Navigating Industry-Level Risk
Takeaway: The equivalent of ‘Johnny Rotten’ is now the most powerful person in the world. For the pharmaceutical industry, navigating this “holy shit moment” will take a more original approach to strategy, structure and tactical mix investments.
Updates since original publication on November 15:
December 4 to integrate Moderna CEO Stéphane Bancel comments at the Forbes Healthcare Summit
December 5 to integrate perspective from the editorial board of the Wall Street Journal
The Kinetics of Collapse: The ‘Vaccine Variation’
Conservatives who support Donald Trump’s choice of Robert F. Kennedy Jr. to lead the Health and Human Services Department say he will disrupt the healthcare bureaucracy. They may be right. But he could also disrupt access to life-saving medicines and the innovation ecosystem that creates them. Robert F.. Kennedy nomination to be HHS secretary is a threat to American medical innovation.
So begins RFK Jr.’s Race Against the Cure, an essay from the editorial board of the Wall Street Journal.
The industry-level risk, from the perspective of the paper, is that RFK Jr. would use his regulatory power at HHS to further discourage biopharmaceutical investment and undermine innovation. “He says he wants to end alleged corruption between drug makers and government — by which he seems to mean curbing pharmaceutical profits by making it harder for medicines to come to market. Consider the treatments that could get stalled under Secretary Kennedy:
Gene therapies using CRISPR tools and virus vectors that repair defective genes that cause debilitating conditions such as sickle-cell disease and hemophilia. Devices that stimulate electrical impulses in the brain stem and which can cure auto-immune diseases. CAR T-cells re-engineered in test tubes from a cancer patient’s blood that attack tumors.
Antibody drug conjugates that deliver chemotherapy to cancer cells around the body like targeted missiles and don’t damage nearby tissue. Personalized mRNA vaccines that turbocharge the immune system to target particular proteins from a patient’s tumor and prevent recurrences. GLP-1 agonists like Ozempic that also treat drug and alcohol addictions, Parkinson’s, dementia and more.
Mr. Kennedy opposes GLP-1 drugs because he thinks Americans should eat healthier and exercise to lose weight. That’s fine as far as it goes. But neither exercise nor dietary changes will cure diabetes, and hormonal changes make it difficult for severely obese patients to lose weight without medical interventions.
Will all of this come to pass? Impossible to predict. But hope isn’t strategy. Neither is all the “data” and expert knowledge that money can buy and produce by all the technology that money can buy and produce. That's The McKinsey Method, and it's failing at a fast clip.
"Abruptly quitting" in the past week: Stellantis CEO Carlos Tavares; Intel Corporation CEO Pat Gelsinger; VillageMD CEO Tim Barry; Kohl's CEO Tom Kingsbury; Northvolt CEO Peter Carlsson. In the past quarter: Nike CEO John Donahue; CVS Health CEO Karen Lynch; Aetna CEO Brian Kane; Starbucks CEO Laxman Narasimhan; Vice President of the United States Kamala Harris. In the past year: Boeing CEO Dave Calhoun; Campari Group CEO Matteo Fantacchiotti; Hertz CEO Stephen Scherr; Wipro CEO Thierry Delaporte.
'Strategy in an Era of Abundant Expertise' (borrowing from an upcoming article in Harvard Business Review) is going to require a different brand of creative leadership altogether, a whole new form of big market imagination.
At the Forbes Healthcare Summit (December 4), Moderna CEO Stéphane Bancel said that he plans to address any partisan hurdles with the incoming Trump administration’s vaccine and pandemic preparedness policies with “facts and data.”
“As you can imagine, we operate around the world. We operate with any governments that the people elect in office,” Bancel said in response to a question about working with the Trump administration during the Forbes Healthcare Summit in New York City on Wednesday morning. “And so it’s really using facts and data.”
“I believe most people want to do the right thing. We, like people in government, want to protect Americans. That’s why we’re doing business every day,” Bancel said. “And so I think it’s just getting the facts, getting the right experts to advise those people to understand the consequences of making a decision.”
Good luck competing with your data-backed argument. Trump transition manager Howard Lutnick told CNN before the election that this was RFK Jr.’s plan: “He says, if you give me the data, all I want is the data and I’ll . . . show how that it’s not safe. And then if you pull the product liability, the companies will yank these vaccines right off of the market.”
“At an event late last week in Arizona, anti-vaccine activist and Donald Trump transition team member Robert F. Kennedy Jr. said he’d fire and replace 600 people from the National Institutes of Health on day one of a second Trump term. The NIH is one of the public health agencies Kennedy loathes the most—and despite still lacking any defined role in a new administration, he’s clearly relishing the opportunity to promise retribution against them.
Kennedy made eyebrow-raising claims while fawning over Trump.
In comments that were first reported by ABC News, Kennedy declared, “We need to act fast, and we want to have those people in place on January 20, so that on January 21, 600 people are going to walk into offices at NIH and 600 people are going to leave.”
Kennedy, a long-standing opponent of vaccines, has consistently been critical of the NIH, the Centers for Disease Control, and other federal agencies that are part of the basic infrastructure of public health. His ‘The Real Anthony Fauci’ attacked Fauci, a former NIH director, at book length, albeit with what one physician reviewer called “many errors and gross misrepresentations.”
....Robert F. Kennedy Jr. Reveals Plans to Fire 600 Federal Health Workers, Mother Jones, November 12, 2024
Even before the news that Robert F. Kennedy Jr. was nominated to sit astride a care and service infrastructure with 13 divisions that run more than 100 programs, the drug market for vaccines was already trapped by the kinetics of collapse. Before 3 pm yesterday, Moderna had lost about $43 billion in market value in the last five months and Stephane Bancel stepped down as chief commercial officer. Pfizer had lost about $30 billion in market cap and was arguing with activist investor Starboard Value over strategic direction, management effectiveness and the concepts of "value" and "innovation" in the drug market.
[Note: The pressure seems to be working: Anirban Sen at Reuters was the first to report that Pfizer has hired Goldman Sachs to find a potential buyer for Pfizer Hospital, a business unit formed after a $17 billion Hospira acquisition acquisition in 2015. “The business, which could be worth a few billion dollars, currently generates nearly $500 million of earnings before interest, taxes, depreciation and amortization, the sources said, cautioning that a deal is not guaranteed and Pfizer could choose to keep the division. Pfizer and Goldman declined to comment.”]
And on Novavax's 3Q earnings readout on Tuesday -- which was followed by a “stock plunge” after lowering sales guidance (again) -- EY Entrepreneur Of The Year and chief executive John Jacobs said his business needs to recover from its struggles in the collapsing COVID vaccine market and get into profitable territory. "We're going back to our roots," Jacobs said in an interview. "It's hitting the reset button and now starting to pivot our way.”
Meanwhile in Idaho the day before Donald Trump defeated Kamala Harris to become the leader of the free world, a regional public health department decided to stop providing COVID-19 vaccines to residents in six counties. From local news outlet KSLcom:
Southwest District Health appears to be the first in the nation to be restricted from giving COVID-19 vaccines. Vaccinations are an essential function of a public health department.
While policymakers in Texas banned health departments from promoting COVID vaccines and Florida's surgeon general bucked medical consensus to recommend against the vaccine, governmental bodies across the country haven't blocked the vaccines outright.
"I'm not aware of anything else like this," said Adriane Casalotti, chief of government and public affairs for the National Association of County and City Health Officials. She said health departments have stopped offering the vaccine because of cost or low demand, but not based on "a judgment of the medical product itself."
And an hour before the market closed yesterday, “shares of prominent vaccine makers plunged Thursday after President-elect Donald Trump announced his pick of Robert F. Kennedy Jr. to be the next secretary of the Department of Health and Human Services. As news reports of Trump’s choice began trickling out, Covid-19 vaccine maker Moderna dipped as much as 6%, and Pfizer fell almost 2%. Novavax, which created a protein-based Covid-19 vaccine, fell almost 6%.”
How to Save a $1 Trillion Market
On Friday, Donald Trump chose Dr. David Weldon, a former congressman, to serve as the director of the Centers for Disease Control and Prevention.
As a member of Congress, Dr. Weldon pushed the false notion that thimerosal, a preservative compound in some vaccines, had caused an explosion of autism — a hypothesis that experts say has no evidence. He also introduced a “vaccine safety bill” that aimed to relocate most vaccine safety research from the C.D.C. — which he said had an “inherent conflict of interest” — to a separate agency within the Department of Health and Human Services. In its coverage of the announcement, the New York Times:
Mr. Trump’s choice signals yet again his commitment to reforming the role of federal health agencies in radical ways. Though Dr. Weldon is an internist, his skepticism of vaccine safety and concern about C.D.C. overreach echo those of other nominees, including Robert F. Kennedy Jr.
“Americans have lost trust in the CDC and in our Federal Health Authorities, who have engaged in censorship, data manipulation, and misinformation. Given the current Chronic Health Crisis in our Country, the CDC must step up and correct past errors to focus on the Prevention of Disease.”
The Hill’s take (“Drug industry treads carefully after stunning RFK Jr. nomination’):
Lobbyists said they had anticipated Kennedy would get some kind of role in the administration but were surprised at his being picked for HHS secretary. They are now scrambling to figure out what kind of damage Kennedy could inflict were he to be confirmed. “Striking at the heart of a science-based industry like this by saying nonsensical stuff and actually having power to do something about it is bad news,” said a lobbyist who works for drug companies. “I think right now they’re in sort of like ‘holy shit mode.'”
I’m having a hard time seeing how the Strategic Pivot Thing happens for any vaccine business, particularly if that pivot depends on roots planted in a territory that is being uprooted at wrap speed (inside the Trump transition team, Kennedy’s plans to reset healthcare in the United States are referred to as an “Operation Warp Speed for chronic disease”).
Kennedy has said he would like to upend public-health agencies and rid them of what he views as the corrupt influence of the food and pharmaceutical industries. He has said he wants to ban pharmaceutical advertisements on television and has made false claims about vaccine safety, including linking vaccines to autism and describing shots for Covid-19 as the deadliest ever made.
Public-health leaders have responded with horror and disbelief.
“Robert F. Kennedy, Jr., is not remotely qualified for the role and should be nowhere near the science-based agencies that safeguard our nutrition, food safety, and health,” said Dr. Peter Lurie, president of the Center for Science in the Public Interest, in a statement yesterday. Nominating an anti-vaxxer like Kennedy to HHS is like putting a Flat Earther at the head of NASA. CSPI opposes this nomination and any other nominees who are a direct threat to science and evidence-based solutions. If unassuming little viruses could talk, measles, mumps, and rubella would be loudly cheerleading for the nomination of this prolific spreader of scientific misinformation.”
Which misses and misunderstands the Punk Rock Ethos driving Trump.
If the ideas take hold, Kennedy could undo decades of public-health policies that doctors and scientists have hailed as improving the health of Americans and lengthening their lives. Trump vowed during the campaign to give Kennedy influence in his administration. “He’s going to help make America healthy again,” Trump said of Kennedy in his victory speech. “Have a good time, Bobby.”
Any 'drug + retail pharmacy system' whose business forecast, pitch deck and storyline of value to The Street uses the word "vaccine" -- e.g., cancer vaccine (projected @ $42 billion); flu vaccine (projected @ $17 billion); hepatitis vaccine (projected @ $13 billion); shingles vaccine (projected @ $13 billion); covid vaccine (projected @ $10 billion); CMV vaccine (projected @ $3 billion) -- is now foundationally fragile at best. (It didn’t help things when President Biden declared on 60 Minutes that "the pandemic is over").
Framing things in somewhat different terms: this $1 trillion Market Growth Outlook (via MarketsandMarkets)....
"The global vaccines market growth forecasted to transform from USD 78.0 billion in 2024 to USD 94.9 billion by 2029, driven by a CAGR of 4.0%. Similarly the vaccines market (excluding COVID -19 vaccines) is projected to reach USD 80.3 Billion by 2029 from USD 53.0 Billion in 2024, at a CAGR of 8.7% during the forecast period. Technological advancements in vaccine development, increasing government initiatives for immunization programs and expanding investments in research and development are some of the factors driving growth of this market."
....is wrong at the first slide. The jumping-off point is illogical. The entire concept is the problem. And all the hand-wringing from all corners about the impact of Trump 2.0 is missing the deeper storyline: The base layer doesn't “work” with a total change in territory that has happened overnight. The equivalent of ‘Johnny Rotten’ is now the most powerful person in the world. Strategic fit to accelerating, amplifying and exponentially-increasing chaos is going to take a whole new approach to strategy, structure and tactical mix investments.
When it comes to pharmaceutical brand, business and industry leadership 'reading the market’ accurately:
"The elephant in the room is the room itself, an approach to business and product marketing unchanged since the “modern pharmaceutical industry” began around 1849, when Pfizer was founded in Brooklyn.”
After 175 years, it’s time to start creating differently.
Playing a Different Game
In his book on the history of soccer tactics, Inverting the Pyramid, Jonathan Wilson writes that soccer "is not about the players, or at least not just about the players; it is about shape and about space, about the intelligent deployment of players, and their movement within that deployment.”
Unlike chess, soccer is open.
The Standard Model of thought and action — the typical playbook, the familiar territory, the monotonous repetition of ‘dead words’ at the extreme end of redundancy (see Why Harris Lost in One Slide) — in health market strategy is one approaches it as a game of chess rather than a game of soccer. It reduces psychological and social phenomena to quantitative analysis bounded in narrow frames, The McKinsey Method that assumes away complexity and, more often than not, produces a market forecast that misses and misreads The Room.
The Standard Model of competition focuses on the players, not about creating new space within which to deploy them. Everyone seems to be working with a ‘pivot region’ that invariably pivots back to the past.
The big idea machine is broken.
In an interview with CNBC the week before the election, Albert Bourla said he agrees with some of the criticisms from Starboard Value, saying he believes Pfizer is headed in a good direction. “I think we are doing a lot of changes. But if Starboard, and anybody else for that matter, have good ideas, I will certainly discuss them and entertain.”
Here’s an entertaining idea:
Pfizer + Walgreens + CDC + Oracle Health collaborating to construct a new care and service infrastructure in the United States — a better system of markets — where the competition is economic, positioned on the ‘production of affordable health’ as a more original strategy story. Position the new ecosystem as a new brand (something bleeding-edge, something similar to 'Amazon Nova'). Sell it to your current ‘hospital customers’ via Pfizer Hospital. Manage it for market maximization instead of profit optimization. Let Goldman Sachs manage the transactions and deal flows within the context of the new industry ecosystem. Better yet, put out an RFP to the investment banking vendors. Force Goldman Sachs to compete and pitch against JPMorgan and Bank of America for a new market in deal-making a new industry ecosystem sparks.
You could do this for less than what one brand teams spends on one DTC campaign to promote one drug. And you could probably get it done in less time than it takes to get a detail aid produced by an advertising agency and approved by Pfizer regulatory. (As a reference point, Novo Nordisk Foundation is investing around $90 million to launch Denmark’s first AI supercomputer built on an AI data center infrastructure. It took less than six months from announcement to completion.)
Donald Trump, like the Sex Pistols decades ago, is whole a new genre. He didn’t wreck the old order so much as understand how to take advantage of the wreckage that was already there.
The stuck market — whether that’s the strategically-collapsing retail pharmacy market or the soon-to-be collapsing Big PBM market or a drug market floating somewhere in between — will need different policy, economic and business constructs for what lies ahead, better ‘navigational knowledge’ to move faster than the current, to get in front of change rather than become a victim of it.
Meanwhile in Asia, Hong Kong residents reticent to get latest Covid-19 jab, Moderna survey finds:
Hong Kong residents’ willingness in taking the latest Covid-19 vaccine is lower than in Singapore, but higher compared with other Asian markets, according to a new survey by US pharmaceutical giant Moderna, which called on vulnerable groups to get inoculated.
The survey, which involved 5,032 respondents across five markets in Asia, also found a reluctance to get the latest vaccine in Taiwan, South Korea and Japan – with results of 49 per cent, 39 per cent and 29 per cent, respectively.
While Moderna touted in its findings the importance of getting inoculated again, the survey results indicate a “growing complacency” even as coronavirus variants continue to evolve.
But here's the Big Misread, the structural break with reality:
Complacency isn't growing. It's a baked-in feature of the operating environment. It' getting worse, not better. The pandemic is over, President Biden told us so on 60 Minutes. Mission Accomplished. And all the "disease awareness" campaigns from all the vaccine brand teams about "why receiving an updated jab is essential to defend against the contagious disease" isn't going to do much of anything.
“We were hopeful to get a larger market share this year,” said Novavax’s Jacobs after lowering its sales guidance (again).
Which only proves the point: Hope isn’t a strategy. Neither are "the facts".
Over to you, PhRMA.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy and innovation at a system level. To engage with a mind stretch: john@bluespoonconsulting.com