The Big Red Biotech Blog

Generics Companies Eyeball World Biologics Market

The WSJ  gives a good recap of the major generic producers and analysts views of the relative attractiveness of the emerging biosimilars market. World-wide sales of all biological drugs reached $130 billion in 2009, according IMS Health, and are expected to grow much faster than conventional drugs. The market is considered attractive due to the large number of big biologics coming off patent but is challenging from a regulatory/quality perspective to mimic the reference biologic - and pricing is uncertain at the moment.

In the U.S. and European market , biologics drugs with more than $60 billion in annual sales will lose patent protection by 2015, according to Datamonitor. Should the market develop as predicted,  biosimilar copies of these complex drugs alone could make up 50% of the expected $10 billion biosimilars market by 2016, according to Capgemini Consulting. The rest will come from simpler biosimilars of insulin and human growth hormone.

Patents due to expire soon are Roche's Rituxan (aka MabThera),  Remicade, co-marketed by Merck and J&J, and Amgen's and Pfizer's Enbrel. Each drug had more than $5 billion in annual peak sales.  Roche's Rituxan will expire in Europe in 2014.  Three generic players have started copies - Sandoz started midstage trials, following similar steps by U.S.-based Spectrum Pharmaceuticals, in early January and Israel-based Teva Pharmaceuticals last year.

Sandoz, with a roughly 50% market share, ahead of Teva and U.S.-based Hospira, expects the entire biosimilars business could reach more than $20 billion by 2020, up from a current $250 million.  Lonza, teaming up with Teva in its biosimilars venture, expects solid growth because patients, insurance companies and governments want drugs to be cheaper.

The generics companies base their argument on the high price of many complex biological medicines.  But some experts question the generics companies' pricing rationale, saying the current constraints could even force larger generic producers such as Sandoz or Teva to rethink their operating models. Much will depend on how the price of these drugs will develop. 

Prices for biosimilars could be just 30% lower than the prices of the originals, because only a couple of generics firms will compete against an original drug.  The main risk, analysts say, is that if prices don't come down much, original drug producers will be able to retain a large market share. On the other hand, if prices fall too fast, generics firms' margins could suffer.

Industry insiders are also concerned the market may need longer than expected to establish itself, as R&D for these complex drugs is difficult and costly. One of the difficulties with biosimilar of complex biological drugs is that, unlike simple-to-produce chemical generics, which are identical to the originator product, biosimilars aren't exact copies. The are produced in genetically engineered cells.  At best, a biosimilar can only be similar to the original protein - thus the name.  And, because biosimilars aren't identical copies, biotech and big pharma are looking to check the movement by raising bioequivalence and quality-control issues. 

The EMA has so far approved 13 simpler biosimilar drugs. In the U.S., the FDA is currently working to establish how intensive testing for biosimilars needs to be and how the traditional three-phase drug-approval process can be abbreviated. A key concern is to make sure that biosimilar drugs are safe and effective.

It may cost too much time and money for a number of small to midsized generics manufacturers to survive in biosimilars production.  Specific processes, data, research and experience are needed to ensure that a biosimilar has the same profile, efficacy and safety as the originator product.  Some doctors and patients may be reluctant to use biosimilars as a new class of products with no track record in terms of safety and benefits.

Time will tell.  In the meantime, the Big 3 Generics producers and many other Big Pharma companies are not only eye-balling this market but have announced their intentions to enter.  Not too mention all the Asia Pacific competitors who are gearing up to serve local and global markets.

 

 

 

Posted by Bruce Lehr Jan 31st 2011.

Over 35 Blockbuster Pharmaceuticals to Go Off-Patent in 2011 and 2012

More than $209 B in branded drug sales will go off-patent between 2011 and 2014 including big names - Advair, Viagra, Seroquel, Zyprexa, Symbicort, Singulair and Lexapro.  Projections are that the generic market will reach $135-$150 B by 2015 as a result, representing a 9% CAGR.

PharmaGossip: Over 35 Blockbuster Branded Pharmaceuticals to Go Off-Patent in 2011 and 2012.

GenMed CEO, Erwin Bouwens says, "The coming decade will be a period of agresive growth for companies positioned in the generic pharmaceuticals market. We plan to take full advantage of the opportunities to apply for additional drug licenses as they become available."

Posted by Bruce Lehr Jan 24th 2011.

European Vaccine Market Growth Projected

The Jan 1st issue of GEN (pp 16-17) reports on a Kalorama Information market projection on the prospects for the human vaccine market in Europe from 2010-2014. Kalorama predicts the Euro market for vaccines will hit $7.9 B when 2010 is totalled - up from $4 B in 2006. They are further projecting a 10.6% CAGR from 2010-2014 whereupon the market will reach $11.9 B in size.

Growth is driven by both pediatric vaccines (9.6%) and adult vaccines, like H1N1, (11.6%) to produce the projected combined rate of 10.6%.  As can be seen, the adult vaccine segment is expected to grow somewhat faster and will move from being 42.8% of the total market in 2010 to 44.8% of the total in 2014.

Five main countries account for the vast majority of the $7.9 B vaccine sales in European - that being Germany ($2.7 B), France, UK, Italy and Spain.  The European market is supplied by five main companies: GSK, Sanofi Pasteur MSD, Novartis, Sanofi Pasteur, and Crucell. According to the article, these five account for a combined 82% market share in Europe.

 

Posted by Bruce Lehr Jan 22nd 2011.

South Korean Pharma Market Grows at 7.1% CAGR

Business Monitor International’s forecasts Korea's pharma market to reach almost $19.3 billion at in 2014, with a compound annual growth rate (CAGR) of 7.1%

South Korean pharmaceuticals market set to expand at 7.1% CAGR -  Pharma Letter.

The demand is predicated on an aging population with a rising demand for drugs as well as the planned liberalization of the health insurance sector. By 2019, the pharmaceutical expenditure is expected to reach $26.5 billion.

 

 

 

 

Posted by Bruce Lehr Jan 14th 2011.

Where will new drugs come from?

 The Lancet offers some more sobering statistics on the recent failures to get new drugs developed, tested and licensed.  It cites EMA figure for 2010 (through October) that show 38 positive opinions and 41 applications were finalized as compared to 117 positive opinions and 125 finalized applications in 2009. some additonal positive opinions and approvals can be expected to occur in those last two months but not enough to make up the difference from prior year. Drug approvals are DOWN with several celebrated failures occuring in late stage trials.

Where-will-new-drugs-come-from? Lancet.

The editors echo the need to change the existing drug R&D model - an echo that is by now resounding throughout the pharma industry as ROI on R&D continues to plummet. Some familiar suggested fixes are suggested (but let's repeat them anyway lest someone actually pay attention):

• Increased collaboration between academia and industry and among companies in industry itself
• Companies sharing information to avoid repeating expensive mistakes in development (i.e pursuing a failed drug target) or learning from flawed clinical trial designs and methodologies
• More funding in academia to support not only discovery but to provide expertise to bridge the translational and interdisplinary gaps
• Academic augmentation of discovery work aimed at the developing world
• Finally government funding of more basic research or so-called curiosity-driven science which history suggests will lead to bigger breakthroughs for the future

Again, not earth-shattering stuff, but the message is becoming more consistent across a number of commentators on the industry as well as from clinicians, regulators and the industry itself.  Now we need to actually do something about it.

Posted by Bruce Lehr Jan 7th 2011.

 

Big Pharma's Lost Decade

Think a lost weekend is bad, what about a lost decade? 

Derek Lowe writes In the Pipeline that a large majority of Big Pharma underperformed the S&P index for the last 10 years.  The original post was inspired by Jeffrey Kindler's retirment last week and simply noted that Pfizer was one of those (not the only) big underperformers.  And, that despite all the merger activity it had undertaken to try to shore up revenues and make up for pipeline failures, it had been unable to do so.

The conclusion?  Nothing makes up for a bad pipeline at Pfizer, Lilly,  Merck, BMS or anywhere else. Lost revenue unreplaced is lost revenue.

 

Posted by Bruce Lehr December 13th 2010.

Mirror, Mirror on the Wall Who's the Most Ambitious Big Pharma Company of Them All?

 

Mirror, Mirror on the Wall Who's the Most Ambitious Big Pharma Company of Them All?.

According to this post in the BioJobBlog it's Roche with its burgeoning pipeline and claims that it may file 10 INDs before the end of 2013. Certainly, they are a company that acts like an innovator and appears to want to focus its energies on creating new products in new therapuetic catagories to fulfill unmet patient need. Now they just have to avoid the poisoned apples.

Posted by Bruce Lehr December 12th 2010.

Decision Resources: Drug Price Regulation Will Increase

You can take it to the bank.  Decision Resources says in a new report, Pharmaceutical Pricing and Reimbursement: Key Facts in Mature and Emerging Markets, that price regulation of drugs will increase in both mature and emerging pharma markets. 

Most developed economies already exert price controls but this will increase. Both the UK and Germany, for example, have announced their intentions to implement a 'value-based pricing' model.  The US, which allows free pricing, will increase Medicaid rebates and also require a 50% discount on drugs in the Medicare program.

But, don't relegate this phenomenon to just mature markets, emerging markets will join in too. These goverments are expected to demand prices lower than those seen in more developed economies. Substantial budget deficits all over are also expected to exert a downward influence on prices as governments try to keep a lid on healthcare spending. Cost containment may well be disproportionately focused on pharma according to the report (it's easier to see). See Medical News Today for more.

"Drugs that lack proof of innovation will be subject to reimbursement restrictions, unless manufacturers offer prices that are in line with, or below, the prices of competing medicines that are already on the market," said Neil Grubert, M.A., director of pricing and reimbursement research at Decision Resources.

 

 

 

Posted by Bruce Lehr December 10th 2010.

China to Invest $1.5 trillion in Top Industries including Biotech

As reported in Reuters, China's Ministry of Industry and Information Technology said that the government plans to invest $1.5 trillion over the next 5 years in its top 7 high tech industries - which includes biotechnology.  This grouping is expected to grow at a 24.1 CAGR over the next 4 years and at 21.3 CAGR for the subsequent five.  The investment is meant to grow these industries contribution to national GDP from 4 percent of the total now to 8 percent by 2015 and 15 percent by 2020.

 

 

 

Posted by Bruce Lehr December 9th 2010.

FDA Gets Mediocre Grade from Pharma Execs in PWC Poll

Pricewaterhouse Coopers life sciences team ran the 5th survey of pharmaceutical executives -- ceo, coo, a vp or director of regulatory affairs and quality -- representing 50 companies on their ratings of how they thought the FDA was doing. 

What Does Pharma Think Of The FDA? Not Much // Pharmalot.

The results are mixed at best. There seemed to be some agreement that the FDA has improved with its feedback on product development and driving that into companies development plans.  But, the agency wasn't seen to have improved much on its drug approval process and especially in the working relationship with pharma surrounding this process. Users fees were another area of mediocrity with criticism leveled at the agency for lack of transparency, excessive fees, lack of effectiveness in speeding review time, and only 24 percent the fees work as intended.

Bottom line: better luck next survey.

Posted by Bruce Lehr November 30th 2010.

The Myth of the Patent Cliff and Other Red Herrings

From Stuart Lyman via Xconomy today we have a piece challenging whether there really is such a thing as a Big Pharma "patent cliff" or whether it is all a red herring.  Mr. Lyman concludes that a couple companies may have a cliff but by and large the problem in the industry is lack of R&D productivity and too much marketing expenditure on mediocre drugs.

The Myth of the Patent Cliff.

There is no cliff if you plot out "industry performance" over last 10 years versus an individual company or two.  The problem is a dearth of new drug approvals. This actually does show a decline in the past decade.  Drug sales went up 2.5x from 1997-2007 yet approvals of new drugs dropped 50%.  The increase in sales appears to parallel the 300% increase in DTC-ad spending during the same period. Wow!  No new drugs but lots of new ads.

Mr Lyman further notes that there are 6 basic approaches Big Pharma could use to bridge the revenue gaps (see his post above) but only 1 of the 6 actually was geared toward adding a new (as opposed to a modified) drug.  The primary responses were to "curtail research expenditures, cut headcount, and ramble down the other paths."

The myth of the cliff will remain until pharma changes its R&D model and gets back to understanding basic drug mechanisms - and adopts a more collaborative approach - perhaps with academic sites as their funding decreases from other sources.  When that happens, the cliff myth will begin to recede.

Until then, next time you hear about a patent cliff - think red herring - salted, pickled, with mustard, sherry or dill and little aquavit! 

 

 

 

 

Posted by Bruce Lehr November 29th 2010.

Top Pharma & Biotech Companies Global Sales in 2009

Top Foreign Stocks.com and Seeking Alpha have published lists of the Top 20 Pharmaceutical companies by gobal sales rank and a similar list for the Top 10 Biotechnology companies, respectively.  Enjoy!

Posted by Bruce Lehr November 26th 2010.  

 

Novartis unveils long-term Growth Strategy in Dynamic Healthcare Environment

As published in PharmaNews.EU, Novartis presented its growth strategy in healthcare to the analysts last week.  CEO Joseph Jimenez stated "Novartis remains committed to the core strategy of focused diversification in high-growth healthcare segments.  We are leveraging our core competencies in scientific discovery and development to continue driving innovation, growth and productivity across the businesses."

Novartis unveils long-term strategy to grow in a dynamically changing healthcare environment.

 Novartis has four features to its plan to drive growth:

• Diversified holdings with leading businesses in growing healthcare segments - pharmaceuticals, eye care, generics, vaccines & diagnostics and consumer health
• By 2015, the pharmaceutical specialty and oncology portfolio is expected to account for 75 percent of sales
• Strengthen leadership in biosimilars and first-to-market launches to drive performance in Sandoz
• Meningococcal vaccines accelerating growth in vaccines business

Novartis expects to continue to invest in the innovative R&D at the high-end of the industry for the next five years - at least.  It also expects to strengthen its commercial position in the fast-growing BRIC countries. It's innovation position is enviable in this time of patent cliffs for many of its top competitors.  Novartis can boast:

• Pipeline contains 142 projects, with more than 35% in Phase III or beyond
• Planning 30 regulatory submissions in the next 2 years - by the end of 2012
• Leads the industry in NMEs with 55 in clinical development and enjoys 50% success rate in Phase II
• Industry leading vaccine pipeline featuring 17 vaccine candidates in various clinical stages - lead by flu and meningococcal vaccines
• Sandoz generics business enjoys a 50% share in regulated markets

Beyond this investment in R&D and emerging markets, Novartis also plans to cut costs in its supply chain, marketing, sales, and in procurement.  It also plans to create Centers of Excellence in Manufacturing with a goal of getting its capacity utilization rates up to 80%. Money that is saved will be reinvested in more innovation and growth.

 

Posted by Bruce Lehr November 23rd 2010.

Moody's Expresses a Negative Outlook on Pharma Industry

PharmaGossip (via WSJ) reports that Moody's in a new report is down on the near term prospects of the global pharma industry as a whole.  Acording to them, pharma is facing three very large hurdles: record patent expiry's, high regulatory hurdles to new drug approvals, and austerity measures around the world aimed at controlling durg prices and medical spending.

PharmaGossip: Who Will Make the First Pharma M&A Move? - WSJ.com.

The agency is predicting the industry will still continue to engage in M&A activity and will use more debt financing to do so -- even if this approach produces credit-rating consequences. It further notes that the pharma industry is still less leveraged on average than other industries. Finally, the report predicts that generics, consumer health, vaccines and emerging markets will be places Big Pharma looks to diversify into.  As I've mentioned several times previously in this blog, Roche refuses to follow this path except into emrging markets -- from my perspective to its credit.

 

Posted by Bruce Lehr November 22nd 2010.

Brazil Pharmerging Market is new Darling of Big Pharma

Brazil is becoming a hot market for big pharma again.  After nearly 30 years since Big Pharm exited en masse due to high inflation, tough price controls and very weak intellectual property rights, Brazil has become popular again.  Patent rules and regulatory requirements for generic drugs have become stricter. Brazil has a rising middle class that is  rapidly growing and also an increasing number of pharmacies to meet demand. Thanks to the rising middle class, the country is now the eighth largest drug market by sales in the world.

Novo Nordisk, Sanofi-Aventis and Pfizer have all either wholly purchased or purchased very large stakes in Brazilian pharma companies in the last few years. AstraZeneca and GSK have also returned to Brazil with segmented pricing strategies to allow them to compete in generic and in more innovative drug categories targeting the middle class.

Nilton Paletta, president for Latin America of IMS, said:

Brazil is becoming one of the largest and most attractive pharmaceutical markets. It’s the second-biggest emerging market after China, with double-digit growth that will continue for the next few years.

No wonder then that the big global pharmaceutical companies believe it to be a market they can’t afford to ignore.  See Seeking Alpha.

 

 

 

Posted by Bruce Lehr November 21st 2010.

Vaccines - The Wave of the Future

Fierce Biotech updates the progress of late stage vaccines that if approved will begin addressing diseases with no current therapies.  These vaccines if approved can help eliminate another cohort of diseases and may be blockbusters of the future. The list of vaccine-preventable diseases stands at 26, representing a major advancement in the quality of human health.  Thus, one reason the Gates Foundation would like to extend this list.

There are many more vaccines in drugmakers' pipelines that are on course to eradicate some of today's most difficult-to-treat illnesses. In Kalorama Information's report on the future of emerging vaccines, the group estimates that by 2020, emerging vaccines could account for $24.7 billion in new sales up from about $16 B today.

See the emerging vaccines pipeline

Postede by Bruce Lehr November 18th 2010.

 

Move over China and India: Big Pharma Is Eyeing Brazil

This post comes from the BioJobBlog and highlights the fact that Brazil is a BRIC country too!  Big Pharma is increasingly looking to invest there - either in addition to or instead of India/China due to the high expected market growth rates in the country.  Pharma is targeting the Brazilian consumer with both generic offerings and innovative branded drugs.  Move over India and China - Brazil is getting ready to move in too.

Move over China and India: Big Pharma Is Eyeing Brazil.  

 

 

 

 

 

Posted by Bruce Lehr November 17th 2010.

Is Big Pharma Patent Cliff Real?

According to Philly.com, YES it is.  Duh!

But let's review the stats once again.  Four of the top 5 selling US drugs in 2009 will see their patents expire in 2011 or 2012

• Pfizer's $7.5 B Lipitor
• Bristol-Myers Squibb $5.6 B Plavix
• GSK's $4.7 B Advair Diskus
• AstraZeneca's $4.2 B Seroquel

States a report by Bernstein Research prepared in December 2009, 9 out of the top 10 drugs in the world will lose patent protection in the next 5 years, as will 18 of the top 20.  Patents expirations will occur on drugs that accounted for $92 M of the world's roughly $300 M in pharmaceutical sales in 2009 according to IMS Health.

As mentioned here many times before (see posts on R&D changes, Business Models, and Innovation), most of pharma is proceeding lemming like to adopt the same changes to battle patent losses.  These include:

• Cost cutting - i.e. headcount reduction
• Diversifying into nonprescripotion drugs
• Diversifying into animal health
• Expanding into so-called pharmerging markets - especially into BRIC countries

The cliff is coming and the response so far has been uninspiring.

I think the one with the inner-tube is Roche.

Posted by Bruce Lehr November 13th 2010.  

 

Follow Up Post on Where the drugs come from? Which Countries defined!

Here's another post from Derek Lowe's In the Pipeline blog that continues discussing where our drugs come from - pharma, biotech or univerisities.  This installment is focused on the countries of origin.  The upshot is the US leads with more drugs designed to meet unmet-medical-needs, especially from its biotech and university sector.  International biotech drugs are virtually absent which I thought was interesting. To me, that may be a signal to indeed extend the R&D tax credit to biotechs to further support our worldwide lead in drug innovation.

 

Here's the entire In the Pipeline post.

 

Posted by Bruce Lehr November 9th 2010.

Big Pharma Herd: Diversify, It's the Wave of the Future

InPharm reported on a Roland Berger (RB) Strategy Consultants survey of leading pharmaceutical company executive's views of the current business environment, their firm's business model, and implications for their future strategic response.  RB characterized "diversification" as the most popular intended response by surveyed companies and listed three ways to accomplish this - innovation, integrate and de-risk - with the latter two being most popular.

This is what I'm alluding to as the herd mentality in my headline - basically the majority are opting for the less differentiated strategy and avoiding the tougher innovation strategy - which is likely to be more valuable.  Let's look at the survey.  RB went to 25 companies, with more than 40% of WW revenues, including 7 of the top 10 companies, and interviewed 50 executives iincluding CEOs and board members.

The survey says:

• 65% characterized the industry as being in "strategic crisis"
• 67% see diverisification as the answer (I just want to say one word to you. Plastics! )
• 78% perceived generics to be the most important area for diversification (somebody ought to alert PhRMA!)
• This one blew me away.  Almost 50% expect anegative ROI on their current R&D investment and are losing faith in traditional patent-based protection
• The industry expects margins for innovative products to come under attack by goverment managed healthcare
• R&D will not bring required level of returns with companies outsourcing to cut costs

The prediction then was that the industry would become more diverse - ranging from highly focused innovative players to fully integrated healthcare conglomerates.  It seems most are opting for the conglomerate model at this juncture - and are focusing towards generics - I don't see how 65% of the industry can go that route and all survive. Now it's a race to see who can move to conglomerate status first to stake out a position that may be defendable before the herd comes charging along.

I'm reminded of the Ernst & Young Pharma 3.0 report earlier this year that addressed perceived changes the industry would need to make going forward and defined the challenge thusly,

The core of this industry has been innovation and it will stay innovation, but the bulk of the money and the effort has been in the innovation of the product pipeline. What we are seeing going forward is the need for innovation of the commercial model in order to be able to respond to the mega changes of healthcare reform globally.

The consultants say innovation of the business model. The bulk of the industry players prefers cost cutting and product innovation toward generics.  Where is the disconnect here among the herd?

 

Posted by Bruce Lehr October 26th 2010.

 

 

 

 

Keeping Score? Quarter of Public Biotech's Close Doors in Last 2 Yrs

According to data presented at BIO and reported in the Patent Docs blog, 25% of the publicly traded biotechs ceased since the 4th Qtr of 2007.  Fifty-two (52) company's discontinued operations and sixty-two (62) were acquired.  There were only 14 IPOs.  The net effect was a drop in the industry count from 394 public companies to only 294.  According to a Bloomberg report, biotech acquisitions rose from 40 in 2007 to 55 in 2008, dropped to 38 in 2009, and stand at 21 this year.

Posted by Bruce Lehr October 12th 2010.

NSF Reports on US Business Innovation

The National Science Foundation published its 2008 Business R&D and Innovation Survey (BRDIS) recently to provide a map of the incidence of innovation by businesses in the USA. Interestingly, I was motivated to pull this report and read it as I had seen several sources quoting from it and bemoaning that only "9% of the estimated 1.5 million for-profit companies were active product innovators and only 9% were process innovators". 

A typical comment, derived from a summary of the report's findings, is evidenced by this quote from the Washington Post's Ezra Klein. There's also a scary takeaway: "You can’t be an innovative economy if only 9% of your companies are innovating."

I think that conclusion/representation is a tad misleading.

Let's look a little more deeply.  The BRDIS is produced by a joint effort of the NSF and the US Census Bureau.  The survey population is 1.5 million for-profit companies, public and private, manufacturing and service sectors.  Measures of innovation follow well-accepted standards described in the Oslo Manual (2005) prepared by Organization for Economic Co-operation and Development (OECD) and Eurostat. BRDIS draws on the Oslo framework. 

In the Oslo framework, "innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations."

Now the data that I'd like to highlight.  Pharmaceutical and biopharmaceutical companies (as well as raw material suppliers to them like SAFC) are manufacturing companies. Manufacturers represent only 8% of the 1.5 million companies in the survey.  The companies above fall into the chemical sector NAICS 325 (or subsegment NAICS 3254).  In contrast to the 9% figure cited in study summary for all companies, 41% of chemical companies were product innovators and 34% were process innovators.

In the non-manufacturing segment, 92% of the total companies, only 8% reported product or process innovation. However, if you look at companies that specialize in scientific R&D services NAICS 5417, these had innovation rates of 33% for products and 26% for processes.

I point this out, as again, presumably most readers of this blog are interested in the pharmaceutical industry.  The industry is made up of manufacturers that work with R&D service providers/manufacturers.  What's more, the BRDIS data show that there is a large difference in innovation incidence when companies with R&D activity are compared to those without any R&D activity. Companies with R&D (either performing R&D or funding others to perform R&D) exhibit far higher rates of innovation than do non-R&D companies.  Sounds like a pharma company.

Only 3% of the 1.5 million companies in the survey perform or fund R&D.  But of these R&D intense companies, 66% were product innovators and 51% were process innovators. There is also indication that the companies with the most R&D (those in the $50–$100 million and $100 million or more annual R&D categories) report the highest incidence of innovation: 76% and 81%, respectively, for products in 2006–08, and 69% and 71% for processes. Clearly this latter group would encompass Big Pharma for sure.

My conclusion is that things may not be as bleak as the summary stats might indicate at first glance - at least not in the pharma sector.  It would be more enlightening to now compare how the US pharma sector stacks up innovation-wise versus its global counterparts in the industry.  That could show a trailing gap or it could show a leadership position.

 

Posted by Bruce Lehr October 8th 2010.

 

IMS Forecasts $880 B Pharma Market and 5-7% Growth in 2011

IMS's message regarding the 2011 pharma market?  Don't expect major growth in the Western markets and do expect high double digit growth (15-17%) in pharmerging markets - consistent with recent past.   The total global market size will reach $880 B.  The US will remain the number one market at $330 B - 37.5% of the world total - and grow at modest 3-5%.

The 17 pharmerging countries will not only grow at 15-17% but will constitute $180 B in sales or 20% of the world market.  China will grow at a near meteoric 25-27% to a size of $50 B and is NOW the 3rd largest market in the world. Japan will also grow a relatively robust (for an established market) 5-7%.

The European perspective doesn't look nearly as rosy.  The Five Major EU markets - Germany, France, Italy, Spain, and the UK - will only grow at 1-3%, as will North America's Canada.  Suppressed revenue growth is no doubt affected by heavy price controls being enacted in Europe and also reflects the impact of generics availability.  Spain and Canada are poster children for the combined impact of price controls and generics emergence.

One piece of good news for some drug innovators - despite a number of venerable drug franchises reaching their patent expiry and therefore seeing their share attacked by generics - there are 5 new potential blockbusters (projected sales > $1 B) expected to be launched in 2011. Cling to that thought.

 

Posted by Bruce Lehr October 8th 2010.

 

Merck & Sanofi New Pet Project? Sell AH Unit for $1 B

According to a Bloomberg story, Merck and Sanofi will put their animal health unit up for sale and expect to reap at least $1 B in the transaction. Reported suitors include Pfizer, Bayer, Boehringer Ingelheim, Lilly and Novartis. Last week, it was noted here that Big Pharma is increasingly interested in the animal health area as another sales and profit generator.  This is seen as an area that can help out those companies with flagging human health pipelines and facing the patent cliff in the next few years. Companies like the ones on the suitors list.

The companion pet market in particular is seen a bigger draw for investors in animal health. The market is less price sensitive than that of agricultural animals and pet owners have shown their willingness to spend on the health of their pets. The market reached $19 B in 2008 and is reportedly growing steadily at 5% annually - a trend that is expected to continue for at least the next five years.

 

 

 

 

 

 

Posted by Bruce Lehr October 2nd 2010.

 

 

Fierce Top 10 Pharma Companies Revenue/Employee

Fierce Biotech published its 2010 calculations of revenue per employee and ranked the Top 10 Big Pharma companies in a recent piece. Roche can out on top by this measure - one often used by industry analysts to quickly assess relative effficiency of competitors in an industry.  The range reported in the Fierce calculations went from number one Roche's $699,460 to number 10 Bayer's $205,720.

Though this metric varies widely from industry to industry and company to company it nonetheless provides an interesting view into how well a company is run. It can show for example how you’re doing against your competition while providing a simple tong-term tracking metric for both public and private companies. The best run companies (in general) have high revenue per employee figures. 

In looking at revenue per employee, industry leaders usually have higher values. What can cause such a wide variation within an industry? Operational efficiency and productivity are major factors. The number of outsourced business functions also has a big impact.

Investopedia notes that revenue per employee is best used within an industry comparing peers to peers, and that it is really important to look at this metric as it trends over time - more meaningful anyway than a single snapshot.  That means, for this post I should have looked up the Fierce figures for the past several years!

Briefing.com notes that  as a quick "litmus-test" for judging a company, it is hard to beat the revenue-per-employee metric. Labor intensive businesses generally have a lower revenue-per-employee metric. Businesses with a scalable business model generally have low revenue-per-employee ratios when they are small, but demonstrate ever-increasing ratios as they grow.

Revenue Per Employee	Median Operating Margin	Percentage of Stocks Unprofitable	Number of Companies
Less Than $100,000	-1.2%	56.9%	513
$100,000 to $200,000	4.2%	38.8%	953
$200,000 to $300,000	7.7%	26.9%	934
Higher than $300,000	9.8%	28.1%	2,016

Source: Reuters, for raw data, Briefing.com calculations

The above table summarizes how the revenue-per-employee metric can help you gauge, with a reasonable probability, whether a company is profitable or not. The data is calculated only from public companies trading on either the NYSE, the American Stock Exchange, or Nasdaq and includes more than 4,000 companies.

Posted by Bruce Lehr September 30th 2010.