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Pharmaceutical companies need to act now to survive

Senior executives at the largest global pharmaceutical companies recognise the need for change but need to move quickly to ensure sustained growth

Senior executives at the largest global pharmaceutical companies recognise the need for change but need to move quickly to ensure sustained growth, according to findings published in Ernst & Young's bi-annual global pharmaceutical report.

The report, based on a survey of senior executives from major pharmaceutical companies, shows that although these companies recognise the pressures in the industry such as patent expiries, globalisation and a lack of late-stage pipelines, few companies have embarked on the organisational and business changes needed to sustain growth in this new climate.

"All of the top 15 pharmaceutical companies have undergone senior executive-level changes within the last two years, bringing in an influx of new C-suite talent that includes many individuals from industries that have successfully tackled the challenges now confronting pharma," said Carolyn Buck Luce, global pharmaceutical leader, Ernst & Young. "These leadership changes should help innovative companies to transform their finance function, organisational design, and business models in ways that enable them to continue to prosper in a challenging time."

The report shows that the top priority for senior management is to improve the pipeline of new products. Only 40 per cent of respondents considered the optimisation of costs to be the most important initiative, whereas in a similar survey in 2007, this was the top priority for 92 per cent of executives. Companies are looking to drive innovation and reinvigorate R&D in the hope of transforming business models.

"In this period, it is more critical than ever that companies tackle a host of issues that, to date, have not been fully embraced - from the fragmented ways in which risk is managed, to the need to adopt a 'grow lean' culture or best allocate scarce capital," said Mark Hassenplug, global pharmaceutical markets leader, Ernst & Young. "As the industry's focus shifts from driving top-line revenue growth to managing for return, the need to transform finance has grown especially urgent."

17th November 2008

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