"The payback we're looking for is 12 to 24 months," he says. "In our specialty business we would be prepared to take a longer horizon, because we're building a business for the future.

"I think a lot of companies are going to try to find a way to treat primary care as a basic business, where the goal is to ensure pretty ruthless fiscal discipline, so you only make the necessary investments to achieve a level of profitability. Then you reinvest that in specialty. I think that's going to be the business model for the bulk of companies. And that'll be a challenge for some of them—you have to be disciplined, aggressive, and understand the business you're in. We've already seen the benefit of it. Our pharma business, which had single-digit profitability 24 months ago, will be double-digit this year. We've turned this business around in the space of 24 months."

In part, that fast turnaround can be attributed to Bayer's relatively small size. "We can actually transform our pharma business with just our cancer compound sorafenib fulfilling its potential. If sorafenib [Nexavar] and Factor X [Rivaroxaban] fulfill their potential, we'll be one of the real success stories of the next five to seven years, because we can double our pharma business. How many other companies can look at doubling their pharma business in the next five to seven years? That's the Pfizer problem. The laws of big numbers hurt [large companies], and the laws of small numbers give us a competitive advantage."

For Higgins, the future is in specialty drugs—a conclusion many other companies have come to in the past few years. The company has selected cardiac risk and oncology as its target areas. Why those two? "In this industry, you're really determined by what you have in development," says Higgins. "I could tell you it was after exhaustive deliberation, but in reality it's about recognizing the cards you've been dealt and making the best of that.

"If you look at the size of our discovery groups, in both instances, they're very, very, comparable to a Pfizer or a J&J or an AstraZeneca in numbers. It would have been easy to stay with three [therapeutic focus areas]—and to have been suboptimal in all three. Instead we went for two, and we're very competitive in those two areas."

Several products stand out as key building-block drugs:

Nexavar is the first in a new class of anticancer agents, multikinase inhibitors. It works by blocking kinases—specialized signaling proteins—that control development of renal cell tumors, which has the effect of both blocking the development of blood supply for the tumor (antiangiogenisis) and decreasing the proliferation of tumor cells. Developed in partnership with Onyx Pharmaceuticals, sorafenib was approved in the United States in 2005 and in Europe in 2006 for use in advanced renal cell carcinoma. It is currently in Phase III clinical trials for liver cancer and melanoma, and it is being evaluated for other tumor types in early-phase trials. Higgins says Nexavar is the "cornerstone" on which Bayer will build an oncology franchise.

Rivaroxaban (also known as BAY 59-7939) is an oral anticoagulant that works by inhibiting coagulation Factor Xa. The drug is being investigated for use in thromboembolic diseases. Phase III trials for prevention of venous thromboembolism after major orthopedic surgery began in December 2005, and Bayer expects to file for approval in that indication late in 2007. Rivaroxaban is also being tested for use in treating acute VTE and stroke prevention in atrial fibrillation.