Pfizer a multibillion-dollar cash flow every year until it became a generic. When Lipitor came off its patent, this became an opportunity for other pharmaceuticals to pull in some consumers with their own version of cholesterol control. The problem was though, how could they improve a drug that already seemed in its best form?

            Companies in the pharmaceutical industry are making a mad dash in the R&D department to develop the same type of Lipitor but improved with an extra focus on a protein called PCSK9 that would clear the “bad form of cholesterol.” But to make the drug with that extra part would mean administrating the drug in a shot. The price of administrating the shot and the unlikeliness of some consumers willing to get a shot make marketing the new drug difficult. It even makes some companies wonder if they should even continue with the drug. But the market is so large with most American adults having high cholesterol and with the Lipitor off patent, so not developing the new drug would be silly. 

Winslow, John. "The Wall Street Journal." Wall Street Journal. (2012): n. page. Web. 7 Nov. 2012. <http://online.wsj.com/article/SB10001424052970203347104578101082109438820.html?KEYWORDS=pharmaceuticals>.