'Fight or flight?" - Roland Berger study identifies diversification as one of the most prominent trends in the pharma industry, but not for Roche

Big pharmaceutical companies are facing more and more challenges. The study, "Fight or flight?" by Germany-based Roland Berger Strategy Consultants, identifies diversification as one of the most prominent trends across the pharmaceutical industry. The participating companies include seven of the global Top 10 and represent over 40% of global pharmaceutical revenues.

The Roland Berger experts also conducted interviews with top executives to validate the findings and derive strategic implications. The study identified three dimensions of diversification: innovate, integrate and de-risk. At the moment, the most important area for diversification is the generics business. With innovative medicines coming under increased cost pressure and more and more R&D investments yielding a negative return, pharma is embracing the diversified business model as a potential way out of the crisis. In a break with the past, the financial community supports this move.

"Big pharmaceutical companies are at a turning point," says Stephan Danner, partner and pharmaceutical expert at the Consultants. Public cost containment measures, difficult market access as well as massive patent expiries require a fundamental review of the traditional business model."With more than half of the industry's sales going off-patent within the next three years, 65% of the companies surveyed think the pharmaceutical industry is facing a strategic crisis. In this context, 67% of pharma executives see diversification as a potential way forward," states Mr Danner. For those companies currently pursuing diversification, the study identifies three dimensions: the de-risk path, the innovation path and the integration path.