Industry Audit - Pharmaceutical Executive

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Industry Audit
The Company of the Year: Our fifth annual report dives deep into the numbers and comes up with the industry's true top performers.


Pharmaceutical Executive


BusinessWeek, in collaboration with the Boston Consulting Group and IBM, surveyed 1,070 top corporate executives at global corporations. They asked 27 questions on innovation and innovation metrics. To avoid bias, the execs were asked to identify the most innovative company outside their own industries.

The drug industry likes to wear innovation on its sleeve. But these corporate executives did not see it that way. No drug firm made the top 25—but IKEA, Target, and Starbucks did. Genentech, the first drug firm to crack the 100 most innovative, ranked 27. J&J came in at 53; Pfizer at 55; and Amgen at 87. PepsiCola and Frito-Lay, were perceived as more innovative than J&J, Pfizer, and Amgen. What's the story?

According to BusinessWeek, innovation is more than just new products. For example, Southwest Airlines, number 25 on the innovation ranking, excels at operational excellence. The personification of operational excellence, Wal-Mart, came in at 20. That sounds a lot like Forest, which may not have much expertise in technology but knows how to execute strategy and marketing.

Conclusion

The eternal questions remain: What do size, scale, and R&D spend have to do with performance? It seems, counterintuitively, not much. The largest drug company in sales revenue, Pfizer, was outperformed by a firm that is 1/15th its size, Forest. In terms of R&D spend to sales, Biogen Idec has the highest relative spend but not much to show for it. And Forest, a firm that spends a minuscule amount on R&D, is a top performer. So factors like size, scale, and absolute/relative R&D correlate unreliably to perfomance. Unless, of course, everything turns out as John LaMattina of Pfizer portrayed it in a New York Times interview: A golden age of innovative drugs is right around the corner. One can hope that new age comes sooner rather than later.

Bill Trombetta is professor of pharmaceutical marketing and strategy at the Erivan K. Haub School of Business at St. Joseph's University in Philadelphia. He can be reached at


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