Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 57

Typically, the partner fi rms employ carefully coordinated pricing and communica-
tions strategies and, by pooling their sales forces together, can obtain broader access
to markets. 21
Licensing has an immediate impact on the size of the fi rm's project portfolio.
It also affects the resource allocation of the fi rm. Simonet ( 2002 ) identifi es three
types of large pharmaceutical fi rms based on the prevalent sourcing of their project
portfolios: (a) development - oriented fi rms choose to maintain a project portfolio
dominated by in-licensed products, for which the focal fi rm conducts clinical
development (e.g., Johnson & Johnson, Bristol-Myers Squibb); (b) fi rms with well -
balanced portfolios strive to maintain a set of self-originated products that match
or slightly exceed the number of in-licensed products in their pipeline (e.g., Eli
Lilly, Pfi zer, Roche, Novartis, GlaxoSmithKline); and (c) research - oriented fi rms
operate with a relatively small number of in-licensed products in their portfolio,
and place strong emphasis on self-originated products that they take into development
(e.g., Merck & Co., Bayer, Boehringer Ingelheim, Novo Nordisk).
Regardless of their revenue, it is the fi rms experiencing a decline in new drug
productivity (measured as depletion in their research pipeline) that are more likely
to engage in R&D-focused alliances, in-licensing agreements, or consolidation
through mergers and acquisitions (Higgins and Rodriguez 2006 ). The examples
studied in Simonet ( 2002 ) seem congruent with this conclusion—two of the four
development-oriented firms in that review were subsequently acquired. 22
Nonetheless, tempting as it is to make causal inferences about a precipitated down-
fall associated with too much dependence on in-licensed products, anecdotal and
isolated cases like these are not suffi cient for generalization. Besides, an acquisition
can be a springboard to faster growth under a different identity instead of a death
knell for the acquired company. Data including information on the retention of man-
agement and R&D teams and on the fate of projects initiated before the acquisition
may shed more light on these issues.
The assimilation of external ideas, knowledge, technology, or know-how can
determine the future market options for the fi rm, and can be an instrument to quickly
balance a temporarily weakened pipeline. Given the uncertainty in gaining FDA
approval with a single drug candidate, a richer portfolio will increase the fi rm's
chances to take at least one drug to market. The success of a business model with a
stronger leaning toward external innovative input through in-licensing may be con-
tingent on the current state of the fi rm's R&D portfolio, as well as its capacity to
attract, select, and carry out projects of greater potential for success.
21 A recent example for an international alliance of large pharmaceutical fi rms is that of
Boehringer-Ingelheim and Pfi zer for the joint manufacturing and marketing of Spiriva ® , a treatment
for chronic obstructive pulmonary disease.
22 In 2009, Schering-Plough got acquired by Merck, while American Home Products was taken
over by Pfi zer.