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Pharma's Market

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Nov.13

11:11 AM ET

Thursday, 13 Nov 2008

Pharma And The Financial Crisis

Posted By:Mike Huckman

Topics:Stock Market | Medicine | Corporate News | Pharmaceuticals

Sectors:Insurance | Health Care Equipment and Services | Health Care | Pharmaceuticals

Companies:Cephalon, Inc. | Amylin Pharmaceuticals | Bristol-Myers Squibb Co | Schering Plough Corp

Big Pharma
CNBC.com
Big Pharma
Big pharma's got big problems. That should not come as news to anyone who works for, follows or invests in the industry.

But in another comprehensive report on the state of the sector just out today, the folks at Ernst & Young are detailing all of the challenges and issues facing pharma. E&Y hired Broderick & Company, a market strategy firm, to canvass top execs from 15 drug companies all over the world including most of the majors as well as smaller firms like Amylin Pharmaceuticals[AMLN Loading... () ] , Cephalon [CEPH Loading... () ] and Nycomed.

This pulse-taking is kind of a sequel to a similar E&Y report earlier this year on the changing role of CFOs at the big drug companies. Coincidentally, there's new evidence this morning of that trend with Bristol-Myers Squibb's [BMY Loading... () ] CFO announcing he's found a way to increase cash flow over the next couple of years by as much as a billion bucks.

It's also no surprise that in the latest E&Y survey that 72 percent of the senior level managers claim that the "thinness" of their drug development pipelines is their #1 concern. The nearly 50-page report goes over a lot of other familiar ground, but it was written late enough to include a fresh take on the effect of the financial crisis on pharma. E&Y says, "The events of the last two months have been a wake-up call for all industries. And to the pharmaceutical industry, one thing is now perfectly clear: the once-effective blockbuster model of pharmaceutical companies has reached its own 'patent expiration'. And the time for transformation is now. Announcements are being made almost weekly about organizational restructurings."

Even so, E&Y believes the drugmakers aren't moving fast enough. The report says, "It is our experience that transformational strategies require transformational execution. And companies are not as far along as they should be in the implementation of their transformational journey."

As we head into the big pharma meeting season starting with Schering-Plough's [SGP Loading... () ] investor/analyst get-together on November 24th, I'm certain we'll be hearing a lot more about the ongoing "transformational journey".