The Big Business of Boosting Performance - Pharmaceutical Executive

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The Big Business of Boosting Performance


Pharmaceutical Executive


Challenges Ahead

Positioning the pharma business for success carries a specific metric: to achieve annual EBITDA (a key measure of earnings/profit against sales) in the 15- to 20-percent range by 2015. This will require innovation of a different sort, the most important of which is executing in the pharma space the business complementarities that management wants to extract through the broader DSM portfolio. "The goal is to soften our dependence on the traditional CMO model, which is inherently volatile, through a range of new offerings that will make our business more predictable through the transitions that pharma is now undergoing," Patrick Weinberg, DSM's chief financial officer, tells Pharm Exec.

No less than for any company engaged in the know-how business, success will depend on a cross-fertilization of links between an expanding opportunity set in life sciences and technological progress in materials performance. The company now has the diversity of capabilities to do it, assuming it can get the sum of its parts to work harmoniously.

As DSM grows, it will also be critical to stay close to its Big Pharma customers, many of whom are being buffeted by external forces to the extent that it is not always clear what they want. DSM is adhering to a basic strategy rule of thumb by concentrating in areas where it expects to see the greatest cost pressures on the industry. These include finding new ways to leverage efficiencies—and the returns—from innovative drugs nearing the end of their patented product lifecycles; supporting the move toward adjacent businesses such as biosimilars; fostering more innovation in the rationalization of company supply chains; and finding new customers in high-growth markets, where the performance culture is subpar.

Will it work? Time and the quality of DSM's management will tell. But if you care about that unnoticed concept of a superior performance culture—and every patient should, whether he takes a pill or a nutritional supplement, or hosts a medical device—then the answer to this question carries much more import than a simple business calculation. In an industry increasingly structured around partnerships at every stage of the healthcare continuum, from bench to bedside, this concept has to work.

It falls to organizations like DSM to help Big Pharma match the science of discovery to the mechanics of ensuring a new compound is formulated, manufactured, and dispatched for its intended use

The patent cliff and pressures on the traditional blockbuster model—in which manufacturing was an afterthought—have forced companies to devote more attention to proactive management of the entire supply chain


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