Two surveys of pharmaceutical executives released Tuesday suggest a troubling, or at least tumultuous, future for an industry that employs thousands of people in the Philadelphia area.
The consulting firm KPMG spoke with 100 senior executives from companies in three annual-revenue categories, though none with less than $100 million.
* Eighty-three percent of those leaders said it was likely that their company would buy a company or be sold to another company during the next two years.
* Forty-eight percent of executives said revenue would be moderately higher a year from now, but only 16 percent said they expected significantly higher revenue.
* As for jobs, look over that resumé: Just 41 percent said they planned to add personnel in the next year, and 23 percent said they never expect hiring to return to prerecession levels.
David Blumberg, KPMG's national advisory pharmaceutical lead partner, said the executives indicated that cash on company books would likely be spent on geographic expansion.
"Whether it is China or India or Brazil or another emerging market, companies will look to see whether they can buy a company to expand into that country or whether they open their own office, manufacturing plant, or research and development facility," said Blumberg, who works in KPMG's Philadelphia office.
"The key emphasis is organic growth - selling the same product or service that they've sold elsewhere," he said.
Some of the top-selling medicines, such as Lipitor, will soon lose the exclusivity afforded by patents, which means that generic companies will be free to sell their versions for less money.
In KPMG's survey, 58 percent of executives said that patent expiration of key drugs and generic competition was the top concern facing their company. Increasing regulation and enforcement was the top concern among 45 percent, and a lack of new products in the pipeline was cited by 34 percent.
"The good news is companies have cash to invest in or acquire new medicine breakthroughs, or markets and customers to drive some growth," Blumberg said.
This region has the full range of companies and occupations.
Some big companies, frustrated by the time and cost of bringing new products from the laboratory to the market, have slashed research and development spending and staff. Other companies have decided to stay the course with their own research staffs.
"The jury is not back yet on whether there is only one right answer," Blumberg said.
The focus on acquisitions usually means looking for smaller companies that have drugs or devices already producing revenue or close to it.
That can mean jobs for scientists at smaller companies, if not always at the same salary, but not all employees can shift between firms. Blumberg said pharmaceutical service companies and those handling some or all aspects of clinical trials have grown.
"Some of the downsizing - even if it's permanent at one company - could be shifting," Blumberg said, referring to scientists. But he noted that sales is not an employment growth area. "Those jobs have gone away because companies have less people selling."
Meanwhile, the Economist Intelligence Unit reported in a survey conducted for Quintiles, a bio and pharmaceutical services provider, that only 47 percent of 282 life-sciences executives said their company's research-and-development model was capable of meeting their company's needs.
University of the Sciences president Philip Gerbino, who was quoted in the report, seemed to suggest that entrenchment and chaos - "entropy," as he put it - were reasons why companies were slow to improve on their research programs.
Quintiles, which has its headquartered in Research Triangle Park in North Carolina, would like more companies to outsource clinical research trials, so it has an interest in R&D angst.
The 282 senior executives surveyed by the Economist Intelligence Unit came from pharmaceutical companies (39 percent), biotech (21 percent), medical device manufacturers (22 percent) and service providers (14 percent), among others. About 58 percent were high-ranking executives. The respondents came from the Asia-Pacific region (32 percent), North America (31 percent), Western Europe (26 percent) and the balance from the rest of the world. Of the respondents, 43 percent represented companies with more than $1 billion in annual revenue and 24 percent work for companies with more than $5 billion.
Gerbino served on the Economist Intelligence Unit's advisory board for the study, as did Lawton Robert Burnes, director of the Wharton Centre for Health Management & Economics, and Stephen Tang, president and CEO at the University City Science Centre.
The survey indicated there were a variety of reasons for concern about innovation within the research-and-development wing of companies, but also noted that similar concerns were heard in decades past.
There were economic pressures then, too, but the current ones, obviously, seem more challenging to those in the industry and that influences thoughts of innovation.
"Right now," Wolfgang Soehngen, CEO of the German pharmaceutical company Paion, said in the report, "the industry is very much driven by fear rather than by ambition."
Contact staff writer David Sell at 215-854-4506 or dsell@phillynews.com.
