I have been on the look out for somebody in the Big Pharma to break out of the pack. I have given up on Daniel Vasella, Chairman of Novartis. He is still firmly in the cyclical slowdown camp. He reminds me of Rich McGinn, the former Chairman of Lucent, who kept asserting that the landline slowdown was temporary/cyclical and not structural for far too long. Pfizer has looked like a possibility. Jeffrey Kindler, their new Chairman is an outsider. But so far he hasn’t made any noteworthy moves. Now The Economist suggests (“Beyond the Blockbuster”) that Roche is a possible break-out candidate. It’s excited by Roche’s $3b hostile takeover bid of Ventana, a diagnostics firm. It sees this as further evidence that Roche is serious about being a big player in the targeted cancer therapy space.
Targeted oncology has gained momentum over the years. Instead of looking for one blockbuster drug that will treat the over 200 types of cancer, firms have started looking to develop specific treatments of particular cancers. Many firms, big and small, are in the race here. And indeed The Economist is right to say that Roche and Genentech (majority owned by Roche) have a strong franchise in this space. Their recent acquisitions of NimbleGen and 454 Life Sciences made that franchise stronger.
Yet there is a problem. Roche is still stuck with the traditional vertically integrated model of Big Pharma. I believe that the shift away from one-size-fits-all drugs to more specialized (and, in the future, personalized) drugs requires a business model change. What is needed is a disaggregated model where the firms focus on a few core areas of competence, such as drug discovery, development or marketing and outsource the rest to the growing legion of biotechnology start-up firms, contract research organizations, independent drug-development firms and freelance sales organizations. Other forms of cross-company collaboration are also needed to build a new drug delivery system and a new sales model. I am still waiting for a Big Pharma player to move past the tinkering stage to the take-leadership stage.