Scope

3

Datamonitor insight into the specialty pharma market

4

Specialty pharmas must improve their search strategies, work closely with biotechs and target the right therapy areas

4

The current growth-by-acquisition model is unsustainable

6

A network of partners is key to sustained growth

9

Specialty pharmas with a US sales focus are attractive acquisition targets for European and Japanese manufacturers

10

CHAPTER 1 Specialty pharma – the story so far

14

Key findings

14

The specialty pharma market: definition

15

Diverse roots

15

Specialty pharma market size

18

Characteristics of specialty pharma companies

18

Key performance indicators

21

Traditional specialty pharma growth strategy: growth-by-acquisition

26

Search strategies

28

Acquisitions

29

Focused sales and marketing activities

32

Limitations to the growth-by-acquisition model

32

Need for high cash reserves

32

Over-reliance on success of individual acquisitions

33

Lack of appropriate acquisition targets

33

Acquisition targets too small

34

CHAPTER 2 COMPANY ANALYSIS

36

Key findings

36

Benchmarking specialty pharma performance

37

Benchmarking by sales and sales growth, 2000-01

37

Degree of specialization

39

Ratio analysis

43

Funding future growth

45

Individual company profiles

46

Allergan

47

Summary

47

Financial analysis

49

Portfolio analysis

50

Partnership network

51

Andrx

53

Summary

53

Financial analysis

54

Portfolio analysis

56

Partnership network

58

Biovail

60

Summary

60

Financial analysis

61

Portfolio analysis

63

Partnership network

64

Elan

66

Summary

66

Financial analysis

69

Portfolio analysis

71

Partnership network

72

Forest

75

Summary

75

Financial analysis

76

Portfolio analysis

78

Partnership network

81

ICOS

81

Summary

81

Financial analysis

83

Portfolio analysis

84

Partnership network

85

IDEC

87

Summary

87

Financial analysis

88

Portfolio analysis

89

Partnership network

90

King

92

Summary

92

Financial analysis

93

Portfolio analysis

95

Partnership network

98

Lundbeck

100

Summary

100

Financial analysis

101

Portfolio analysis

104

Partnership network

106

Shire

107

Summary

107

Financial analysis

109

Portfolio analysis

111

Partnership network

112

Teva

115

Summary

115

Financial analysis

116

Portfolio analysis

118

Partnership network

119

Watson

121

Summary

121

Financial analysis

122

Portfolio analysis

124

Partnership network

126

CHAPTER 3 IDENTIFYING AND EXPLOITING FUTURE GROWTH OPPORTUNITIES

129

Key findings

129

Short term growth opportunities for specialty pharma, 2002-07

130

Growth drivers

130

Barriers to growth

139

Longer term growth opportunities for specialty pharma, 2007-12

142

Growth drivers

142

Barriers to growth

146

Future scenarios of specialty pharma market growth

147

Winning growth strategies

150

Improved search strategies and better structured agreements

153

Targeting the right therapy areas

154

Creating partnership networks

155

Working with biotechs

157

Moving upstream to reduce reliance on acquisitions

159

CHAPTER 4 THE SPECIALTY PHARMA LANDSCAPE TO 2012

161

Key findings

161

List of Tables

Table 1: Allergan: financial health, 1999-2001

49

Table 2: Allergan’s acquisitions and agreements, 2000-2002

52

Table 3: Andrx: financial health, 1998-2001

55

Table 4: Andrx’s acquisitions and agreements, 1997-2002

59

Table 5: Biovail: financial health, 1998-2001

62

Table 6: Biovail’s merger and acquisition activity, 1999-2002

65

Table 7: Elan: financial health, 1998-2001

70

Table 8: Elan’s acquisitions and agreements, 1996-2002

74

Table 9: Forest: financial health, 1998-2001

77

Table 10: Forest’s late stage pipeline, 2002

80

Table 11: ICOS: financial health, 1998-2001

83

Table 12: ICOS’ acquisitions and agreements, 1997-2002

86

Table 13: IDEC: financial health, 1998-2001

88

Table 14: IDEC’s acquisitions and agreements, 1996-2002

91

Table 15: King: financial health, 1998-2001

94

Table 16: King’s acquisitions and agreements, 1996-2002

99

Table 17: Lundbeck: financial health, 1998-2001

102

Table 18: Lundbeck’s in-licensing activities

105

Table 19: Shire: financial health, 1998-2001

109

Table 20: Shire’s merger activity, 1995-2002

113

Table 21: Shire’s agreements, 2000-2002

114

Table 22: Teva: financial health, 1998-2001

117

Table 23: Teva’s acquisitions and agreements, 1997-2002

120

Table 24: Watson: financial health, 1998-2001

123

Table 25: Watson’s product acquisition activity, 1997-2002

126

Table 26: Watson’s merger and acquisitions, 1997-2002

127

Table 27: Pharmaceutical industry structure in 1998, 2000 and 2005

136

Table 28: Drivers and resistors of specialty pharma market growth

148

List of Figures

Figure 1: Relative future growth potential of 12 specialty pharmas

5

Figure 2: Future growth of the specialty pharma market will be primarily determined by the therapeutic focus and favored growth strategy of top tier companies

8

Figure 3: The impact of acquisitions on specialty pharmas’ operating profit margins

24

Figure 4: Specialty pharma companies’ evolution towards fully integrated pharmaceutical company status

27

Figure 5: Benchmarking by sales: smaller specialty pharmas show higher growth

38

Figure 6: Therapeutic, geographic and value chain focus of selected specialty pharmas

39

Figure 7: Therapeutic specialization in 2001: CNS is the therapy area of choice

40

Figure 8: Specialty pharmas’ geographic focus

42

Figure 9: The number of sales reps is directly proportional to sales

43

Figure 10: Ratio analysis of specialty pharmas

44

Figure 11: Specialty pharma cash reserves

46

Figure 12: Indicators of specialty pharmas’ growth strategies

47

Figure 13: Assessment of Allergan’s strategic position, 2002

48

Figure 14: Assessment of Andrx’s strategic position, 2002

54

Figure 15: Assessment of Biovail’s strategic position, 2002

61

Figure 16: Assessment of Elan’s strategic position, 2002

69

Figure 17: Assessment of Forest’s strategic position, 2002

76

Figure 18: Assessment of ICOS’ strategic position, 2002

82

Figure 19: Assessment of IDEC’s strategic position, 2002

87

Figure 20: Assessment of King’s strategic position, 2002

93

Figure 21: Assessment of Lundbeck’s strategic position, 2002

101

Figure 22: Assessment of Shire’s strategic position, 2002

108

Figure 23: Assessment of Teva’s strategic position, 2002

116

Figure 24: Assessment of Watson’s strategic position, 2002

122

Figure 25: A handful of mega-companies will dominate the industry by 2005

137

Figure 26: Future growth of the specialty pharma market will be primarily determined by the therapeutic focus and favored growth strategy of top tier companies

149

Figure 27: Exploiting revenue opportunities in the new industry space

152

Figure 28: Development companies display the most extensive partnership networks

163

Figure 29: Little big pharmas have the most effective search strategies

165

Figure 30: Selecting an appropriate therapeutic focus is key to maximizing profit margins

167

Figure 31: Elan leads the way in working with biotechs

168

Figure 32: US based specialty pharmas do not yet need to expand beyond their domestic market – only Allergan has a global presence

170

Figure 33: Forest’s organized search strategy is apparent in the strength of its late stage pipeline

171

Figure 34: Allergan is the most favorably positioned to transition successfully to FIPCO status

172