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Pharmaceuticals
As the real economy readjusts to the new market conditions, so there is potentially continued knock on effect to the pharmaceuticals sector. This is driven by western governments' desire from 2010 onwards to severely cut public spending. Our analysis shows that the pharmaceutical sector is not recession proof. (Source: Pressure on the Top Line, KPMG in the UK)
KPMG's pharmaceutical practice combines broad technical expertise with deep industry knowledge to deliver issues based solutions to the key companies in the sector.
Global healthcare spending is set to continue to rise in the period to 2011, but ageing populations particularly in Western countries will place increasing pressure on available government healthcare budgets.
This, combined with the fact that an additional $24 billion of branded products will lose patent protection in the top eight markets in 2009, will reinforce the rise of generic drugs and place increasing pressure on profits for global pharmaceutical companies.
The business structures of the Pharma industry are complex and unsuited to the new dynamics of the market. What are the common areas of high cost consumption and what are the best ways of tackling them?
Perceived risks in the Pharma industry have always been plentiful. The duty of care that the industry has to its patients drives inherent risk from a product consumption perspective. However due to the complexity of the business the financial returns available to shareholders have been hard to calculate as the risks are embedded and are not as clearly articulated as in some other sectors. De-risking the business model offers Pharma companies a clear path to shareholder value creation.
KPMG analysis reveals that if all companies moved from median to top quartile performance across the key metrics of days inventory, payables and receivables outstanding, they could liberate in the region of €17 billion of cash.
The current squeeze on cash and working capital places a strain on all businesses. Once again it is easy to think that Pharma are protected. The biggest problem, however, might well lie beyond their direct control - lurking somewhere within an extended supply chain, outsourced service provider, joint venture partner - or even a funding source.
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Pharmaceutical companies face a period of uncertain financial health. This edition of The Tablet seeks to explore if M&A activity can provide a key tool for companies to respond to these challenges and play a role in improving the industry's future.
This edition looks at M&A in the global pharmaceuticals and biotechnology sectors, the changing landscape of the pharmaceuticals sales force, and IT outsourcing.
KPMG Healthcare & Pharmaceutical Institute provides an open forum for business leaders from across the industry to share perspectives, gain insight, and develop approaches to help balance risk, controls, and improve performance.
