Forbes India 15th Anniversary Special

Global pharma: Focus on core business, pure-play innovation

Global pharma saw three big mergers in 2009, driven by the high cost of drug development. Fifteen years later, the strategy is to hive off allied businesses to focus on pure-play innovative medicines

Naini Thaker
Published: May 30, 2024 04:11:10 PM IST
Updated: May 30, 2024 04:22:03 PM IST

Global pharma: Focus on core business, pure-play innovation India may be the world’s generic drug capital, but when it comes to pure-play innovation, there is a long way to go Image: Getty Images

The year 2009 saw three large mergers and acquisitions between a few of the world’s largest pharmaceutical companies.

Pfizer acquired Wyeth in a deal worth $68 billion with an aim to expand its product portfolio, gain access to Wyeth’s expertise in biotech and vaccines, and increase its presence in emerging markets. Pharma giants Merck and Schering-Plough came together to form a new entity with a strong presence in cardiovascular and respiratory markets, as well as in biologics and vaccines. The deal was worth $41.1 billion. Lastly, in a $47 billion deal, Roche acquired Genentech, known for its innovative work in biotech research. Roche was already a leader in cancer treatments, and with access to Genentech’s portfolio, it developed ground-breaking therapies for cancer. All these mergers and acquisitions were driven by one key factor: High cost of drug development.

Fifteen years later, the strategy has drastically changed—pharma companies are hiving off non-core businesses to focus on pure-play drug development.

One such case study is Novartis. In 2018, the company sold its stake in the consumer health care joint venture to GlaxoSmithKline for $13 billion. Since then, Novartis turned its attention to pure-play innovative medicines. Novartis has also sold off its eye wear business, Alcon; exited its stake in pharma giant Roche for over $20 billion, and spun off its generic medicine arm Sandoz in 2023.

But Novartis isn’t the only one. In 2021, Merck spun out its women’s health portfolio, along with biosimilars and established medicines, into Organon. News reports suggest that Lupin was also likely to demerge its API business, either via a potential listing or a stake sale. Earlier this year, French drugmaker Sanofi was reportedly looking to spin off its consumer business in India. This strategic decision is in line with the parent company’s decision to sell off its entire OTC (over-the-counter) business to focus on innovation, reckon analysts.

“For years now, innovator drugs have always been a priority for most global pharma giants,” explains Vishal Manchanda, senior VP, institutional research, Systematix Group. Danish drugmaker Novo Nordisk’s blockbuster drugs, Ozempic (for diabetes) and Wegovy (for obesity), have been a result of continued investment in R&D—14 percent in 2023. Pharma giant Merck & Co spent about $30.5 billion on R&D in 2023, about 51 percent of its total revenue; and Novartis spends over $11 billion on its R&D pipeline, which is almost 25 percent of its sales.

Global pharma: Focus on core business, pure-play innovation

During a recent interaction with Forbes India Vasant Narasimhan, CEO, Novartis, said: “On average, when we look at the last 20 years, our returns on R&D are well above our cost of capital.” But the risk associated with innovator drugs is that it isn’t consistent. “What happens is you’ll have a few hugely successful drugs, and then you’ll have a few years where you don’t have many successes, and you must accept that, and have the patience and wisdom to accept that you will have rough patches.” According to Narasimhan, it takes over seven years to bring a new drug from initial clinical trials to the end of Phase III, with an average cost at $2.3 billion.

So how far are Indian drugmakers when it comes to innovator drugs? Though India is the world’s generic drug capital, when it comes to pure-play innovation, there is a long way to go.

Also read: Novartis: Innovating for the world, from India


Sun Pharma is one of the few that has been successful in this space. It has a pipeline of over 10 specialty and innovative drugs in the US via acquisitions of late-stage drugs in clinical trials. At the annual meeting of the USA-India Chamber of Commerce in Boston, Dilip Shanghvi, managing director, Sun Pharma, explained that to get into the big leagues, the mindset of Indian drug makers needs to change. “This is clearly a long-term investment and takes time to produce return against high risks or potential failures. But once a product is in the market and it becomes successful, it is justified for all the efforts. I see all this happening in the next two to three years,” he said.

Apart from Sun Pharma, many others such as Dr Reddy’s, Glenmark, Lupin, Biocon and Zydus Lifesciences have been investing in innovative drug research. “But Indian companies need to start investing a large base of their total revenue into drug discovery,” says Manchanda. “Generics has a cap on how much it can grow. To achieve scale, they will need to focus more on innovation like most global pharma companies.”