Two charts capture the dark mood around Big Pharma in 2017

Big Pharma is toast this year.

Or at least that’s what these two charts from a small sample of attendee responses at a breakfast reception Tuesday during the ongoing J.P. Morgan Healthcare Conference reveal. While the survey captured real-time responses of 30-plus people, it is a snapshot of the sentiment surrounding large pharmaceutical companies and their prospects in the next 12 months.

Here’s what Mark Lubkeman, senior partner and managing director of BCG, the consulting firm hosting the reception asked a panel of medtech and pharma executives and the gathered audience: Which healthcare sector do you expect to show the best value creation in 2017?

And here’s how the audience responded:

Notice the 0% growth in pharma for this year.

“Classic pharma companies are in trouble,” Lubkeman said to audience laughter as results of the real-time survey showed up.

The next question was: Which healthcare sector do you expect to show the worst value in 2017?

Here’s the chart that shows most people in the room were down on healthcare providers followed by large pharma companies.

The panel chimed in with one large pharmaceutical company executive displaying wry humor.

“I would like to thank everybody for their confidence in Merck & Co. – duly noted,” said Sunil Patel, vice president and head of corporate development at Merck, and the audience once again guffawed.

Then, on a more serious note, Patel proceeded to describe the challenges ahead for this sector in 2017 and beyond.

“I do think all the Big Pharmas will probably going to be challenged. Next year (read 2017) we might have a little bit of growth, but over the next two to three years”… he trailed off.

Patent cliffs are looming, he pointed out. For Merck they involve Vytorin and Zetia, both cholesterol drugs.

“The biosimilars are going to start rolling in and so you are going to see Big Pharma challenged for growth,” Patel said.

He did, however, point out that even despite the challenges there are pockets of opportunity.

“If you are in the I/O (immuno-oncology), you have a unique opportunity to see some growth,” Patel noted, adding that these assets involve a lot of “R&D burn.”

And so how do you get the growth given that traditional revenue streams are drying up and high-quality drugs like I/O products eat up a lot of cash.

“So then the corollary becomes, ‘what do you do to fix it’ and that’s when you pay too much for a biotech company,” Patel declared confirming the notion that biotechs are going to see good growth this year.

And deal flow has already begun with Takeda announcing Monday that it is buying Ariad Pharma for $4.7 billion, or $24 per share. And Johnson & Johnson is attempting to buy Swiss biotech firm Actelion after initial discussions failed.

Photo: Herianus, Getty Images