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David Snodgrass Executive vice president and chief strategy officer Affinity Federal Credit Union Basking Ridge Numbers Show Smoking Ban Hurts Casinos I found it interesting that casino profits are down 22 percent and they're blaming the economy and competition as well as the smoking ban. Atlantic City's smoking ban will ultimately cost taxpayers not just millions, but literally hundreds of millions of dollars in lost revenue, and you can bet your bottom casino dollar that it won't be the lawmakers or the antismoking organizations that will pay the bill.

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									                                                                                                      Carolyn Buck Luce                                          THE NJBIZ INTERVIEW

Cost-Cutting Done, Pharma Heads Weigh New Challenges
NJBIZ: What did you set out to achieve                                                                                                                                            NJBIZ: Are companies cutting back
with the “Progressions” study?                                                           Pharmaceutical companies in New Jersey and elsewhere are rearranging                     their capital expenditures?
Buck Luce: This was a survey of 40 top                                                                                                                                            Buck Luce: We don’t get a sense
executives at 15 global pharmaceuti-                                                     the pieces on their strategy chessboards, according to the latest “Pro-                  that there would be cutbacks. The
cal companies to get their perspec-                                                      gressions” report on the industry that was released in November by con-                  pharmaceutical industry spent $60
tives not just on the transforming role                                                  sulting firm Ernst & Young. Carolyn Buck Luce, Ernst &Young’s New                        billion in R&D last year and
of their functions, but also the emerg-                                                                                                                                           biotechnology firms spent $50 bil-
ing business model and the organiza-                                                     York-based global pharmaceutical sector leader who co-authored the                       lion — that is a $110 billion spend.
tion to power the new business                                                           report, says cost-cutting remains one area of focus. But pharmaceutical                  Life sciences invests in innovation
model. This is the sixth report so far                                                                                                                                            for the future.
                                                                                         executives are also mulling the new opportunities and challenges uni-
and the second volume this year, and                                                                                                                                                    The question is how to get a bet-
we completed the interviews between                                                      versal health care would bring, and new ways of defining the customer                    ter return. The pharmaceutical indus-
May and September this year.                                                             and tapping new markets in the emerging economies. Buck Luce shares                      try has never aggressively managed its
                                                                                                                                                                                  balance sheet the way lower-margin
                                                                                         the report’s key takeaways with NJBIZ Staff Writer Shankar P.
NJBIZ: Did pharmaceutical compa-                                                                                                                                                  industries have done. So in the last 12
nies in New Jersey lead the trends?                                                                                                                                               months, we have seen a much greater
Buck Luce: New Jersey has many glob-                 In the U.S., on the one hand,              In the latest survey, 66 percent       industry reputation.                       focus on receivables and inventory
al pharmaceutical companies, and in            there is continuing pressure on             of executives said the most impor-                                                     management to get a greater return.
many respects led the industry in              prices, which will continue in the          tant strategic initiative was reinvigo-     NJBIZ: What makes a pharmaceuti-
terms of the trends that impact their          new administration. On the other            rating the R&D pipeline, while 40           cal company successful today?              NJBIZ: How are pharmaceutical
competitors globally. What happens             hand, the new administration has a          percent said expanding into new             Buck Luce: These current times are         companies faring in boosting their
in New Jersey for the pharmaceutical           commitment to universal health              markets and restructuring their             creating a sense of urgency to look at     product pipelines?
industry is a critical component of            care. What constitutes the bottom           marketing and sales programs to             short-term tactical responses to be        Buck Luce: A large portion of com-
what drives the industry globally.             line is the price of the product and        become more customer-centric                able to preserve shareholder value         panies’ new drug pipelines has
                                               unit value, and how well you manage         were their main areas of focus.             and make sure costs are under con-         come from alliances and acquisi-
NJBIZ: What are the main takeaways             costs to bring products to market.                                                      trol. There was an awful lot of focus      tions of biotechnology firms; we
from the “Progressions” report?                                                            NJBIZ: What are the top concerns on         on costs a year ago, when compa-           expect that to continue and speed
Buck Luce: There is a tremendous               NJBIZ: Cost-cutting is no longer a          a pharmaceutical executive’s mind?          nies realized there was a lot of fat in    up. The unfortunate aftermath of
amount of change. The question is:             prime focus area, the report suggests.      Buck Luce: We asked the executives          their companies and a lot of oppor-        the credit crunch is the drying up
how do you manage some of the                  Buck Luce: In our previous report,          what they felt were the most                tunity to cut costs.                       of capital for biotechnology com-
short-term risks and pressures, and            cost containment was one of the             important pressure points forcing                 But there is only so much you        panies, and the moderation of
at the same time be able to take               most important initiatives. In this         changes in their business models.           can cut before you begin to impair         their valuations.
advantage of the good news?                    report we found more of a balanced          Seventy-two percent said driving            the infrastructure for the future.              Even though this is an opportu-
     The fundamentals are good.                approach where optimizing cost              product growth with a robust                There is now a balance about how           nity in the short term for pharma-
Globally, more and more people are             was [just] one the many
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