The Disaggregation of the Pharmaceutical Value Chain and its Innovation Implications.

​The evolution of the pharmaceutical industry has witnessed the continued disaggregation of the industry value chain.  This disaggregation has resulted in larger, more established companies increasingly focused on downstream competencies in such areas as regulatory affairs and product commercialization with earlier-stage sector participants asserting themselves as the primary engines of industry innovation.  As a result, today’s biopharmaceutical industry may arguably be considered largely an outsourced R&D function and feeder system for the commercial infrastructure of big pharma.  

​While the migration of the industry towards this functional segregation is not a new phenomenon, what is striking is the degree of the shift.  As is illustrated in the chart presented below, as recently as ten years ago some 60% of novel drug approvals were tied to companies whose origins could be traced to the traditional pharmaceutical industry.  Within the last handful of years, however, that percentage has dropped to as low as 20%.  Even this percentage may be an overstatement of the actual figure after factoring in the acquisition appetite of big pharma for its smaller biotech peers.  The implications of this shift on market performance, a topic to be explored in an upcoming blog post, is notable.