Category Focus Rewards Biopharma Shareholders

For years, biopharma industry leaders have wrestled with the limits of scale. Despite the benefits that come with size, companies with revenues of $35 billion or more have significantly underperformed smaller companies with annual revenues of between $5 billion and $35 billion in total shareholder returns (TSR). (See Exhibit 1.) Why do the largest companies struggle to deliver above-average shareholder returns? And more important, what can they do to lift a stubbornly low TSR?

The short answer: avoid complex, wide-ranging portfolios that undermine focus. Large biopharma companies compete in many categories and tend to...