The populist-driven shifts sweeping the US and EU have triggered plenty of questions when trying to assess the outlook for the global life sciences industry. One certainty, however, amid post-Trump victory and pro-Brexit mandates, will be change, as Pharm Exec’s annual industry forecast explores. 

	Perhaps more than ever this year, there is no escaping that ubiquitous word “uncertainty” in our annual look at what’s ahead for the biopharma industry. Donald Trump’s victory in the US elections and the UK’s vote to leave the European Union in 2016 were political earthquakes with aftershocks for pharma that could alter the landscape all the way from the already unsteady terrain of drug pricing and trade deals with emerging market countries to the labyrinthine administrative headaches generated by Brexit. In practice, whether the doomsayers or the optimists will see their visions realized will be dependent on how this shift to populism is ultimately strained through political filters, but for 2017, as 

 Editorial Advisory Board (EAB) member Cliff Kalb points out, pharma should expect that the major environmental constant will be change. 

	As Kalb reminds us, policymakers in both the UK and US are expected to reflect the will of the voter through their pro-Brexit and Trump victory mandates. Elections in France, German, and Italy may reinforce the trend as 2017 progresses. In the US, pharma is anticipating the demise of Obamacare, repatriation of overseas profits, and reduced regulation and taxes, freeing up cash. In Europe, the environment may change more gradually, but populist/nationalist attitudes place the Euro at risk and could see the potential rise of individual country level policy and regulatory regimes and a return to local currencies.

	And there are still industry issues that will cause headwinds to growth, adds Kalb. “New therapies, such as combinations in cancer, a proliferation of orphan drug approvals, and the continuing shift in care from volume to value will offer up ongoing controversies around pricing, market access, and the industry’s public perception,” he says. “In the US, the end of the ‘free money’ Federal Reserve era may stimulate increased M&A, which ultimately results in employee uncertainty and redundancy.”

	For Al Topin, president, HCB Health Chicago, 2017 is going to be “a maximum VUCA year.” First used at the US Army War College in the 1990s, “VUCA” was a framework to describe the volatility, uncertainty, complexity, and ambiguity of general conditions and situations of the Cold War. Topin comments: “Even before the election process began, the processes of development, commercialization, and marketing a new molecule was fraught with ever increasing risks. Add a new, unpredictable administration driving a shift in the legislative, regulatory, and financial environments - and VUCA clearly describes circumstances.” 

	We begin 2017 with more questions than answers, says Topin, among which are: 

		Will industry have a clearer path through the FDA approval process? 

		How will a potentially simplified approval process add to industry’s risks? 

		Will a growing market continue to fund our investment in R&D and reward industry’s successes? 

		Will reduced taxes allow for further investment, or will the closing of deductions add to industry’s expenses?

		Can further investments in digital platforms to maximize R&D and marketing continue to deliver savings and increased results, or with rapid industry adoption, will it begin to create a more level market?

	Clearly, adds Topin, we are entering the world of “unknown unknowns.” 

	Trump caused another upset after the election when he bluntly and, for some, unexpectedly announced that he was going to bring down drug pricing. For ZS Associates’ Ed Schoonveld, however, the pricing trends that were already under way-the shift to value and affordability-will continue irrespective of the US election outcome: “I don’t think anybody believes Trump is going to do things in total isolation,” he says. 

	Ipsos Healthcare’s Steve Girling, also a 

 EAB member, notes that “payers will continue to demand evidence cost savings as manufacturers invest significantly in real-world evidence generation strategies to provide the proof points to match the costs-versus-value arguments.” He points to established, chronic care markets like diabetes, which “will continue to feel the pressure from extensive competition in an ongoing price versus outcomes-driven payer paradigm.”

	In oncology, though advances are leading to increased competition for immunotherapy treatments, different pricing dynamics seem to contribute to an escalating and unsustainable trajectory. “Will the new Republican administration’s action(s) regarding possible reforms to (or repeal of) the Affordable Care Act (ACA) and Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) impact the overall cancer care of Americans and the cost of it?” Girling asks. Big science, with complex delivery solutions, and hopefully cures, seem like opportunities for “Trumpcare” to win “bigly,” if they can reach patients without bankrupting patients.

	As for rare disease, another area where the industry can’t help but make big headlines with dollar signs and lots of zeros, Biogen and Ionis Pharmaceuticals showed no sign of reversing the trend by pricing newly-approved 

 for spinal muscular atrophy at $125,000 per injection, a price point that comes to $750,000 in year one of treatment, and $375,000 per year in perpetuity. Op-Ed sections seem to have been relatively tame in response to 

’s sticker shock, so far hinting at the fact that high science and the pursuit of curative treatments for devastating areas of high need will be rewarded. 

	But the fact that the news hit during the holiday season might also explain some of the quiet. Except for a mention in the President elect’s profile in 

’s Person of the Year issue, drug prices as a topic seem to be low on the list of priorities. But a well timed article, followed by even a slight comment or retweet, say during early January’s JP Morgan investor congregation in San Francisco, could have a chilling effect.

	“The market has become significantly more difficult in terms of getting payers to cover new drugs, and one of the implications is that value communication needs to be much broader,” explains Schoonveld. “A lot of the PBMs (pharmacy benefit managers) and other payers have taken control; they’ve been empowered to make tough decisions.” The 21st Century Cures Act could facilitate easier communication of economic data to payers, but it will also be necessary “to communicate more broadly to provider organizations and medical associations, because the debate around affordability and value of drugs has clearly expanded,” says Schoonveld. 

	This pushback by payers “is not personal,” says Girling, however. “It’s global. Japan recently announced it would have annual price reviews rather than every two years, and for all products not just a selection. That’s another example of the need for the industry to demonstrate value.”

	In Europe, all drug companies are faced with tougher pricing negotiations that are driven by ever-tighter controls on national health system funding across Europe. For Schoonveld, however, 

most payers in Europe do not acknowledge that the need for pharmaceuticals is growing as the population is aging: “This is a side effect of the aging population, but payers are sticking their heads collectively in the sand.”

	In 2017, things will get even tougher, as individual European countries combine their strength to negotiate jointly with drug firms on prices for new medicines. 

’s Brussels correspondent Reflector explains: “Ireland is set to join with Austria, Belgium, the Netherlands, and Luxembourg in a new coalition to boost their collective bargaining power, and similar schemes are gathering impetus in the Nordic countries, the Balkans, and in Central and Eastern Europe.” (

Click on sidebar above to read more about 2017's overall healthcare picture in Europe

	Looking toward the emerging markets, questions surround the impending fortunes of the BRIC nations. “There are two schools of thought on BRIC,” Marc Yates, director, Asia-Pacific and Emerging Markets, The Research Partnership, tells 

. “One is ‘been there, done that, BRIC is old news.’ But the other is that you can’t isolate BRIC and say it is finished. The number one driver is the global economy and how it impacts those markets.”

	China remains a major force. In 2015, it overtook Japan to become the second largest pharmaceutical market. With annual growth rates, as reported by Frost & Sullivan, of more than 18%, the country will reach the top position by 2020. China is seeing growth in the medical device, contract research, and API manufacturing sectors. The relaxation of the one-child policy for the urban middle-class may see a slight increase in the number of children born in China, with a potential impact on pediatric vaccines and private health uptake, says Yates.

	But, as Reenita Das, partner at Frost & Sullivan, points out, market changes and currency devaluation are having a negative impact on “most of the segments related to pharma and life sciences,” especially some of the government initiatives. “Therefore, even 2020 care program is progressing slowly and might get delayed by few years,” Das says. There is also the delicate matter of Donald Trump’s resistance to the “One China” principal, and how trade relations will fare if he upsets China’s sensibilities by using Taiwan as a bargaining chip. 

	In Russia, however, there is “potentially a big upside” if Trump fosters a positive relationship with the country and sanctions are eased, observes Yates. But the country still falls behind western European nations in terms of research innovation and technology development, says Das, primarily due to lack of investment. Even so, the Russian pharmaceutical industry is still one of the fastest-growing across the world.

	Brazil’s budget deficit was 10.1% of its GDP in 2015. Stimulating the country’s economy is going to be “a tough ask” if there are curbs on the amount of credit available, says Yates. In the pharma market, Das points out, the generics sector is anticipated to be the main factor for growth. Innovation and improvements in the medical equipment sector have also been consistent, she reports, and Brazil has the largest medical device market in Latin America. Medical imaging also has a large market. 

	Further, Das adds: “Brazilian hospitals are expanding and modernizing their existing infrastructures in order to improve their services. This is gradually leading to the significant penetration of IT solutions, such as hospital information systems (HIS), electronic medical records (EMR), and picture archiving and communication systems (PACS), especially in private healthcare providers. Technologies such as cloud computing and big data are expected to change the way healthcare is provided in the country.”

	In India, the government continues to look at developing the country as a global healthcare hub. Says Yates, “India is looking outwards. If you look at companies like Ranbaxy, they’re looking to be global players, not just value commodity generics companies, so it is interesting to look at India not just as a domestic market but as an exporter of quality medicines.” 

	And despite its challenges, “India at present ranks amongst the fastest growing countries of the world in terms of GDP growth, a trend which is expected to continue for the next 10 years,” says Das. “The last couple of years have witnessed a large number of multispecialty hospitals coming up in all parts of the country. Driven by the increased domestic demand for high-end services as well as medical tourism, the healthcare sector has attracted high investments focused at making the existing facilities on par with developed nations.”

	While technological innovation has an impact on all markets, many patients and providers in the emerging markets are embracing it at a faster pace, observes Yates. There are companies looking to  “disrupt the whole model” in emerging markets with e-detailing and telemarketing, facilitating e-consultations or video consultations with doctors, and filing scripts through e-pharmacies. “The growing, urban-elite middle classes are online, comfortable with mobile technologies to a degree, and more willing to pay,” adds Yates. “There is a huge appetite for this in the emerging markets; they are quite open to change, whereas the rest of us may still be a little conservative.” 

	Further afield, Frost & Sullivan reported last year that Asia-Pac was the fastest growing region globally. In Asia and Southeast Asia nations such as  Malaysia, primary care chains are expected to expand integrated services spanning across diagnostic and preventive care, strengthening primary care as the first point for healthcare services. Asia-Pac will also see a growth in private health insurance due to awareness of rising healthcare costs, awareness campaigns by insurance companies, and the push by governments for shared spending. 

	For Yates, the Association of Southeast Asian Nations (ASEAN) is interesting as it comprises countries such as Myanmar, Cambodia, and Laos alongside medical hubs with centers of excellence such as Hong Kong and Singapore. Thus, medical tourism among the better off in the ASEAN region is still seeing Singapore, for example, “punching above its weight.” Das points out that local manufacturing is gaining importance across the ASEAN environment due to the strengthening US dollar and high percentage of healthcare imports and the increasing presence of Japanese healthcare products and services. And the ASEAN Economic Community’s (AEC) efforts to create an open market place for medical devices, goods, and services across the region is expected to benefit both local and multinational corporation players in the next few years. 

	Vietnam, for example, is “definitely fulfilling its promise,” says Yates, despite a challenging environment. Many Japanese and Korean pharmaceutical and device companies have invested in the country and it is “one of the most preferred manufacturing destination in the region.” For Yates, however, Vietnam’s promise as “the next big thing” is still compromised by the fact it has a very young population, and has ongoing issues with red tape and corruption.

	“Despite the difficulties, Asia [and Latin America] cannot be overlooked if companies desire to grow faster than their competition,” says Frost & Sullivan’s Transformational Health research analyst Siddharth Shah regarding the company’s recent 

analysis. “To gain the edge, healthcare players must take the plunge, invest in these regions, find the right local partners, design custom strategies for each country, test them in pilots, and go large-scale.”

	At pharmexec.com in December, John S. Linehan, an attorney in the Health Care and Life Sciences practice group of Epstein Becker Green, wrote: “In 2016, the populist trend in American politics was an undeniable factor behind Trump’s election victory as well as the ascendancy of Bernie Sanders and Elizabeth Warren within the Democratic Party. During upcoming months, industry observers will be looking for signs as to whether drug pricing is an area in which both parties can agree on instituting significant legislative action at the state and federal levels. The nature and shape of any such reforms will be highly consequential for the US pharmaceutical industry, which has served as a prime source of innovation in medicine. The question going forward is whether cool-headed reform that facilitates patient access to drugs without stymying pharmaceutical R&D investment can be achieved in an era of fervent populism and discontent over rising healthcare costs.”

	On reflection, Linehan stipulated that populist mentality can take on forms perhaps more extreme than demanding pricing controls. “People want action, and I think we’ll see, in fact we’re already seeing it, reform by enforcement,” Linehan wrote. Where in the past, civil action was being taken against companies, we may see a trend toward greater accountability demanded by charging individual corporate executives. Generics price fixing, kickbacks, illegal and unethical specialty

 pharmacy buyer relationships, the opioid epidemic, these are all areas where we might see serious charges brought against individuals in 2017. 

	If 2016 was characterized by one perp walk (Martin Shkreli) and multiple executives being paraded on Capitol Hill for meandering, and rather silly and embarrassing interrogations, perhaps in 2017 we’ll see more politicians attempting to take off the kid gloves.

	Government reform can be long and complex, where politicians are tripping over each other to get something accomplished. Underscoring the changes on the national scale were also state-level attempts to strike the industry. Notably, California’s Prop 61 failed, but it received significant attention and resistance from the industry. Other state mandates like Vermont’s “transparency” requirements will make headlines, but results will likely just be more confusing than the laws themselves. Executives in cuffs, perp walks, real criminal enforcement will, that’s a more direct and crowd-pleasing.

	An interesting factor to consider could be a halo effect of population questioning “truth in media” (arising from the election cycle) to questioning “trust of the healthcare/pharma industry,” notes Girling. Well known to this audience, survey data places the industry’s approval/reputation numbers near that of the tobacco industry. So could consumer “trust” be an issue? And what form could the empowering of a populist mindset take? Certainly, strikes directly against the industry could be a result. But as terms like “coastal elite” and “drain the swamp” are in the zeitgeist, don’t expect the FDA to escape upheaval. Last time we checked, the FDA would easily be considered “establishment,” and is pretty close to a coast.

	It’s hard to imagine how the industry would react to major FDA changes. And so it’s not surprising that the industry collectively gasped at the mention of a Peter Thiel-associated FDA appointee-managing director of Mithril Capital, Jim O’Neill. Giving a lofty FDA seat to a relatively libertarian mindset, like venture capitalists with a passion for seasteading, could be an industry shocker.

	With such a change in FDA’s mandate a possibility, the phrase snake oil salesman surrounds Trump for more reasons than one. Could the fallout, Girling wonders, be an industry in which “pay for performance” would suddenly become a huge question and insurers would be rubbing their hands as the arbiters of efficacy and, therefore, access?

	The accelerating pace of technical and scientific change will inevitably drive the industry in 2017 and beyond. “The internet of things (IoT) will spawn the IoMT (internet of medical things),” says Kalb. “We are morphing to a system where patient, pharmacy, doctor, hospital, medical device, payer, and pharma firm are all connected in real time.”

	Kalb points to “mega-medical supercomputers” like IBM’s Watson, which “will enable growing virtual interactions, remote care, ongoing database expansion and record keeping, and patient monitoring, and provide pharma with new opportunities well ‘beyond the pill’ for R&D, marketing, and for new revenue sources as well as cost control.”

	Pfizer announced in late 2016 that it will be deploying IBM’s Watson for Drug Discovery cloud-based, cognitive tool to accelerate its immuno-oncology research, analyzing “massive volumes of disparate data sources, including licensed and publicly available data to unearth insights at a scale and speed beyond what is manually possible.” Lauren O’ Donnell, global vice president of life sciences for IBM Watson Health, tells 

: “We’ve been thinking and talking about digital disruption for years and now it’s here. Watson for Drug Discovery is able to do in months and even weeks what it has traditionally taken researchers years to do-that is, sift through large volumes of journals, data, patents, and other information to generate new hypotheses.” The platform has reportedly “ingested 25 million Medline abstracts, more than one million full-text medical journal articles, four million patents, and is regularly updated.”

	IBM’s Watson Health business unit has launched or is preparing to launch cognitive tools across the healthcare spectrum-from oncology and clinical trial matching to compliance and value-based pricing-aimed at tackling the problem of what to do with the reams of data that organizations have been busily amassing. Wearables, for example, can generate many terabytes of data, says O’ Donnell, “but then what do you do with it? How do you get to what is relevant? Cognitive technology can sift through all that and bring out the most relevant pieces.” 

	She explains: “All the homogenous data, the unstructured data that is not sitting in an electronic medical record, this is the data that’s going to come from the Fitbits, the Apple watches, the diagnostic devices. Add the cognitive capability to that technology and we are going to have wearables that, for example, provide instantaneous data on how a patient is doing based on when they just took their insulin or their activity levels, and can predict a hypoglycemic event hours before it happens.”

	Pharma companies may as yet be proceeding with characteristic caution into the cognitive computing arena, but O’ Donnell says, “There are those who are leading, like Novartis, who already has a pilot program doing these types of things. Others, while they know they have to do something, they don’t know where to start. But I don’t think companies are going to have a choice. In drug discovery, for example, nobody can afford to spend billion-plus dollars and 10 years to develop a drug. There’s a better way.”

	For all the uncertainty ahead, continuous innovation will remain the lifeblood of the life sciences industry. However, says Kalb, “to remain a leader, pharma will need to expand its myopic view of competition, and routinely broaden partnering activity to actively participate in a wider segment of the overall healthcare space.” 

	For Topin, in a year of “maximum VUCA,” the industry’s first and most impactful tasks are to reduce uncertainty and minimize complexity so it can effectively reduce its risks. “We could sit out the year and see what happens, but that’s not in the playbook. Now is the time to invest aggressively in learning more about the areas that we can identify for change.”

’s European and Online Editor. He can be reached at 

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The populist-driven shifts trumpeted from the US to the EU leaves plenty of question marks when trying to size up the trajectory of the global pharma industry. One certainty, however, will be change.

Path of Uncertainty: Pharm Exec’s 2017 Industry Forecast

Belén Garijo, CEO of Merck KGaA, Darmstadt, Germany’s healthcare business, shares her steady-vision strategy in transforming a traditional pharma unit focused on small molecules for chronic disease to a high-tech specialty producer of immunotherapy drugs for rare cancers 

	In conversation, Belén Garijo does not miss a beat. Behind those practical but stylish glasses is a woman with a sharp eye-an eye that travels-observing, processing, and always staying one step ahead of the next question. The impression the 56-year-old physician gives to a visitor ranges from curiosity to empathy to decisiveness. These are character traits that fit well with the mandate she holds as a change agent, responsible for repositioning a traditional pharma business centered on small molecules for chronic disease to a high-tech specialty producer of immunologic drugs that represent the future of treatment for rare cancers. Joining Merck KGaA, Darmstadt, Germany in 2011 to lead commercial operations for the Biopharma business, of which Garijo was tapped to be CEO in 2013, she then became the CEO of the overall healthcare business later that year, succeeding Stefan Oschmann, who is now Chairman of the Executive Board & CEO of Merck KGaA, Darmstadt, Germany. Garijo is responsible for nearly two thirds of annual Group turnover, and sits as one of six members of the Group’s Executive Board. 

	Garijo summarizes her task with a simple missive: To be first in disease. And to be first to market. There is also a daunting metric laid down by her boss, Executive Board Chairman Stefan Oschmann, to generate $2 billion in new sales over the next five years, mostly from the output of a novel immuno-oncology partnership forged with Pfizer in 2014. That growth must be secured in the midst of a deepening skepticism among payers that new entrants to this increasingly crowded therapeutic field are differentiated enough to justify a premium launch price. It’s an argument about creating a common language on value-can this multilingual advocate for innovation make the case? 

 at Merck KGaA, Darmstadt, Germany US Healthcare headquarters at EMD Serono in Rockland, MA, Garijo holds forth on how the trust of mentors overcame some early resume gaps; the “no rule book” standard for tackling culture conflicts in M&A; lessons from repositioning a conservative R&D organization to take the risks required for breakthrough innovation; and rejecting the notion that women executives, unlike men, must choose between family and career-it’s a myth, she says, a bind on the potential from thinking forward. Here are excerpts from our conversation.

Your career has been focused on the intangibles around business transformation: leading the integration of large organizations, often with markedly different cultures, and moving them to embrace a new way of relating to products, customers and patients. You are also a physician with a strong bias toward professionalizing the practice of medicine. What lessons have you learned from prior assignments at Abbott, Aventis, and Sanofi and how do you apply them in the context of your current role as one of the most senior women line executives in the industry?

I must be honest. My early goals in life had nothing to do with business. I am surprised where I am today, as a global line executive responsible for a $7.7 billion P&L business with operations in 56 countries. I wanted to serve the community as a practicing physician, where I grew up in a small city in southern Spain. I received my medical degree and spent six years tending to patients in clinical pharmacology and internal medicine, where the powers of observation, good judgment, and personality count and you have to improvise a lot. 

	Still, for me, a life in the clinic was confining and lacked potential for professional growth. An opportunity arose to join Abbott, as medical director for its Spanish affiliate. I took the position because I recognized this function was important to the industry’s future, as stakeholders embraced the medicalization of information in approving drugs for patients. Abbott ended up bringing me to its Illinois HQ, where I was exposed to a diversity of experiences that launched me into the position I hold today. 

	It was a risk, both for me and for the company, which assigned me an international medical affairs portfolio without any obvious credentials that qualified me for the role. Abbott enabled me to shift from an individual practicing physician, reliant on other people’s innovative ideas for new medicines, to a member of a large R&D team responsible for those ideas in the first place. 

	One lesson I draw is how much my career has been shaped by people who trusted me more than I was prepared to trust myself. Opportunities arose despite lacking the experience normally associated with the job. For example, trust from others helped me make the second major transition in my career, moving from the medical/R&D function to the commercial side of the business. I had the good fortune to benefit from superiors who acted on hunch and instinct to

 see beyond the narrow parameters of the job description. My mentors shared a trait in pursuing a personalized view of the world, allowing my own profile to define the job instead of the other way around. They were disruptors in choosing people whose lack of experience predisposed them to act differently. 

	I follow this precept now that I am responsible for talent development for 20,000 colleagues in the Group’s healthcare business. I want them to benefit from that same open mindset in evaluating potential. Taking a chance on someone is inherently good. How else can a company break the mold and adapt to the changes that now demand an entirely new approach? You can’t follow a prescriptive path to finding good people in an industry where success is so often circumstantial. 

You are from Spain, obtained your first significant assignment in Chicago, and held senior roles in a company-Sanofi-Aventis-that evolved as a hybrid of German and French management with a touch of US entrepreneurial spirit, at Genzyme, where you oversaw that company’s integration with Sanofi. Has the experience made you believe that culture is a defining characteristic of organizations today, or in this era of globalization, is it that all organizations are more or less alike? 

If your business follows opportunities across regions and markets, then you have to create a culture that unleashes the positive potential of diversity and inclusion. We are an industry highly dependent on human capital. Setting a distinctive culture with strong input from the top tier of management is critical to molding that capital in a productive way-one that bridges the differences induced by geography, demographics, and business practices, reinforced by social values and traditions. Culture is essential when you consider the fundamental fact that tactics that make for success in the US are not necessarily going to deliver the same results in China.

	Hence, few people believe that a strong, distinctive company culture doesn’t matter in an industry as globalized as biopharma. My ascent in management is due to having lived and worked in so many different countries, where I was able to experience how to execute priorities, adjust my communication style, and to lead and inspire teams to do their best for the company. One of the hardest tasks in working within a strong cultural mindset is to execute well locally while retaining a global perspective on the big strategic issues. You have to maintain a balance between these two, often conflicting impulses. What will require global engagement and where will a local focus prove optimal? The best managers in biopharma learn how to create this context early on, which then trickles down through the ranks. That’s how culture makes a difference. 

Do you believe that women managers are more sensitive to the importance of company culture than their male counterparts? 

Women tend to see the issue of culture from a more personal perspective, because women managers-more than men-evaluate family obligations against the day-to-day requirements of their job. This dimension underscores the cultural aspect of living in two worlds. It’s often said that only women executives are obliged to make “choices” between children, family, and their career. 

	Speaking for myself, I think that view is exaggerated. I work hard to bring other women into senior jobs in the healthcare business, yet I find it a challenge because I see these very women expressing regret that, ”if I follow this path, I will have to forego my family.” I’ve heard the remark so many times and I make it an obligation to show that making such an either/or choice is unnecessary. I worried about this at various stages of my career but in the end, my fears proved false. One reason is our company has embraced technology as an internal communications tool. It makes everyone more mobile and employees with children are key beneficiaries-working remotely when necessary is easier than ever.

You have been assigned key leadership roles directing the merger of Aventis and Sanofi operations in Spain, the JV combination between the MSD and Sanofi-Pasteur vaccines businesses, as global integration leader for Sanofi’s acquisition of Genzyme, and, currently, as the senior executive responsible for the oncology development partnership with Pfizer. What insights can you share on creating these combinations and managing them successfully? 

The most important goal in any integration is delivering on the hard objectives-and the essential ingredient is figuring out the “how.” The way to do that is adopting a highly inclusive style of leadership, on both sides, which begins with securing a reputation as a good listener. It is also important to remain focused on the ultimate objective in combining the two companies. This involves thinking above and beyond the tactical element of finding synergies, like reducing costs. 

	Another key task is distinguishing between short-term goals and what you must do to position the combined business for success over the long-term. For the latter, a three-year, step-by-step road map has to be put in place very early in the process. This evaluation has to include a strong commitment to culture change-without that, delivering on the original promise behind the deal will be harder to achieve. 

	I learned this the hard way, when I worked for Aventis as general manager in Spain while it was being acquired by Sanofi. I was chosen to lead that process, requiring me to scuttle my own business plan and priorities to conform to what Sanofi wanted from the integration of our two operations. I had to abandon several local product launches and take the painful step of moving our offices from Madrid to Barcelona, a “mission impossible” process virtually unheard of in Spain, with its pronounced regional identities. In addition, I had to lead a management committee composed of two sets of executives used to operating in distinctly different cultures. My Aventis colleagues worked in a decentralized environment with a lot of local autonomy, while the Sanofi people were very buttoned up and expected to be guided from the top. 

	Sitting at the table in front of these people forced me to change. I had to create a sense of balance and to accomplish that I put an unrelenting focus on the need to make a fresh start. Together, we had to reinvent all the rules, so instead of perusing all the management manuals we devised a simple question to benchmark our progress: will this action create or add value to the combined company? If it did, we did it; if it did not, we went in another direction, even if in doing so it required a cultural adjustment, on either side.

What about your experience in leading the Sanofi Genzyme combination? The deal sparked criticism from investors because the big pharma culture of Sanofi was perceived as a drag on the characteristics that made the Genzyme business so attractive. 

 We carried an advantage in that case. There was a firm consensus at Sanofi to preserve the independence and entrepreneurial culture at Genzyme. The word came down from the Board: no “sanofizing” Genzyme. Hence, we had a clear assignment to protect and preserve the culture of Genzyme within the larger organization. In fact, we went beyond that and helped drive a new business model for the combined company, founded on what at the time was Genzyme’s unique “patient-centric” approach to the customer. It remains the motivating principle behind all of Sanofi’s stakeholder relationships today.

What about the acquisition of the Swiss biotech Serono? Was the motive similarly straightforward? 

 I joined Merck KGaA, Darmstadt, Germany as chief operating officer for the biopharma business, after the integration with Serono. I discovered no real integration of these two family-owned businesses had taken place. Serono remained at its former HQ in Geneva; many executives continued to act as if it was still independent. This mindset needed to end, which we accomplished by pulling out of Geneva and redistributing resources to our R&D facility here in Massachusetts. It was another example of fostering a necessary change in culture, emphasizing our tilt to a global, US geographic focus. Closing Geneva, thus, had little to do with just cutting costs. 

You joined Merck KGaA, Darmstadt, Germany in 2011, taking a series of assignments that have also been transformative for the company. How has the Group changed in the past five years?

 Merck KGaA, Darmstadt, Germany at that time was at an inflection point: in 2011, we confronted a crisis with the regulatory authorities in the US and Europe declining to approve

 in our MS pipeline. Management had to acknowledge that the company was faltering on the innovation, clinical development, and regulatory affairs fronts, not having introduced a patent-protected medicine in more than a decade. 

	When a big dream disappears, the consequences can clarify the mind-and that’s what happened here. I was tapped to lead the healthcare division, which was, and, at 65% of total Group revenues, remains the largest of our three global businesses. My mandate was to return to the fundamentals: commercializing patent-protected medicines on diseases for which there are few equivalent treatments. The design was to move from being a supplier of 

traditional pharmaceutical and chemical products, operating mainly in Europe, to a global company centered on innovative science and technology. 

	The early phase of this transformation focused on operational efficiencies. But we’ve moved well beyond that to create an entirely new business model, with an emphasis on high value specialty drugs for complex conditions like cancer and various immunologic disorders. In that sense, we’ve moved away from small molecule medicines in primary care, characterized by low margins and generic competition. As a company with deep roots in Germany, where we were founded almost 350 years ago, our sales were over-weighted to the region’s low growth cycle, so we decided to pivot to North America and the emerging countries. More than a fifth of our revenues now come from the US, a market that is central to the Group’s future. 

	All of this is framed in a strategic plan we call “Fit for 2018.” It has put us on track to a different product portfolio as well as a different geographic reach. Our healthcare business is less dependent on Germany and Europe while the product portfolio has broadened beyond our traditional MS franchise to include products in the most promising therapeutic segments, including next generation immuno-oncologic drugs and combinations and in immunology. We are also expanding our base in fertility treatments, a patient- sensitive business where we benefit from decades of expertise. 

What’s the current state of progress toward “Fit for 2018?” 

We have completed work on the operational overhaul of the business and are well along in the growth phase, which involves launching new products, including the results of our novel oncology partnership with Pfizer. We’ve successfully introduced a new commercial operations model built around a smaller, more specialized and “high touch” sales force. We have reinvigorated our core franchises, in MS and fertility products, aiming to make these global products, with a pole position in all the major markets but especially the US. We are filing again for EMA approval of our investigational compound 

 and are looking to do the same in the US. 

	Innovation is a second element in Fit for 2018’s grow-the-business phase, where we intend to establish ourselves as a leader in specialty medicines for rare and complex conditions like cancer. This required a substantial overhaul of R&D, accomplished in a restructuring we completed in early 2015. More productivity from existing resources was our aim, combined with placing us as partner of choice in in-licensing drugs or leveraging internal assets we could not commercialize on our own. 

	It started with an extensive pruning of our product pipeline, a high stakes gamble in which we eliminated nearly all that we had in late-phase development while accelerating discovery work in three therapeutic areas: oncology; immuno-oncology; and immunology. The centerpiece of this new strategy is our investigational compound 

, the key product in our partnership with Pfizer, with potential indications-as monotherapy or in combination-for a wide range of cancers and tumor types. 

	The third priority is upgrading regulatory and development capabilities to boost our standing with the FDA. Progress to this objective has been facilitated by the expansion of our R&D presence in the US. The Geneva closure gave us the leeway to recruit more talent here in the US. Half of our regulatory and drug development teams now consist of experts we have attracted from outside. We’ve kept all the talent we had on the discovery side. It has given us opportunity to shake up the innovation process and reinvigorate the pipeline, which I believe is better than anything we have seen in the company before. 

Is it fair to say avelumab is the inflection point of the “Fit for 2018” strategy? 

 I would say it symbolizes our progress in repositioning the business around patient centered, breakthrough innovation. 

 was developed here, in-house; we brought it forward to Phase I. But as we saw its potential, we also knew we lacked the size, scale, and presence to reap that potential on our own. In recognizing 

 as an important product, Pfizer has ratified our company’s emergence as a player in oncology, particularly in the competitive US market. That’s a game changer for us. It also freed up internal resources that we could devote to the parts of our pipeline outside oncology. And, to be sure, we have other assets besides 

Can you summarize the current state of the partnership with Pfizer? How are decisions made by the two parties? 

Right now, we have nine pivotal trials underway and 30 clinical programs in multiple indications and tumor types. Avelumab, our anti-PD-L1 antibody, has been accepted for review for a marketing authorization by the FDA and the EMA, as a treatment for Merkel cell carcinoma, a very aggressive form of skin cancer. Regulators have granted breakthrough therapy designation, which means a fast-track status to our applications, and we expect decisions by the agencies later this year. 

	Beyond this, we are collaborating with Pfizer on more than 30 different investigational programs, including the following cancer types: non-small cell lung cancer; renal cell carcinoma; bladder cancer; third line gastric cancer; ovarian cancer; and squamous cell carcinomas of the head and neck. Each of these represent cancers with few alternative therapies-the unmet medical need is great. We also have a co-promotion program in the US and other countries with Pfizer for 

, launched by Pfizer in 2011 for treatment of ALK-positive metastatic non-small cell lung cancer. 

	The goals are ambitious, but we are pursuing them as a marriage of equals: it’s a 50/50 allocation right down the line, from development to commercialization. There is a global Executive Committee that decides, with members divided equally between both companies. Discussions are open and each participant is free to bring his or her own ideas to the table. We are looking for exposure to as many sources of expertise as we can manage.

Is the partnership focusing on potential post-approval issues, such as strategies on market access and pricing? Are you building a value proposition with appeal to payers? Or is this handled separately? 

We are very attentive to this area. In fact, I met [recently] with the US commercial and medical teams to underscore the importance of working with stakeholders to communicate our value platform to payers, oncologists, and patients on 

 as well as the investigational drug M7824, a potential first-in-class bifunctional fusion protein therapy, which is a new approach to immunotherapy beyond the current class of checkpoint inhibitors. All of us are aware that a tolerable risk-benefit profile is not enough to drive market uptake. It has to be accompanied by proof that the incremental value of the product is significant in terms of patient outcomes. That has to drive our entire approach to product development in the US, which is a proxy for the rest of the world, too. 

	One thing that concerns me is silo thinking between the development teams, which focus on risk-benefit, and the market access teams, which often intervene very late in the journey to registration. I am pursuing a single integrated strategy, with a team responsible for considering risk-benefit and value simultaneously; relying on the best and most novel approach to evidence we can muster. We intend to prove this model on the M7824 compound because of its possible potential as a curative tool in cancer immunotherapy.

One part of your functional portfolio is leading the Merck KGaA, Darmstadt, Germany’s reputation enhancement efforts. What benchmarks can you cite here? 

I take this commitment seriously. Together with my colleagues on the Executive Board, I took the initiative to create a separate, dedicated Access to Health (A2H) unit that works across the company to bring more of our medicines forward to the patients who need them. Our work has been rewarded by the independent Access to Medicines Foundation Index on industry performance in promoting access, where we rank fourth among the 20 largest global biopharma companies surveyed. Given our smaller P&L footprint relative to the others in the list, we are definitely punching above our weight on this issue. 

	In a larger sense, it’s important to stay vigilant and recognize how important industry self-regulation through various codes of conduct is to preserving our global license to operate. Our business practices are rigorous and well recognized by our customers, in all markets and geographies. Nevertheless, from an industry-wide perspective, we must be more proactive in presenting the value our products bring to society. The present industry effort around the value argument is not sufficient for the long-term. Our company carries a unique advantage here in moving the industry forward. As a family-owned and family-oriented enterprise, corporate responsibility is a given: it remains integral to our priorities on the business side. There can be no separation of the two. 

To conclude, how will you measure success as you lead the Merck KGaA, Darmstadt, Germany’s healthcare business in 2017? 

Our success will be measured by how well we execute on our strategic priorities to deliver $2 billion in incremental sales by 2022 and the successful launch of the drugs currently in our pipeline. At the end of the day, it is the way we manage these that will decide on the speed and volume that we can provide patients with access to these drugs. We expect the first launch of 

 in 2017, followed by additional launches each year after 2017 through 2022. Also, our ambition is launch 

 in Europe and to file in the US, which will hopefully be followed by other promising compounds in the pipeline outside the 

oncology space. In addition, expect to see the fruits of our special expertise in combining drugs with devices from other parts of the business to create intelligent delivery solutions for patients. 

	At the same time, we want access to the best external innovations to fuel our discovery engine through creative approaches on in-licensing. I point to our new agreement with Intrexon, a US leader in synthetic biology, to share expertise in CAR-T technology applications geared to expanding the treatment pathways in immuno-oncology. 

	Other platform-partnering projects are underway with two US-based biotechs, Mersana Therapeutics and Sutro Biopharma, to develop next-generation antibody drug conjugates to fuel early-stage discovery and preclinical development activities. Our goal is to be either first in disease or indication to bring innovation to patients in need; this will be our key measure for 2017 and beyond. 

’s Editor-in-Chief. He can be reached at 

Pharm Exec speaks with Spanish-born Belén Garijo, CEO of Merck KGaA, Darmstadt, Germany’s healthcare business, who shares her steady-eyed approach in transforming a traditional pharma unit focused on small molecules for chronic disease to a high-tech specialty producer of immunotherapy drugs for rare cancers.

Biopharma Change Agent: Belén Garijo

	The US healthcare system is under constant pressure to reduce the cost of care while addressing the needs of a growing and increasingly unhealthy population. Opportunities to improve the systems that serve this vast industry abound, in particular with emerging technologies that currently address other, seemingly unrelated consumer needs.

	It is my belief that, as the Internet of Things (IoT) continues to evolve, healthcare will be able to tap into the potential of an increasingly connected world. The current growth of connected devices is steadfast from wearable devices to in-home virtual assistants, so the dream of a fully connected world is steadily becoming a reality, and it could mean big things for healthcare.

	Currently, IoT providers (e.g. Google, Microsoft or Amazon) are developing their solutions in isolation, fine-tuning their own licensed ecosystem of data and connectivity and providing users with an element of data exclusivity for their individual piece of the puzzle. The opportunity for growth and proliferation of these devices and systems, however, will come when we have a standardized, connected ecosystem.
	
	Healthcare is an industry already struggling to reconcile the challenges presented by disparate data versus the possibilities presented by connectivity. Today, health information is scattered and siloed, with healthcare providers, payers and manufacturers often seeing a different version of the truth. However, if we as an industry can create greater inter-connectivity in a single ecosystem-a Healthcare Internet of Things-there will be significant benefits to patients, physicians, payers and drug developers. A connected healthcare ecosystem that spans from research and development all the way through to commercialization and treatment adherence could be just the solution for life sciences companies and payers seeking to demonstrate value from new treatment outcomes.

	Here are three ways connected ecosystems and IoT can benefit healthcare and demonstrate value to the healthcare system.
	
	


	
	With the advent of smart pills, glucose monitors and similar devices, we have already seen how such technology can improve patient adherence. As wearable technology continues to embed itself into everyday life, and life sciences companies seek out more viable and long-term applications for such devices and platforms, adherence rates will continue to increase.
	
	Additionally, manufacturers will begin to integrate elements of gamification in health-related devices as they do in consumer tools, which will also help increase uptake. The underlying principles of gamification, something that triggers the brain’s reward pathways, will be designed to promote positive action and reinforcement for the correct, adherent behavior. This could be as simple as adding a points and badges reward system to a medical app, where patients earn points for taking their medication at the correct times of day. The ability to use this data and analyze behavior patterns for continual improvement will be game changing.
	
	


	
	An ecosystem with patients leveraging diverse connected devices will of course create a deluge of new data. In real-time, healthcare practitioners will be able to monitor a patient’s health, activity levels and reaction to treatments. If a patient suffers a hypoglycemic episode or cardiac event, for example, that data can be fed directly back to the physician or specialist to take immediate action.
	
	This goes beyond adverse effects and can include other elements that are often out of view of treating physicians such as sleep patterns, weather conditions, dietary information and any other factors that might impact outcomes. All of these indicators have a cumulative impact on the outcome derived from standard medical

	interventions. In short, for the first time, healthcare systems will have a complete picture and be able to optimize treatments and the surrounding environment for better outcomes.

	The significant amount of data generated by a connected ecosystem can do much more than impact an individual outcome-it can influence the future trajectory of research and development as well. Real-world evidence (RWE) is already championed for its ability to go beyond data captured in a controlled clinical trial environment to data captured in real-world scenarios. In fact, we are already on the cusp of seeing how RWE can impact access to treatments, thanks to recent amendments to the Cancer Drugs Fund in the UK. Under the new system, RWE will play a key role in determining the future reimbursement of many

	With the introduction of a Healthcare Internet of Things, those same devices that are improving adherence and patient outcomes could also include mechanisms that feed outcomes and efficacy data back to manufacturers in real-time, allowing closer alignment of new trials to the real world and the right patients. This feedback loop of performance and outcomes-based data could change the face of drug development as we know it.

	While a fully formed Healthcare Internet of Things may be several years away at least, I’m confident that the benefits are numerous and that we are laying the groundwork now for a more connected, efficient future of healthcare. Crucially, during the next few years we must address the siloes we are accustomed to, using technology and expertise from multiple sectors to address these pressing market needs and embrace innovation and collaboration for a more cost-effective, outcomes-based healthcare system that benefits every stakeholder in the value chain.

 is Founder and Executive Chairman of Zephyr Health. He can be reached at pr@zephyrhealth.com

Columns

Connected ecosystems will change the future of healthcare. Three key value drivers are outlined.

The ‘Healthcare Internet of Things’

	As with so much this past political year, we all witnessed things we would not have thought possible 12 months ago. Experts had to clear the pie from their faces more than once. The main story for pharma was also one of the top issues nationally, the now very real prospect of repealing/replacing Obamacare. Connected, of course, are the industry’s favorite two words, drug pricing, a topic politicians are all to willing to sound off on, though rarely with much more insight than to incite the mob.

	In contrast to repeal/replace and drug prices, the post election story that few saw coming is the implication stemming from a possible Trump appointee: the inkling that there might be a challenge to the FDA itself, calling into question its core mission. The healthcare media threw 

 Jim O’Neill’s name was mentioned. O’Neill, as we now know, comes from the venture capital world as the managing director of Mithril Capital and is connected to the controversial Peter Thiel. 

	Suggesting a somewhat libertarian lean, O’Neill’s has in the past expressed that FDA ought to approve drugs based on safety alone, easing and speeding up the path to market. Those from venture and tech communities are known to look at healthcare regulatory burdens with a cynical eye. But for those entrenched in the healthcare world, questioning the FDA’s mission to determine safety and efficacy is anathema, downright blasphemous.

	The news that O’Neill’s name could be on Trump’s roll call made an earlier panel discussion even more relevant than it had seemed at the time. On December 1, at the Forbes Healthcare Summit in New York, the always ebullient Leonard Schleifer, CEO of Regeneron, stressed the importance of “high bars” for approval while butting heads with Pfizer’s CEO Ian Read. Schleifer’s braggadocious characterization of the company’s science (and disdain for others) came across as supremely confident that the FDA should set bars for approval as high as possible, with Regeneron among the few able to make the leap. The concept of outright eliminating efficacy was not even on the table.

	But while many were right to point out that such a change would indeed be a massive shock to the industry, few have connected to the other saga for which industry watchers have blasted the FDA. The approval of Sarepta’s 

 for a subset of Duchenne muscular dystrophy (DMD) patients came as major headlines for the tragically underserved patient population, but was trashed by those who expect efficacy metrics to be quantifiable. Sarepta’s drug proved very little in terms of efficacy, in a very difficult patient population, where placebo groups are nearly impossible to populate. So the FDA failed, according to many, ceding its objectivity in reverence to a pitiable and animated rare disease advocacy group.

	But industry critics failed to connect the next dot, i.e., that the market still worked! Sarepta now faces significant challenges because payers are 

. The company’s stock rocketed, doubling after approval, but has fallen back, and is now close to its pre-approval value. 

	The next step for the FDA, not to mention those in rare disease communities, is anyone’s guess. Few will celebrate the fact that DMD remains a miserable death sentence with minimal options. Do payers want this responsibility and the backlash that comes with refusing an option, even though they can call it unproven?

	But the industry, at minimum, needs to be willing to consider different thinking. Many rare diseases seem intractable given the current approval demands. Why not consider for certain diseases lower bars for approval to get drugs to market, then let payers, doctors, and patients sort things out?

	Though their voices have rarely been heard at healthcare conferences, there are many of the VC/tech/libertarian ilk who see the FDA fitting the origin story of other bureaucratic regulatory bodies. Starting with a government overreach in reaction to real or perceived disaster, they grow like weeds with few questioning their necessity. A contrarian, outsider taking the helm could be interesting, to say the least.

’s Senior Editor. He can be reached on Twitter at 

Rethinking views on limited-efficacy drug approvals may be in order.

Connecting the Dots for an Enraged Media

	The last few years have been a positive period overall for both the pharmaceutical and the biotechnology industries on many fronts. Most importantly, the number of new drugs approved and under development has escalated for pharma and biotech companies. Many of these are driven by new methods, such as immuno-oncology, personalized medicine, stem cells, and biologics. We are also witnessing the development of a greater number of drugs that cure diseases rather than just extend life.

		The valuations of pharma and biotech organizations in the public and M&A markets soared up until the end of 2014 in part because of these positive developments, but share prices and public valuations have been volatile since then with the drug-pricing controversies. 

		Public biotech shares have been hit particularly severely since the end of 2014, and as a result, the IPO market began to cool off in the second half of last year. This is creating a difficult equity financing environment for biotech companies, which, in turn, has affected the choices available to biotech firms to continue to fund their companies.

		Through the third quarter of 2016, 37 deals were completed worth $117 billion, compared to 56 deals completed worth $200 billion in 2015. From a historical perspective, this is a very strong volume of activity for the industry. However, from an annualized point of view, this represents a decrease in the dollar activity compared to last year, and a slight decrease in the number of deals. The main driver of this moderate slowdown has been the absence of the mega tax inversion-related deals that we saw last year. However, the clampdown on the tax rules by the US Treasury Department strongly discouraged those companies pursuing tax inversion deals and killed a number that were in the works as of the end of last year.

		In part because of this action, there were fewer mega deals, with only two large deals completed, the $31 billion acquisition of Baxalta by Shire and the $40.4 billion acquisition of Allergan’s generics business by Teva. Drugmakers are acting as both buyers and sellers, forming strategic alliances and swapping as they shore up their core businesses, exit non-core units, and use or seek tax inversion advantages.

		As of September 30, 2016, the value of the deals announced but not closed was $7 billion (20 deals), a solid number of agreements, but a weaker dollar volume in the pipeline. The pipeline was $240.4 billion (16 deals) at the end of December, but the massive Pfizer/Allergan merger was cancelled and took a large dollar amount off the table as a result. 

		Biotech M&A activity has almost always been modest historically, with small spurts of activity from time to time.

		Through the third quarter of 2016 there were 29 biotech M&A deals completed worth $14 billion, versus 31 deals worth $19 billion completed in 2015. 2016 activity is on track to exceed 2015 in terms of the number of deals. The dollar volume trajectory is less clear.

		This pick-up in activity is partly due to the major dropoff in biotech IPOs since the later part of last year as the market has turned against biopharma companies. Through the third quarter, only 22 IPOs have been completed this year compared to 61 for all of last year and 72 the year before. On a dollar basis, the picture is even more severe with only $1 billion raised in IPOs during the third quarter, compared to $5 billion the year before. Secondary offerings have also been adversely affected. Sealed off from high valuation equity offerings, the biotech companies are less fortunate than they were in 2013, 2014, and most of 2015, when they were able to raise money at high valuations. In many 

cases, it is not even an issue of valuation and the biotech companies have not been able to go public at all. As a result, the biotech organizations who are in Phase II and Phase III clinical trials, where the cash consumption is high, have been forced to either sell or to partner in order to deal with their shortage of cash.

		The pipeline of M&A deals as of September 30, 2016 was weak, as the value of deals announced but not closed was very modest at only $600 million on only one deal.  However, the movement has picked up, as biotech companies are being picked off as acquisition candidates. There has been a litany of firms who have announced that they are “exploring their strategic alternatives.”

			Young & Partners expects Pharma M&A activity in 2016 to fall modestly in terms of numbers of deals and more significantly in terms of dollars. The shutdown of the large inversion deals contributed to the dollar slowdown. 

			However, volume will still be significant in 2017 and beyond, driven by the restructuring and strategic needs of the pharma companies and the residual impact of what has been a feeding frenzy. This is being fueled by the massive business restructuring that is happening in pharma and the consolidation that is occurring both on the generic and non-generic sides of the business.

			Pharma companies are modifying their business portfolios to focus on leading positions and to exit weaker positions, and non-core and mature/established products, to search for growth, to attempt to replace lost or soon-to-be-lost revenues, and to drive for scale and cost reduction through consolidation.

			Outside of M&A, the need to fill the shrinking drug pipeline is also facilitated by in-licensing arrangements and the formation of partnerships and joint ventures involving both pharma and biotech companies.

			Therefore, in spite of the headwinds from the current ruckus about drug pricing, we believe there will be strong pharma M&A volume ahead of us, but moderately curtailed on a dollar basis by the inversion rules now in place.

			The primary biotech M&A theme has been pharma and big biotech acquisitions of biotech companies for pipeline enhancement. 

			The most promising biotech companies over the previous three years were able to go public first and attract significant interest and high prices later. The surge

 in IPOs gave biotech companies more flexibility as to whether and when they exit via a sale. However, the recent slowdown in IPOs will drive many companies to either sell themselves or raise funds via partnering deals or discounted private placements.

			Therefore, M&A volume and partnering deals will likely increase significantly in 2017, but still be well below that of the pharma industry.  

			For ethical pharma companies, there will continue to be a wide variety of tools to acquire revenues and pipeline drugs, but the valuations are challenging, particularly for promising drugs in late stage clinical trials and for companies with strong products.

			 The challenge will be to pick the right overall mix of M&A, licensing, and partnering to accomplish corporate strategic goals and defend and deliver shareholder value.

			The generic pharma companies will continue to face a number of industry challenges. This will result in a continuation of the current industry consolidation and selective strategies around diversification. 

			For biotech companies, public and private, the future is exciting from the drug development side, but troubling on the private funding, IPO, secondary equity financing, and M&A fronts. 

			Time will tell whether the very public attack on drug pricing will ease up and/or force changes in the industry. 

 is President and Managing Director, Young & Partners, Life Science Investment Banking. He can be reached at 

With the soaring valuations of companies in the public and M&A markets now seemingly a distant memory, the challenge for pharma and biotech business will be choosing just the right overall mix of M&A, licensing, and partnering.

Pharma and Biotech Markets: Challenges and Opportunities

	As new faces and agendas emerge in Washington, pharmaceutical companies will face multiple challenges in developing safe and effective therapies that are affordable to patients and payers alike. More biosimilars, cellular and gene therapies, complex dosage forms, vaccines and combination therapies will benefit from innovative research and regulatory approaches. And the imperative of combating the devastating

 opioid epidemic across America will require formulations able to treat pain while also resisting abuse and misuse, and also put the spotlight on the role of marketers in promoting opioid prescribing.

	These issues will be shaped by a new administration that has pledged to overhaul the nation’s healthcare system. The prospect of millions losing coverage has dire implications for drug prescribing and reimbursement, and for maintaining an effective drug regulatory and oversight program. Conservatives in Congress and the White House are looking to scale back federal government operations through budget cuts and hiring freezes. Such actions could be devastating for biomedical research at the National Institutes of Health (NIH) and for FDA, which already lacks sufficient resources to carry out its many mandated responsibilities and struggles to fill some 700 open staff positions.

	Pharma companies could gain from corporate tax reform under Trump that lowers rates and facilitates repatriation of foreign revenues to US-based companies. At the same time, Trump’s rejection of the Trans- Pacific Partnership (TPP) trade deal undermines prospects for global harmonization of patent policies and for common standards for conducting clinical trials, producing quality medicines, and ensuring adherence to ethical and legal standards.

	While industry hopes to avoid an all-out anti-pharma campaign from the new administration, pharma was jolted last month by Trump reiterating his promise to “bring down drug prices.” Continuing public outrage over too-costly medicines has prompted some pharma CEOs to pledge limits on annual price hikes. They’re also blaming price increases on the need to pay ever-higher rebates and fees to pharmacy benefit managers (PBMs) and wholesalers and calling for greater transparency in how the current distribution process limits manufacturer revenues and harms consumers who lack adequate insurance coverage.

	At the same time, a de-regulatory approach that challenges FDA restrictions on industry communications and promotional activities could lead to important policy changes for marketers. In response to legal challenges on several fronts, FDA held a public hearing in November to discuss proposals for revising policies that limit the dissemination of off-label information. Biopharma companies cited the benefits of discussing additional uses of medicines with health professionals, while FDA officials and consumer advocates raised concerns about permitting wider promotion of unproven claims.

	Marketers also hope FDA will revisit its regulatory approach to social media communications and current curbs on how companies may respond to queries about unapproved uses at public meetings and through online postings. An early win could come from clarification of FDA policies for disseminating 

economic information on products to health plans and formulary committees. A more flexible approach was originally proposed in section 114 of the 1997 FDAMA user fee legislation, but never implemented; language in the the 21st Century Cures legislation supports such action (see sidebar).

	Trump reformers also could back changes in the Open Payments program that scale back requirements for reporting pharma payments to doctors and hospitals. Critics killed a provision in the Cures bill that dropped reporting on the value of reprints and fees paid physicians for continuing medical education activities; industry ‘Cures’ Challenges and Communications Changes Ahead for Pharma Health reform, pricing pressures will shape drug marketing and development in 2017 and CME providers will press further for that revision and other changes in the “Sunshine” program.

	A main theme of Congressional reformers is for FDA and industry to facilitate faster patient access to new therapies, a goal championed by multiple Cures provisions. But regulators can only approve those applications that sponsors submit, and that has slowed down. As 2016 came to a close, FDA official reported that new drug approvals for the year would fall far short of the near-record set in 2015. Very disappointing is the recent failure of clinical studies for a promising Alzheimer’s disease treatment and patient deaths that shut down clinical trials for a new cancer therapy.

	These developments raise questions about how much data and what kind of evidence is needed to bring innovative product s to market. FDA has approved 

Health reform, pricing pressures will shape drug marketing and development in 2017.

Pharmaceutical Executive-01-01-2017

Path of Uncertainty: Pharm Exec’s 2017 Industry Forecast

Biopharma Change Agent: Belén Garijo

The ‘Healthcare Internet of Things’

Connecting the Dots for an Enraged Media

Pharma and Biotech Markets: Challenges and Opportunities

'Cures' Challenges and Communication Changes Ahead

Win Your Brand with Action

The State of Market Insights in Pharma

Country Report: Philippines

Pharmaceutical Executive, January 2017 Issue (PDF)