Today, Matt Herper published an analysis of drug development costs for 98 companies over the past decade. He showed that costs are rising -- to the tune of $5.5 B per drug for firms that had 8 to 13 approvals in that decade. Today, Fierce Biotech published an analysis of the Big Pharma and Biotech companies that had either the fastest staff growth or the greatest staff reductions since 2007. I thought it would be interesting to look at side by side (very quick impressions -- no analysis per se by me).
I looked at the average cost per approval list in the Herper article for big drug companies, and compared it with the list of fastest growing companies in the Fierce Biotech article. Here some observations and speculation for what they are worth:
- The top growing companies (1-7) include: Celgene, Gilead, Teva, Biogen Idec, Novo, Baxter and Amgen
- On the Herper cost list, they rank from Novo's $4.6 B per drug to Baxter's $1.54 B per drug in slots from 15th to 37th.
- The entire range is below the $5.5 B average for companies producing 8-13 drugs in the last decade. None of these companies had 8 approvals. Amgen had the highest at 5.
- The top shrinking companies (1-6) include: BMS, AZ, Lilly, GSK, Pfizer, and Merck
- On the Herper cost list, they rank from AZ's $9.5 B per drug to BMS's $3.3 B per drug, in slots 3rd to 23rd.
- Pfizer, Merck, GSK and BMS had 10, 9, 11, and 9 approvals respectively. The other two fell well below 8 approvals.
- The four companies had average cost per drug approval of $5.4 B. Almost dead on with the $5.5 B average. The top 4 companies really skew this figure.
- There is ZERO overlap between the two groups except with BMS, which falls well below GSK's 13th spot on the cost list at $5.2 B per drug, which ranks 23rd at $3.3 B per drug but is the top shrinker in this time span.
Hmmm. What might this imply? Did BMS get out ahead of the curve in cost cutting? They actually cut staff from 42,000 to 27,000 in only 1 year between 2007 and 2008. Did that save them? BMS got the long-knives out much quicker than its competitors. Should AZ, Lilly, GSK, Pfizer and Merck be accelerating their cuts? Basically, do they need to cull dead wood programs to be healthier? That's one interpretation one could have. What about Sanofi! Way way way up at number 2 on the cost list and on neither the growth or shrink list (at least among top 7). Maybe Viehbacher has some seriosu chopping to do.
Similarly, does rapid growth of other companies suggest they may be moving toward their high cost bretheren's position and that we can start looking for them to appear on the next decade list of unproductive R&D spenders? If BMS, is now seen to be more "optimized in size". Does that mean companies like Novo, Amgen and Celgene should be looking to reduce instead of grow so fast? Celgene actually clocks injust above BMS at number 22 on the drug cost list at $3.5 B per drug. Should brakes go on? Novo sits at $4.6 B per drug and Amgen at $4.2 B per drug -- should they cut some?
Teva clocks in just below BMS at an average cost of $2.88 B per drug. They have reportedly slammed on brakes on growth. Maybe their timing is right. They do have powerful BMS managers over there now. Maybe know something? We'll see. The observations I make are simplistic, but may have their truths nonetheless. Regardless, I find the observations interesting. It looks like less is more. It could be simply bad programs get cut when belts are tightened and staff size is a surrogate measure of this.
Posted by Bruce Lehr Aug 12th 2013.