Are investors feeling more love for pharma?
It doesn't take much work to find an article that swings a sharp blade at some corner of the pharmaceutical industry. Corruption, faked test results, even a possible sex scandal -- they've all been in recent news.
But underneath the salaciousness is a different story -- one of an industry whose reputation shows signs of being on the rise with investors.
An article published earlier this month in Pharma Times reported on the development. Based on a recent Barron’s study ranking the world’s 100 largest publicly traded companies, 11 pharmaceutical companies made the cut among the most respected by investors --- including several in the top quarter.The main criteria investors used to rank their favorites included strong management, ethical business practices, business strategy, competitive edge and product information.
Johnson & Johnson ranked fifth, followed by Gilead Sciences (15), Novartis (22), Amgen (24), Bayer (25), Bristol-Myers Squibb (27) and Roche (31). Gilead, Novartis, Amgen and Bristol-Myers Squibb all rose from last year's rankings.
Other pharma companies included Merck at 43, AstraZeneca (48), Pfizer (51), Novo Nordisk (54), GlaxoSmithKline (59) and Sanofi (74). Only Sanofi slipped significantly, dropping seven points.
Turning around the public perception
Though investor polls may have different outcomes than popular opinion polls, there can be an intersection of values. In December 2013, Luke Timmerman, a healthcare journalist and industry expert, weighed in on the bad reputation that the pharmaceutical industry has garnered over the last 20 years, as well as some remedies to reverse this negative reputation. At the same time, Timmerman noted that over-regulation and reactions to negative news stories may have contributed unfairly to the less-than-rosy perception of pharma.
Timmerman maintained that pharma "is fundamentally a good force for progress and has made many great achievements building on its investments, and society’s investments, in basic biomedical science. There are many supersmart, dedicated, well-meaning pharmaceutical and biotech employees today who are getting results. If they didn’t have adequate economic incentives, we’d never get them to work so hard creating the great drugs, vaccines, diagnostics, and devices that do a lot of good. There’s no reason why pharma should always be destined to be a public enemy.”
Reiterating some of the common claims against pharma, Timmerman lists complaints related to price gouging, not making good on promises of innovation and loss of a moral compass as top concerns. "Time and again, I’ve seen companies over the past couple years push drug prices to stratospheric levels that surprise and sometimes shock Wall Street analysts," he wrote.
He suggests that the industry take a series of actions that go beyond a good PR offensive. Among Timmerman’s suggestions are increasing data transparency, as well as patient engagement. He also suggests that industry should support FDA more in order to help the agency expedite its review processes and provide the momentum needed to bring drugs to market more quickly. He warns companies to rein in unethical sales and marketing practices, put more money into sponsored research and stop direct-to-consumer television advertising. His rather acerbic take on that situation: “The 30- or 60-second spot is for entertainment, not medical information.”
As part of his suggested “to-do” list, Timmerman also suggests redoubling research and development efforts, as well as investing more aggressively in global health. Timmerman notes that many of the efforts on the global health front are largely symbolic; however, there are exceptions.
One example: In 1981, a team of scientists at Merck developed mectizan (ivermectin), a broad-spectrum antiparasitic drug that is a cure for river blindness. This drug was truly a game-changer and a major credit to Merck, which was hailed as a corporate leader and icon of scientific integrity and progress for years afterward. With unassailable logic, Timmerman makes his case, writing, “If you spend $200 million coming up with a vaccine for malaria and you give it away for free, you could probably save millions of lives. It wouldn’t bankrupt any of the Big Pharma companies. And it get might generate 100 years of future customer goodwill in the developing countries where that kind of breakthrough occurred.”
Needed: More 'good stuff'
One suggestion Timmerman has for the pharmaceutical industry is to keep up the good work. And despite the complaints, there is a lot of good work being done. Innovation, persistent R&D and a willingness to take on the challenge of addressing unmet medical needs---these are the good things that are happening, but more is needed.
Timmerman cited three relatively recently approved drugs, in particular, as examples of good work: Kalydeco (ivacaftor), developed by Vertex as a novel treatment for cystic fibrosis (CF) that actually targets the underlying CF protein; Kadcycla (ado-trastuzimab emtansine) developed by Genentech for treatment of HER2-positive breast cancer and Imbruvica (ibrutinib), from Janssen, for treatment of mantle cell lymphoma and chronic lymphocystic leukemia. Clearly, there are many, many more examples—far too many to list. This short list, however, exemplifies breakthrough treatments.
While some changes are certainly necessary, when it comes right down to it, investors may have the right idea. There is value in the pharmaceutical industry -- for investors and everyone interested in scientific progress and access to life-changing therapies.