Merck & Co's announcement that it is cutting an extra 8,500 jobs, which follows recent restructuring at the likes of Pfizer, AstraZeneca and GlaxoSmithKline, again shows that big pharma needs to be more entrepreneurial and adopt more flexible structures.
This is the view of John Lyon, former global vice president of contract research organisation major Covance, who is now a venture capitalist as well as professor of practice in entrepreneurship at Warwick Business School in the UK. He believes that Merck’s move is "part of a realisation that the days of the blockbuster drug are coming to a close".
Noting that "there is a huge transformation going on in the pharmaceutical industry", he says that companies can no longer rely on the blockbuster with revenues in excess of $1 billion per year. He argues that scientists have spent "many years, decades even, investigating new medicines from existing chemical compounds and proteins, but it is becoming more and more difficult simply because there are less to look at as the years go by".
Furthermore, he says that "there are only a finite number of compounds, so the industry is having to shift its focus", which means that firms need to become more innovative "in an increasingly competitive sector".
Be 'better and faster'
Prof Lyon told PharmaTimes that "the winners will be those that can not only innovate to produce new products, but can adopt their business models to cater for products that have overall less turnover than the hurdle used in the past where there is still unmet medical need". He went on to say that "bearing in mind that it costs millions of dollars to develop a proprietary medicine, and sales forces are not cheap to operate, there has to be a better and faster way to get through the development process".
He argues that using "smaller empowered teams that are accountable and being allowed to outsource where they believe will produce the optimal result" is key. While CEOs are always vulnerable with restructuring, "for the better ones, it means opportunity not crisis. It should be a way of refining the talent pool".
Prof Lyon states that large corporations are very process-driven so they need "flexible dynamic organisational structure…to act swiftly to changing market dynamics along with the ability to address real-time controllable risks through swifter decision-making". He acknowledges that this takes time, as "it is an on-going process that will take many years - it is like turning an oil tanker".