Consolidation is here to Stay
Jane Griffiths: Consolidation in the pharma industry is here to stay: as market competition increases, M&As are one of the fastest ways for companies to obtain critical mass, allowing them to broaden their product range or branch into new therapy areas whilst extending their geographical reach. Acquisitions also enable cost savings to be achieved through the consolidation of functions and systems and realizing economies of scale. Additionally, acquisitions enable companies to strengthen their financial position, in some cases providing an immediate revenue boost. The rate of consolidation will be limited by the search for companies that are strategically and culturally aligned, ideally that can add immediate value to the bottom line.
The contracting environment will likely mirror activity in the pharmaceutical industry, particularly as CDMOs are set to become less of a vendor and more of a long-term strategic partner to pharma. CDMOs looking to remain competitive will need to consolidate to match the scale and reach of consolidated pharma companies, as well as provide more end-to-end capabilities, and become more agile to meet supply chain complexity.
Aggregate innovation has held strong despite dramatic increases in pharma M&A activity. Concerns about the impact of consolidation on drug innovation are misplaced because most drug innovation today originates not in traditional pharmaceutical companies but in biotechs. In these smaller firms, a culture of nimble decision-making and risk-taking facilitates discovery and innovation.
At Johnson & Johnson, we recognize the challenges are huge and we look beyond our own walls for solutions through vehicles like our Janssen Innovation Centres. We have a saying that ‘the world is our laboratory’: we seek medical breakthroughs wherever they occur – whether that’s a university, research organization or other biotech or pharmaceutical companies. Our goal is to identify the best ideas inside and outside our organization to tackle the biggest unmet medical needs of our time. Our acquisition of Actelion early this year is proof of just that.
