The Rise and Fall of Pharma Reputations - Pharmaceutical Executive

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The Rise and Fall of Pharma Reputations
In the 2004 insider survey, some Big Pharmas lost ground while fast-moving biotechs shot to the top.


Pharmaceutical Executive


Genentech also rose sharply in the RSS rankings to claim the second place position for 2004, up from seventh a year earlier. The company registered an eleven-point increase—from 60 in 2003 to 71 in 2004. RCC believes the successful launch of Genentech's Avastin (bevacizumab) colon cancer drug and its strong growth prospects in pharmacogenomics (personalized medicines) helped to boost its reputation last year. This premise is based on respondents' references to the innovativeness of Genentech's products, the quality of the company's employees and regulatory relationships, and its strong corporate governance. As one executive commented, "Genentech is a highly innovative and creative organization and is well positioned for the future."

Amgen also made a strong showing in 2004, moving up to third place in the overall ranking with an RSS of 70, up five points from 2003. Respondents pointed to improvements in Amgen's employee retention and work processes, along with its ability to execute strategic alliances and successful acquisitions. One executive's comment that Amgen is "a technical leader and very creative" is typical of respondents' views of the company.

Downward Movers Troubling events of 2004 led several of pharma's biggest and best-known companies to lose status among industry insiders.

Merck, to no one's surprise, moved from its top-ranked position in 2003 down to eighth place in the current study. Respondents in 2004 were significantly less enthusiastic about Merck's strategic direction, its financial security, and its management team. It is important to note, however, that even though the recall occurred in the middle of the 2004 survey, Merck's RSS remains at a respectable 60. Without the strong corporate reputation Merck had built up in recent years, its slide down the RSS scale could have been far more severe. Reflecting the immediate uncertainty, comments from respondents varied widely. Some asserted that Merck continues to be "a diverse, quality company," while others pointed to "a questionable future given Merck's weak pipeline and the Vioxx recall."

Bayer AG's score made the most precipitous decline of any company in the study, dropping 14 points to 45. Ranked 17th in the 2004 poll, Bayer's overall reputation was hurt by a sharp drop in insider perceptions of its ethics. The company's ranking in what is currently the most important reputation metric, ethical behavior, dropped to last place in 2004, down from fourth place in both 2002 and 2003. In particular, respondents cited issues with company leadership, trustworthiness, treatment of employees, and relations with vendors and suppliers. One said, "Bayer is overextended and too diversified to know what it is doing."

Pfizer also had difficulties in 2004. After sharing a first-place ranking with Merck in 2003, the company slid to sixth place in the overall reputation rankings. Pfizer maintained a still relatively high RSS of 66 in 2004, thanks in large part, RCC believes, to the reputation capital it had built in earlier years. Nevertheless, the firm was affected by the same issues that are troubling Merck.

Pfizer's Celebrex (celecoxib) arthritis drug competes with Vioxx and may have similar negative side effects. Given its size, analysts believe Pfizer faces difficulties in developing enough new drugs to fuel future revenue growth. Industry executives gave the company lower marks this year in financial transparency, work process innovation, and treatment of employees. At the same time, Pfizer achieved higher marks for its competitive differentiation, earning the top rank in that metric. "Pfizer is a strong company," said one respondent, "but there are questions about its pipeline longer term."

New Drivers RRC's reputation questions are designed to get at the drivers (or metrics) that respondents believe will add to or detract from a company's reputation strength. The answers, combined with researchers' assessment of behavioral measures, help provide a more accurate overall picture of each company's reputation strength. They also provide critical information that companies can use to assess their current status and to identify areas for improvement through operational changes, communications programs, or both.


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