Upcoming speech on June 19
On June 19, in the Bay Area I will speak about Critical Chain in the pharmaceutical industry: http://bit.ly/z41Vz. Below is a brief summary:
Title: Critical Chain Project Management - Optimizing Projects for Speed and On-time delivery This presentation answers the question why senior executives should care about Critical Chain. By introducing Critical Chain project management companies are able to reduce cycle time by +15% in the first year. On-time delivery rates of projects are in the +95%. How is this possible? This presentation discusses the differences between Critical Chain project management and conventional scheduling approaches. Dr. Scherer gives an overview of key concepts of Critical Chain Project Management. He reveals implementation strategies on how to introduce rapid and reliable project management in large scale project-driven organizations. He uses real-world examples showing how Critical Chain applies in the world of Fortune 500 R&D organizations in the life science space.
The Organizer: BioPharma PM Network BioPharmaPM is a network of local communities throughout the world. This network is dedicated to the sharing of project management best practices within the Pharmaceutical, Biotech, CRO and Medical Device industries, at a local and global level. They are an independent 100% volunteer based organization, which remains aligned with PMI and PMBOK principles. Their goal is to customize the application of project management best practices for the life science industry.
New Wave of Mergers in Pharma
Over the last few months we have had a number of interesting merger announcements within the pharmaceutical industry. Major top 20 pharma companies were announcing to buy each other up.
- Roche buys Genentech: Roche agreed to acquire full ownership of Genentech for $46.8 billion. It had owned the majority of Genentech since 1990. The main reason cited for the transaction is that it will make the coordination of product development easier.
- Merck merges with Schering-Plough: Both companies announced on March 9, 2009 that their boards approved a definitive merger agreement. The new entity will carry the name Merck. This was a somewhat unexpected turn of events, because Merck’s strategy up to this point had been to buy much smaller companies and to acquire rights to individual experimental drugs.
- Pfizer buys Wyeth: Also this year Pfizer announced to buy Wyeth. The transaction is expected to close in the second half of this year.
- Lilly buys ImClone: In the last quarter of 2008 Lilly announced to acquire ImClone for $ 6.5 billion outbidding Bristol-Myers Squibb Co.
- GSK buys Stiefel: GSK is spending $3.6 billion to buy privately owned dermatology specialist Stiefel in an effort to bolster its pipeline.
The pharmaceutical industry has a history of major mergers. Companies like GSK have been the product of multiple mergers up to this point. However, these major announcements were made within a short period of time. So, what are the key drivers for this recent development?
Without any question, one of the driving forces is the never-ending quest to improve the pipeline of these major players. The hope is that, post merger the acquiring company will have a stronger pipeline of drugs that can be carried forward in their R&D organization. Of course, there is the hope of finding synergies, which is another word for carrying out the same amount of work with less people.
Some experts have voiced the opinion that the availability of freshly introduced TARP funding in the financial system was one of the key conditions for making these mergers possible. Certainly, this argument seems to have some legs, given the general unavailability of any kind of credit funds prior to the US government intervention.
It remains to be seen how successful the post-merger integration efforts will actually be. The final outcome of these mergers cannot be fully assessed for years to come. One thing is for sure though, when all the deal making is over, the regulatory process has resulted in the final approval and all documents have been signed, implementation will be essential. The fundamental necessity to drive execution from the board room level down to each and every project team will decide over a win or loss. Big Pharma just got a little bit bigger.
Outsourcing in the Pharmaceutical Industry
The pharmaceutical industry is changing rapidly. There is still an ever increasing demand world-wide for new treatments of diseases such as cancer, diabetes, obesity etc. The world-wide pharmaceuticals market is estimated to be $870 B in 2009 and will reach one trillion around the year 2013. At the same time, pharmaceutical companies are working hard to make a business model work, and that relies heavily on their ability to launch block buster drugs. These are products that need to hit the market in time to finance the multi-billion dollar infrastructure necessary to invent, develop, manufacture, distribute and market the new drugs. The top 50 pharmaceuticals share the same business challenges.
1. Rising costs and decreasing productivity
2. A fast growing Generics Industry
3. Litigations
In previous postings about the pharmaceutical industry, in general, and project management in that industry, in particular, those issues were discussed in greater detail. Now more than ever, pharmaceutical companies are trying to improve their operational efficiency. There is an emerging trend to strategically outsource entire segments of the R&D process. For quite some time, R&D work was subcontracted to third parties on a project-by-project basis. Examples of this kind of subcontracting are studies, the management of a clinical trial, data analysis etc. As a result, there are a slew of third party vendors called contract research organizations (CRO) that have taken on the role of an extended work bench. In 2007, this industry was world-wide about $18.7 B in revenue and is now estimated to grow about 15% annually over the next few years. In recent years pharmaceutical companies are taking the outsourcing process to an entire different level. Companies like Wyeth and Eli Lilly have begun to outsource entire functions to CROs.
1. Wyeth outsourced clinical data management to Accenture.
2. AstraZenica outsources major portions of their discovery chemistry work to ChemBridge Research Laboratories.
3. Eli Lilly outsources data management to i3, monitoring of clinical trials to Quintiles and major portions of their tox work to Covance.
Those deals are indicative of a shift in the sponsor-CRO relationship. What we see happening is what other industries have experienced before. Similar relationships between major brand companies and their vendors exist, for example in the semiconductor, banking and automotive space. These relationships can yield significant productivity improvements if managed correctly. R&D projects are not only crossing functional boundaries but also run across multiple businesses. In this world project managers are becoming the new mid level management capable. They need to be capable of dealing with the different stakeholders in various functions and corporate entities.
