11 Aug Drug blockbusters: a measure of pharma success
The pharma and biotech industries have various ways of measuring success, but nothing is more visible than demonstrating testimonials with patients happily recounting how a drug changed their chances for life or quality of life. After all, this is the reason why most people decide to join this industry versus propagating hamburgers, coffee, or movies around the world.
Unfortunately, while Wall St. might applaud such efforts, what the analysts really look at is the number of existing or potential drug blockbusters that a company has in its therapeutic arsenal. A drug blockbuster is defined as a drug with annual sales of $1 billion or more.
To reach this lofty level was no easy task some 25 years ago when only a few existed.
As I have noted in past articles, it was SmithKline & French (now Glaxo SmithKline, after morphing into SmithKline & Becton and then SmithKline & Beecham) that had the first blockbuster, an anti-ulcer drug called Tagamet (cimetadine). Today there are about 118 blockbusters on the market according to Med Ad News in its latest report. GlaxoSmith Kline, alone, has 12 blockbusters, with a 13th co-marketed with Roche.
The top 10 blockbuster drugs generated some $64 billion in annual sales last year, representing more than 10% of the global pharma market.
The truth is that achieving a drug blockbuster is no easy feat – much more difficult than its movie counterpart. To begin with it takes 12 or more years, on average, to get a new drug to the marketplace and several hundreds of millions of dollars (versus 2-3 years for the average movie and some 100-150 million dollars). While movies go through a rating review process by regulatory authorities, they face, in reality, little regulatory restrictions.
Drugs, in contrast, get scrutinized continuously and heavily by government regulatory authorities around the world. This scrutiny is to answer two basic questions:
- Does the drug provide increased or enhanced efficacy in treating or preventing a disease over existing therapy for patients?
- Does the drug provide better safety (or less adverse effects) or quality of life than existing therapy for patients?
To answer these questions, pharma and biotech companies spend millions of dollars and a lot of time to test the drugs and try to bring forward clear information on the results. What the pharma industry thinks may be clear results, however, are not always seen by the FDA in the same light.
To mitigate the high risk and cost of developing a blockbuster, many companies have decided on the pathway of obtaining co-marketing and/or co-development partners around the world or in key geographic regions (e.g. Japan, Brazil, Europe, etc). Such partnerships not only help defray the inventor company’s costs, but also help plug the partner’s product portfolio gaps while they are waiting for their own products to get to the market place.
While having a blockbuster drug may seem like a blessing (and it certainly is a financial one), it may also be a drug company’s Achilles heel due to patent expirations. When a drug patent goes, up to 90% of revenue (and income) can disappear within 18 months. In the old days, drug companies used to jack up drug’s price substantially in the last two years before patent expiration, hoping that there would still be some residual sales and profitability. This tactic is no longer an effective one due to the high discounting by multiple generics (particularly if the prize is to capture the market of a former blockbuster).
Nevertheless, Big Pharma thrives on blockbusters, so let’s take a look at the leading ones:
Leading Global Blockbuster Drugs – 2007
|1. Lipitor (Pfizer/ Astellas Pharma)||Cholesterol||$13.7||<1%>|
|2. Plavix ( Bristol-Myers Squibb/Sanofi-Aventis)||Thrombotic Events||$8.1||+28%|
|3. Advair/Seretide (GlaxoSmithKline)||Asthma||$7.0||+14%|
|4. Enbrel (Amgen/Wyeth/Takeda)||Rheumatoid Arthritis||$5.5||+22%|
|5. Remicade (Johnson & Johnson, Schering-Plough, Mitsubishi Tanabe)||Rheumatoid Arthritis||$5.3||+18%|
|6. Nexium (AstraZeneca)||Gastrointestinal Disorders||$5.2||+1%|
|7. Rituxan(Roche-Genentech-Chugai/Biogen Idec||Cancer||$5.2||+14%|
|8. Diovan ( Novartis)||Hypertension||$5.0||+19%|
|9. Zyprexa (Eli Lilly)||Schizophrenia/ Anxiety||$4.8||+9%|
|10. Risperdal (Johnson & Johnson)||Schizophrenia||$4.7||+12%|
|11. Actos (Takeda/Lilly)||Diabetes (type 2)||$4.3||+14%|
|12. Singulair (Merck)||Asthma||$4.3||+19%|
|13. Protonix/Pantozol (Nycomed, Wyeth)||Gastrointestinal Disorders||$4.2||+5%|
|14. Seroquel (AstraZeneca/ Astellas)||Schizophrenia||$4.2||+18%|
|15. Herceptin (Roche – Genentech – Chugai)||Cancer||$4.0||+24%|
|16. Prevacid (Takeda/ Abbott Labs)||Gastrointestinal Disorders||$4.0||<7%>|
|17. Effexor (Wyeth)||Depression||$4.0||+2%|
|18. Aranesp (Amgen)||Anemia||$3.6||<12%>|
|19.Lovenox (Sanofi-Aventis)||Deep-vein Thrombosis||$3.6||+7%|
|20. Atacand/Biopress (candesartan)||Hypertension||$3.5||+11%|
|21. Avastin ( Roche-Genentech-Chugai)||Cancer||$3.4||+39%|
|22. Cozaar (Merck)||Hypertension||$3.4||+6%|
|23. Copaxone (Teva Pharmaceuticals/Sanofi-Aventis)||Multiple Schlerosis||$3.3||+16%|
|24. Aricept (Esai/Pfizer)||Alzheimer’s disease)||$3.3||+14%|
|25. AcipHex (Esai/Johnson & Johnson)||Gastrointestinal Disorders||$3.1||+3%|
Source: Med Ad News, July, 2008; Bold = inventor company
The top 25 drugs represent about 20% of total global drug sales. Interestingly, only three of the top 25 drugs show a decline in sales. There are some very interesting trends, however: while Pfizer still has the top drug, Lipitor, this drug is slated to lose patent protection in the next 2-3 years around the world, and Pfizer will lose one of the drug industry’s historical best selling drugs. Pfizer, previously, had 3 drugs in the top 10, but the over two have already had patent expirations and sales have declined significantly. You will note that Pfizer does participate with some other blockbusters via co-marketing arrangement.
Merck, a traditional drug powerhouse, only has one blockbuster in the top 25; likewise it previously had several. Many of the leading pharma companies will have key drugs losing patent expiration within the next 2-4 years, and the industry will most likely see a decline in sales during that period in spite of new product launches. In preparation for this extreme sales and profit loss, most of the companies have already started a series of preparative activities:
- Significant reduction of company assets (offices, manufacturing facilities, personnel, etc.) around the globe – this reduction will most likely not be enough when the patent bloodbath takes place and more reductions will be necessary
- Aggressive acquisition of products and companies using large amounts of cash on the balance sheet – while this is positive, it also may not be enough
- Restructuring of R&D process from top to bottom, with outsourcing of key activities such as clinical trials and even animal studies; Pfizer recently announced setting up a new R&D office in San Francisco in the heart of Silicon Valley and near the research intensive University of California – San Francisco (UCSF); again while this is healthy, it will take years to see the benefit.
The industries that are benefiting from the downsizing, as I have noted in prior articles, are the Contract Research Organization (CRO) and Contract Manufacturing Organizations (CMOs), and the generic pharma industry of which at the forefront are the Indians, and Teva, in addition to Novartis).
Still, Big Pharma and Big Biotech need to continue to have blockbusters, if not mega blockbusters ($10 billion or more in sales). Where will these come from? Most likely not Big Pharma, which is not known for R&D productivity. It is and will continue to be interesting to see how the industry copes with what is quickly becoming a major crisis.
See you soon!
This article previously appeared in MidwestBusiness.com, and was reprinted with its permission. The article is not meant to be a stock recommendation.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.