Guggenheimer: There is going to be more competition for a few good assets. This scarcity will drive the price of these assets very high,
and business development people will push to pay top dollar simply to seal a deal and justify their existence. We haven't
mentioned it, but I expect that Big Pharma companies have an annual target number of deals to get done. This can no doubt
lead to some crazy valuations.
Craighead: I see more separation between winners and losers in this space. A successful licensing strategy for the next few years will
focus on who can negotiate a consistent patchwork of small deals—in the under $500 million range—rather than pinning all your
hopes on that big deal around a compound with blockbuster potential. A solid portfolio of small products, with their impressively
high margins, can compensate for a lack of blockbusters —and at a much lower level of volatility in the market.
Simes: Let's not forget that it is just as difficult and time-consuming to do a $100 million deal as it is to do a billion-dollar
Davis: Agreed. And one thing Big Pharma will have to do is move decision-making down to the level of the actual business unit to
get deals done. This is hard because liability always skims to the top. So no one wants to cede control. There is a corporate-wide
dimension to risk that big companies can't delegate.
DeBenedetto: Regulatory risk will continue to complicate the metrics in deal assessment. How do you quantify the implications of the "black
box?" FDA restrictions on marketing are now established; this can occur irrespective of what the advisory committees might
recommend. Authorization is only a provisional step. And regulatory risk is at its highest in markets where the future growth
potential is supposed to shatter precedents: China and India. Companies must have a presence in the emerging markets, but
this is no guarantee of profits to compensate for the tighter controls coming in the mature countries.
Davis: The generic threat is real. Bigger players like Teva are seeking to move up the value chain with a commitment to innovation,
while at the same time becoming more aggressive in staking claim to the low-end commodity segment. The formulation expertise
of generic companies is good and getting better. This is easing the path to generic entry, aided by a sympathetic policy climate
Simes: The US market is still front-and-center to deal-making strategy. In that regard, the 2012 election is the pivot point for
the entire industry. There are four key outstanding issues: progress of the health reform legislation, including the prospect
for pricing negotiations based on federal purchasing power; patent reform; a corporate tax overhaul; and regulatory uncertainty.
Who controls Congress and the White House will be critical to the outcome.