Key Trends in Offshoring Pharmaceutical R&D

Summary

Key Trends in Offshoring Pharmaceutical R&D: Company strategies, emerging markets and impact on ROIs

Offshoring and outsourcing have become an increasingly critical contributor to pharma and biotech R&D strategies in recent years. They enable companies to focus on core competencies such as drug discovery or technology development whilst contracting out non-core processes to experts, often at lower costs. As offshore investments begin to mature and provide returns on investment, the opportunity to migrate individual components or whole segments of R&D portfolios will continue to rise.

'Key Trends in Offshoring Pharmaceutical R&D' is a report published by Business Insights that evaluates the offshore R&D strategies that can reduce development times and improve productivity, with analysis of a variety of strategic partnerships, academic collaborations, and outsourcing opportunities. This report identifies emerging areas of technological and scientific significance across the globe and examines the offshore strategies and investments of the top 20 pharma and biotech companies across Asia, Australia, Central and Eastern Europe, Latin America and the Far East.

This report also provides a financial and managerial valuation of leading companies based on their P/E ratio, return on assets (ROA) and return on investment (ROI) and measures company performance against the healthcare industry, pharmaceutical and biotechnology sectors and leading shares of the S&P500.

Key Findings

• Companies that have allocated over 60% of their R&D expenditure offshore have displayed greater shareholder return, operating margins, market capital growth and return on assets.
• The US currently attracts 53% of total industry R&D spend, however it is forecast that 20% of this expenditure will migrate to Asia Pacific by 2010.

Australia, China and Singapore are emerging as key areas for scientific and technological investment.

• Leading pharma and biotech companies have undergone major R&D restructuring over the last five years and now adopt a focused, streamlined global approach which is increasingly reliant on offshore strategic partnerships, academic collaboration and outsourcing to establish networks of scientific expertise.
• Scientific and technological excellence within emerging economies is a key incentive for offshore investment, enabling companies to enhance innovation and productivity within their R&D programs.
• Managerial expertise is a critical factor driving the success of offshore investments, helping leading pharma and healthcare companies to outperform their peers and the S&P 500 index in 2008.

Use this report to...

• Assess the offshore R&D strategies of the top 20 pharma and biotech companies with this report's analysis of offshore investment and deal trends over the last five years.
• Discover which geographic regions have the greatest potential for offshore R&D

investment by identifying key areas of technological, scientific and academic expertise across Asia Pacific, Australia, Eastern Europe, Latin America, the Middle East and South Africa.

• Measure how the offshore strategies of the top 20 pharma and biotech companies have influenced their R&D productivity and efficiency with this report's financial and managerial performance review, comparative analysis of healthcare/pharma/biotech sectors and S&P500 index assessment.
• Identify the key drivers and opportunities for offshore investment with this report's analysis of major offshoring trends and R&D developments.

Explore issues including...

Shifting focus of R&D strategies. The industry has become more globalized in its R&D approach as part of efforts to improve productivity and efficiency. Networks of offshore partnerships and academic collaborations are now enabling companies to harness external expertise on a project by project basis.

Offshore investment in emerging economies. Companies are increasingly turning to emerging countries to counter the slowing growth of US and European markets. Investing in offshore R&D facilities provides companies with local expertise and a greater understanding of local economies.

Offshore opportunities in tertiary economies. The success of commercial opportunities in emerging markets has expanded the regional scope of investment, with Australia, Israel and Singapore all seen to provide labour arbitrage and access to specialists.

Focused managerial directives are critical. Successful R&D performance is underpinned by a streamlined R&D strategy which is well managed by a team of scientists, technologists and non-scientists which can guide global networks ensuring early go/no go decision making which builds on the core competencies of both internal and external researchers.

Discover...

• Which countries are attracting offshore investment?
• Which areas of research and technology are attracting offshore investment?
• How are the leading pharma and biotech companies changing their R&D programs?
• Which major companies and academic institutions have attracted offshore investment?
• What factors are driving offshore investment?
• What is the financial performance of the leading pharma and biotech companies based on P/E ratio compared to their peers and the S&P500?
• Which companies have delivered the best return on assets and return on investment during the last five years?
• How will offshore investment influence R&D productivity in the future?

Contents

• Key trends in offshoring pharmaceutical R&D:
  • Company strategies, emerging markets and impact on ROI
  • Executive summary
  • Offshoring: what, where & why?
  • Company analysis
  • Market analysis
  • Valuation
• Chapter 1 Trends in offshoring R&D
  • Summary
  • Introduction
  • The evolution of offshoring
  • Trends in offshore locations
  • The decision to offshore
  • Offshoring vs inshoring
  • Emerging R&D trends
  • Conclusions
• Chapter 2 Leading pharma and biotech offshore R&D strategies
  • Summary
  • Introduction
  • Leading pharma & biotech company revenues
  • Leading R&D portfolios
  • Global R&D footprint
  • Returns on investment in the emerging economies
  • The impact of economic crisis on pharma's cash position
  • Johnson & Johnson
  • Revenue
  • Emerging markets
  • Deals
  • Pfizer Inc
  • Acquisitions
  • R&D strategy
  • Deals
  • Roche Holdings Ltd
  • Acquisitions
  • R&D centers
  • R&D strategy
  • Offshore deals
  • Sanofi-Aventis
  • Offshore strategy
  • Offshore R&D facilities
  • Novartis AG
  • R&D strategy
  • Offshore activities
  • Deals
  • Offshore acquisitions
  • GlaxoSmithKline plc
  • R&D strategy
  • Outsourcing
  • Offshore R&D facilities & deals
  • AstraZeneca Plc
  • R&D facilities
  • Offshore deals
  • R&D strategy
  • Merck & Co Inc
  • Restructuring
  • New commercialization model
  • Offshore R&D strategy & deals
  • Eli Lilly & Co
  • R&D strategy
  • Deals
  • Wyeth
  • R&D strategy
  • Clinical research partnerships
  • Bristol-Myers Squibb Company
  • BioPharma model
  • Strategic acquisitions
  • Amgen Inc
  • JVs and partnerships
  • Schering-Plough
  • R&D investment
  • Deals & acquisitions
  • Abbott Labs
  • Deals
  • Genentech
  • R&D investment
  • Acquisitions
  • Novo Nordisk A/S
  • Venture capital
  • Bayer Schering Pharma AG
  • Biogen Idec
  • R&D evaluation
  • Partnerships and strategic alliances
  • Baxter International
  • Conclusions
• Chapter 3 Offshoring hotspots and emerging markets players
  • Summary
  • Introduction
  • Globalization
  • Return on offshore R&D investment
  • Regional offshore investment deals
  • Asia-Pacific
  • China
  • India
  • Japan
  • Singapore
  • Australia
  • Eastern Europe
  • Latin America
  • Brazil
  • Middle East
  • Israel
  • South Africa
  • Conclusions
• Chapter 4 ROI from offshoring R&D
  • Summary
  • Introduction
  • Key areas for return on investment
  • R&D valuation
  • Financial performance
  • Managerial performance
  • Conclusions
  • Index
• List of Figures
  • Figure 1.1: Areas for R&D offshoring
  • Figure 1.2: Primary, secondary & tertiary investment
  • Figure 1.3: Key drivers for offshore investment
  • Figure 1.4: Balancing local and offshore investments
  • Figure 1.5: Trends in R&D
  • Figure 2.6: Pharma/biotech R&D intensity (%), 2007
  • Figure 2.7: Leading pharma mid-to-late-stage product pipelines (no. of late stage pipeline products), 2007
  • Figure 2.8: Leading pharma replacement power, 2007
  • Figure 2.9: Healthcare global R&D footprint
  • Figure 2.10: Accelerated growth in the Emerging Markets, 2006
  • Figure 2.11: Geographic diversification of leading pharma sales, July 2007-Jun 2008
  • Figure 2.12: J&J pharma sales (% share by product), 2007
  • Figure 2.13: J&J deals by type (no. deals), 2007
  • Figure 2.14: Origin of material of drugs by Roche, Genentech & Chugai, 2007
  • Figure 2.15: Novartis Pharma sales, 2007
  • Figure 2.16: Novartis deals, 2007
  • Figure 2.17: Merck's commercialization model, Dec 2007
  • Figure 2.18: Eli Lilly deals by type (no. deals), 2007
  • Figure 2.19: BMS biopharma model 2008
  • Figure 2.20: Schering-Plough deals by type (no. deals), 2007
  • Figure 2.21: Novo Nordisk's R&D strategy, 2008
  • Figure 2.22: Biogen's shareholder value creation plan
  • Figure 2.23: Baxter's global sales by region, 2007
  • Figure 3.24: Global R&D performance payoff for leading R&D spenders, 2005-2007
  • Figure 3.25: Location of offshore contract R&D (number of deals), 2004-2008
  • Figure 3.26: China offshore activity (% deals), 2004-2008
  • Figure 3.27: India offshore activity (% deals), 2004-2008
  • Figure 3.28: Japan offshore R&D activity (% deals), 2004-2008
  • Figure 3.29: Singapore offshore activity (% deals), 2004-2008
  • Figure 3.30: Australian offshore activity (% deals), 2004-2008
  • Figure 3.31: Eastern Europe offshore activity (% deals),2004-2008
  • Figure 3.32: Brazil offshore activity (% deals), 2004-2008
  • Figure 3.33: Israel offshore activity (% deals), 2004-2008
  • Figure 3.34: South Africa offshore activity (% deals), 2004-2008
  • Figure 4.35: Pharmaceutical R&D expenditure, average R&D expenditure per NAS launch, average
• ROI per NAS (1988-2000)
  • Figure 4.36: New strategic and decision making models to target productivity issues
  • Figure 4.37: US pharmaceutical P/E ratios
  • Figure 4.38: US biotechnology P/E ratios
  • Figure 4.39: Leading companies over-performed ROA showed positive 5 year growth
  • Figure 4.40: Leading companies over-performed ROA showed negative 5 year growth
  • Figure 4.41: Leading companies over-performed ROI showed positive 5 year growth
  • Figure 4.42: Leading companies over-performed ROI showed negative 5 year growth
  • Table 1.1: Global technology research parks in secondary & tertiary countries
  • Table 2.2: Top 20 pharma/biotech revenues & R&D investment ($m), 2007
  • Table 2.3: J&J emerging economy sales growth (%), Q308
  • Table 2.4: J&Js recent R&D activities (ex US and top 5 European countries)
  • Table 2.5: Pfizer's recent R&D activities (outside the leading pharma countries)
  • Table 2.6: Roche's recent R&D activities (outside the leading pharma countries)
  • Table 2.7: Sanofi Aventis recent R&D activities (outside the leading pharma countries)
  • Table 2.8: Novartis AG recent R&D activities (outside the leading pharma countries)
  • Table 2.9: GlaxoSmithKline recent R&D activities (outside the leading pharma countries)
  • Table 2.10: AstraZeneca recent R&D activities (outside the leading pharma countries)
  • Table 2.11: Merck & Co recent R&D activities (outside the leading pharma countries)
  • Table 2.12: Eli Lilly recent R&D activities (outside the leading pharma countries)
  • Table 2.13: Wyeth's recent R&D activities (outside the leading pharma countries)
  • Table 2.14: Amgen recent R&D activities (outside the leading pharma countries)
  • Table 2.15: Abbott's recent R&D activities (outside the leading pharma countries)
  • Table 2.16: Genentech recent R&D activities (outside the leading pharma countries)
  • Table 2.17: Novo Nordisk's recent R&D activities (outside the leading pharma countries)
  • Table 2.18: Bayer Schering's recent R&D activities (outside the leading pharma countries)
  • Table 2.19: Biogen Idec recent R&D activities (outside the leading pharma countries)
  • Table 2.20: Baxter's worldwide facilities, 2008
  • Table 3.21: Top Ten R&D generators, users and importers (US$bn), 2007
  • Table 3.22: Latin American offshore agreements
  • Table 4.23: R&D productivity high and low benchmarks
  • Table 4.24: Valuation ratios by company
  • Table 4.25: Industry investment summary