3. COST CUTTING AND DEAL MAKING
Large layoffs show no sign of letting up in 2011, even after a year in which some 50,000 people lost their jobs as drugmakers
slashed payrolls. "There will be more layoffs in sales and marketing, a general downsizing in manufacturing, and R&D will
also come under the lens," says Aitken.
Pharma is cutting back on marketing spend even in high-profile areas like cancer, says Jan Heybroek, president of the Arcas
Group. "The model is changing, too. The company is the commercialization chief and will outsource the rest—strategy, implementation,
Megamergers and other consolidations resulted in the closing of research sites in the US and across Europe—with more to come
this year. Wave after wave of job losses have improved the bottom line, but the larger effects of cyclical layoffs will be
an increasing source of concern for managers. "The cost to employee morale is terrible. I worry that it's death by a thousand
cuts," says Tollman. Determining what the company's long-term cost structure will be and then doing one massive layoff may
produce a more competitive, engaged base from which to grow, he says.
Following 2009's two monster mergers, pharma deals now focus mainly on strategic transactions in the $100 million to $200
million range. But with diversification and globalization the playbook for growth, pharmas will continue to spend big to acquire
firms with key assets, regional access, or revenue streams in 2011. Currently, the spotlight is on the $8.5 billion hostile
takeover bid of Genzyme by Sanofi-Aventis, likely to conclude in the French firm's favor in the next few months.
"The velocity of M&As will increase to build pipelines and gain access to new markets," says Terry Hisey, Deloitte's US Life
Sciences Leader. With venture capital having abandoned biotechs, Hisey predicts that Big Pharma will form new partnerships
with academia from which the still-unfulfilled paradigm-shifting promise of genomics, gene therapy, and gene silencing will
give signs of progress in 2011.
4. EMERGING MARKETS
Most of pharma's growth potential lies in emerging markets, and 2011 will be a year of applying lessons learned. "The industry
is being much more realistic about what the market potential and price points actually are, what the product portfolio should
be, and even if they should be in the market at all," says Hisey. "It's not about protecting their brand—it's about building,
borrowing, or lending a brand."
Buck Luce agrees: "China and India need essential medicines, not innovative ones. Most emerging markets are dominated by generics,"
she says. "This is creating a different way of building businesses, such as big pharmas and small in-country companies collaborating
on OTC sales of an essential drug or a branded generic." In fact, branded generics are expected to expand widely in 2011—they
offer consumers the promise of quality and safety in markets where counterfeit products are common, and that promise is something
consumers will pay more for. The only flaw in this strategy is governments are beginning to apply breaks on pricing in this
Pharma is not only building brands, it's building markets from the ground up by opening manufacturing plants and R&D centers—especially
in China, which became the world's third-largest pharmaceutical market last year, with predictions of growth in sales of 25
percent in 2011 to more than $50 billion, according to IMS.