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Abstract

After its early stage of development prior to the 1970s, the global pharmaceutical industry witnessed an accelerated growth due to huge investment in research and development, adoption of innovative technologies and the discovery of new drugs. Blockbuster drugs created multi-billion dollar companies called the Big Pharma that dominated the pharmaceutical industry, which was one of the most profitable industries in the world. However, at the turn of the 21st century, falling productivity of research and development investment and tough government regulations had resulted in a scarcity of new drugs, and spiralling new drug development costs. In addition, a slew of patent expiries, rising competition from generic drug manufacturers and declining consumer trust had created a difficult business environment. These conditions precipitated a trend of strategic alliances amidst pharma companies, to control costs and ensure market positions. In 2001, Switzerland-based Roche Group merged its Japanese operations with one of Japan's leading pharma companies, Chugai. Despite the low success rate of cross-border alliances, with a Swiss parent company and a Japanese management team, the Roche-Chugai partnership successfully achieved the estimated R&D, revenue and cost synergies. The outlook for the company's future was also very bright.
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April 2006

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Abstract

After its early stage of development prior to the 1970s, the global pharmaceutical industry witnessed an accelerated growth due to huge investment in research and development, adoption of innovative technologies and the discovery of new drugs. Blockbuster drugs created multi-billion dollar companies called the Big Pharma that dominated the pharmaceutical industry, which was one of the most profitable industries in the world. However, at the turn of the 21st century, falling productivity of research and development investment and tough government regulations had resulted in a scarcity of new drugs, and spiralling new drug development costs. In addition, a slew of patent expiries, rising competition from generic drug manufacturers and declining consumer trust had created a difficult business environment. These conditions precipitated a trend of strategic alliances amidst pharma companies, to control costs and ensure market positions. In 2001, Switzerland-based Roche Group merged its Japanese operations with one of Japan's leading pharma companies, Chugai. Despite the low success rate of cross-border alliances, with a Swiss parent company and a Japanese management team, the Roche-Chugai partnership successfully achieved the estimated R&D, revenue and cost synergies. The outlook for the company's future was also very bright.

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April 2006

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