Introduction to the pharmaceutical market and practice
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As a lecturer for "Basic Principles of Drug Discovery and Development" for Department of Life Sciences, National Central of University for two years. In charge of "Introduction to the pharmaceutical market and practice".
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Introduction to the pharmaceutical market and practice
- 2. 產品生命週期 PRODUCT LIFE CYCLE 競爭策略 COMPETITIVE STRATEGY 課 程 大 綱 ＡＧＥＮＤＡ 01 03 05 產業分析 INDUSTRY ANALYSIS 行銷策略 MARKETING STRATEGY 02 04 2 價值與併購 VALUE & M&A
- 3. 魏景成 講師自介 生技製藥業職歷 綠茵生技集團 海外營業處副總經理 生達化學製藥 國際事業部項目經理 國鼎生物科技 國際業務部副總經理 展旺生命科技 事業發展專員 語言：英文、日文、韓文 藥事法規：RAC國際醫藥醫材法規人才認證（Regulatory Affair Certificate- General Scope） 專案管理：PMP國際專案管理師（Project Management Professional） 產品上市：NPDP國際新產品開發管理師 （New Product Development Professional） 企業鑑價：企業評價師證照（經濟部工業局培訓，中華無 形資產暨企業評價協會認證） 科技管理：MMOT跨領域科技管理與智財運用國際人才培 訓計畫先修班結訓 智財管理：智慧財產人員能力認證(TIPA)：專利程式控管 類、專利檢索分析與加值運用類認證 日本醫藥：日本登錄販賣者試驗合格、日本藥學檢定一級 企業法務：日本企業法務（ビジネス法務）檢定二級 國際貿易：國貿大會考合格 3
- 6. Deeply influenced by pharmaceutical regulation. Price of the drug is determined by the drug price system. Promotion and advertisement is regulated Complicated and exact information is required 医薬品マーケティング新戦略 高橋真人 Enormous cost and time are required for product development. Features of Pharmaceutical Market 6
- 7. Value Chain of Phramaceuticals, Payers, and Providers Pharmaceutical Value Chain Payers Value Chain Provider Value Chain 7
- 9. Stage Development Introduction Growth Mature Declining Strategic Issues Product Design Market penetration Increase market share Maintaining revenue Maintaining profit Profit (revenue) minus + - increase max reduction Product lifecycle and profit Revenue Cost Sales Profit Marketing cost Production cost Development cost Approval Discovery Launch 9
- 10. Portfolio management Margin ratio Time Company Existing Category Priority Category Existing category Non-priority category New category 10 BCG Matrix
- 11. Drug lag US JP Preparation period Clinical trial period Review Preparation period Clinical trial period Review Drug lag Launch Launch 11
- 12. Reform of the Medical and Health Care System of China 12
- 13. Lifecycle management up to drug launch 5~9y 3~9y 1~3y Non-clinical Basic research Phase I Phase IIa Phase IIb Phase III Expert committee Pharmaceutical committee Pharmaceutical Affairs Post marketing survey Application for re-examination Clinical Trial Submission TPP Plan (Indications, Target Countries) TPP Decision Sales scale, sales system, production system evaluation Scale of trial, facilities, PI, etc. Response to deficits, launch plan and sales strategy Plan for post-marketing surveillance 13
- 14. Product Strategy: Target Product Profile (TPP) • Indication • Efficacy • Safety • Dosage & Administration • Sales Impact • Superiority • Time • Dosage Form Proof of Concept 14
- 15. TPP & strategy design in development stage TPP design Research design STP design 4P design PM assign Market research Competition survey PEST Analysis Needs Survey Fact Investigation SWOT Analysis 3C Analysis Segmentation Targeting Positioning Promotion scenario Scenario investigation Branding Promotion strategy Price strategy Distribution strategy PMS design MR training MR promotion PMS NDA Phase III Phase IIb Phase IIa Phase I Approval 15
- 16. Goal of Post market lifecycle management Development Introduction Growth Mature Declining Revenue Launch Years of post marketing 16
- 17. Patent period, development and sales period in pharmaceuticals Nonclinical Basic research Clinical trial Dossier submission 3~5y 2~3y 3~9y 1~3y R & D period Reexamination Revaluation period Patent application Originator sales period Generic sales period Patent period 17
- 18. Comparison of sales of originator and generic between US & JP US JP Originator sales Generic sales 18 patent expiration time revenue
- 19. Rank of lifecycle value-growth to mature #2 Humira Launched on 2002 115.9B USD #9 Herceptin Launched on 1998 79.2B USD #12 Nexium Launched on 2001 65.3B USD #3 Remicade Launched on 1998 105.1B USD 19 Infliximab Esomeprazole / PPI Adalimumab Trastuzumab
- 20. Rank of lifecycle value-mature to decline #2 Abilify Launched on 2005 63.5B USD #19 Gleevec Launched on 2001 56.2B USD #20 Losec Launched on 1992 52.0B USD #1 Lipitor Launched on 1998 152.0B USD 20 Atorvastatin calcium Omeprazole/ PPI Aripiprazole Imatinib
- 21. • Launch next generation product • New indication • New dosage form • Change Composition • Maximize brand loyalty • Strategic pricing • Switch to OTC • Release of generics by our company • Liquidation/ license out the product Strategy against Patent Expiration Strategy against Patent Expiration 21
- 22. 22
- 23. 23
- 26. Ranking of Prescription Drug Sales 26
- 27. Top 10 Selling Products WW in 2024 PD1 Antibody TNF Blocker anticoagu lant PD1 Antibody NHL CDK 4/6 inhibitor multiple myeloma mAb Psoriasis HIV 27 Macular Degeneration
- 28. PEST analysis for pharmaceutical products Politics 1.Regulation relief Healthcare system reform 2.Revision of Pharmaceutical Affairs Law 3.Strategies against intractable diseases 4.China–United States trade war Economics 1.GDP/ appreciation/ depreciation 2.Increasing drug expenses 3.Promotion of generic products Society 1.Aging 2.Increase of lifestyle diseases 3.Environment protection Technology 1.Development of regenerative medicine 2.Genomic medicine 3.New treatment method 4.Artificial intelligence 28
- 30. Healthcare environmental analysis Epidemiology 1. Potential patients / diagnosed patients 2. Incidence 3. Average onset age · mean disease duration 4. Male / female ratio / age composition ratio 5. Survival rate / mortality Etiology 1. Condition (pathogenic mechanism) 2. Pathological findings 3. Classification on pathology, pathology 4. Presence of inheritance Diagnosis / Examination 1. Criteria 2. Main symptoms 3. Inspection method (insurance reimbursement?...) 4. Monitoring method (blood concentration…) 5. Criteria for determining severity Treatment 1. Non medication therapy 2. Medication therapy 3. Guidelines 4. Market size (amount, number of patients) 5. Competition situation (number of products / share) 30
- 31. Drug price setter Involvement of the authority Drug price of new drug Price reduction after launch Japan Government High Low High France Government Medium Medium Low Germany Free Medium Medium Low US Free Low High NA Drug price system 31
- 33. Spending growth in the total market reaches $100 billion by 2018. Pharmaceutical Spending 33 (Rest of world)
- 34. U.S. spending growth on medicines will peak in 2014 and then moderates through 2018 Pharmaceutical Spending 34
- 35. Japan’s growth is expected to return to historic patterns through 2018 after atypical 2014 Pharmaceutical Spending IMS Market Prognosis 2014-2018 35
- 36. Accessing in emerging markets 36
- 37. Pharmaceutical Spending Spending level increases are tied to recently expanded access, with 95% of the population now covered by public health insurance plans. 37
- 38. Pharmerging growth steady with greater access to medicines and economic improvement increases Pharmaceutical Spending 38
- 39. Generics continue to drive growth globally 39
- 40. Specialty therapies continue to be more significant in developed markets than in pharmerging 40
- 41. Therapeutic Area Igea Hub Pharmaceutical Club 41
- 42. Top 10 therapy areas in 2024, market share & sales growth 42
- 43. Over view of Indication Density 43
- 45. Drivers and brakes, by the therapy area 45
- 46. Most expensive clinical programmes 46
- 47. WW Total Pharmaceutical R&D Spend 47
- 48. Biosimiliar in development by countr y 48
- 50. Classifications of Originators 50 Covering primary area and specialty area Marketing powerfully in all directions Mega player(Almighty type) Covering both original and generic drugs Larger enterprise size Multiplayer (Diversified type) Covering mainly on specialty areas No. 1 in target category Category players(Specialty type) Covering intensively the niche area No.1 or first three in the target category Niche player (Concentrated type)
- 51. Competitive strategies in pharmaceutical industry Feature ○ eager to M&A ○ domination by size and resources ○ brand Product ○ blockbuster products ○ first-in-class Feature ○ research intensive type ○ differentiation ○ alliance Product ○ blockbuster products ○ best-in-class Feature ○ conventional sales & marketing ○ resist to merge Product ○ medium market size product ○ cloner & imitator Feature ○ centralized type ○ resist to merge ○ high profit Product ○ small to medium market size products ○ less competition area 51
- 52. 3C analysis for pharmaceutical products Customer Company Competitor Where to compete? How to compete? What to compete? Patient trend transition of patient size recognition rate acceptance rate Actual medical condition number of physicians diagnostic rate specialty Treatment status dosage rate, efficacy rate, satisfaction level presence / absence of guideline Organization sales system quantities of MRs marketing system Products status characteristics of products market share Market entry product lineup relationship with customers Organization sales system quantities of MRs marketing system Products status characteristics of products market share Market entry product lineup relationship with customers 52
- 53. 3 new products business strategies Existing category competition New category entry New business development Market analysis Customer analysis Product analysis Competitive analysis Resource and inventory check Macro-environment analysis · Industry analysis Market analysis · customer analysis · competitive analysis Impact on market entry & investment outcome investigation 53
- 54. 8 Elements for product differentiation Price Dosage Chemical Formulation Usage ADME Mechanism Form Core function Efficacy Safety Indication 54
- 55. 3 Different Business Models for Pharma 55
- 56. Alliance & outsourcing viewed from value chain Research Development Clinical Trial Marketing Promotion RD Alliance Co-promotion CSO CRO Vertical integration Horizontal integration Alliance Outsourcing Integration 56
- 57. Types of the Strategic Alliance Cost reduction type Time saving type Risk avoidance type Weakness complement type Synergy type 57
- 58. 58 NRDO model and Networked Pharma model.
- 60. Innovator (dissemination) theor y 60 Awareness Differentiation Loyalty Concentration
- 61. Research Div. Development Div. Production Div. Distribution Div. Sales Div. Physician Patient Payer Marketing Div. Value chain and Marketing in pharmaceutical companies Construction of value chain Unmet Medical Needs 61
- 62. Marketing domination Marketing vs R&D: Who leads product development? 62 R&D domination
- 63. Attribute and behavior analysis Attribute analysis Geographic Demographics Age, Sex Psychological Lifestyle, personality, prescription rights, treatment policy Behavioral Frequency of use, royalty, presence of consultation Awareness of disease / treatment Awareness of disease, Adaption rate of treatment Specialty · clinical dept. GI · CV… Facility Attribute University Hospital · Clinic Behavior analysis Product selection process Problem recognition, Problem solving, Product selection, Product purchasing, Product valuation 63
- 64. Model in calculation drugs consumption 50 100 100% 70% 60% 50% 30% 20% Potential patients Consultation rate Diagnostic rate Dosage rate Prescription rate Persistence rate LOSS 64
- 65. Market composition of medical products and example of patient flow Total p‘ts Conscious Consultation Diagnosis Prescription Our p’t share Average dose Persistency Daily avg. price Non-conscious Non-consultation Non-diagnosis Non prescription Competitor’s p’t share Average dose Persistency Daily avg. price Realize it is a disease? Been consulted at a hospital? Been diagnosed? Drugs are prescribed? What is the patient share? Average amount daily intake? How long will it be taken? Existing market Potential market 65
- 66. Marketing process & main research Segmentation & Targeting Positioning Branding Promotion Prescription share Amount share Fact Needs & insights Positioning & Message Branding Survey Scenario survey Mind share survey Dynamic survey Market share Treatment algorithm (decision tree) Patient flow Evaluation of drug, treatment motivation Tx issues, dissatisfied or worried points, ideal status Major treatment goal, clinical benefit, product characteristics Visual, logo, tagline, signal Understanding and acceptance of promotional content Understanding, conviction, differentiation, prescription intention New patient share, Switching share, Additional share, Maintenance share, Total share IMS(IQVIA) share 66 Fact Needs & insights Positioning & Message Fact Needs & insights
- 67. 4 Ps marketing mix Product Price Place Promotion Generic name Brand name Effect, feature Quality Dosage form Design package Product logo Warranty Drug price Transferred price Sales price Allowance Discount Credit conditions Channel Distribution range Product assortment Location Stock Transport Advertising Sales Force Sales Promotion Public Relations Internet 67
- 68. Relationship between drug price and prescription share and profit 100% 50% 50 100 150 200 250 300 350 Patient share 1 day drug price Share Profit drug price*patient share* (1 - cost rate) Share at best price Best price 68 Profit/day
- 69. 69 《新藥》健保價審定流程 1. 健保署進行醫療科技評估＊ 2. 藥物諮詢專家會議（提供給付建議） 3. 藥物共同擬定會議（討論決議） 4. 達成共識後會暫予收載支付 5. 次年第一季報請衛服部核定公告 學名藥會依健保已收載品項不同來評估用何種方式來 審定藥價，BA/BE學名藥主要以原廠藥價（會打8折- 9折）、BA/BE學名藥價、BE對照品藥價及廠商建議 價格去做評估，取最低價。若藥品屬於一般學名藥品， 會以原廠藥價(會打8折)、BA/BE 學名藥價、一般學 名藥價及廠商建議價格去做評估，取最低價。
- 70. Methods of Sales Forecasts Sales forecast New Products Introduction/ growing Short-term forecast (within 1 year) Medium- to long- term forecast (longer than 2 years) Existing Products maturity/ deline Short-term forecast (within 1 year) Medium- to long- term forecast (longer than 2 years) Market breakdown method Benchmark method Growth rate analysis method Survey analysis method · Product competitiveness Statistical prediction method Product life cycle analysis method Judgment intensive (experience) method 70
- 71. Strengths Weaknesses Sales force Effective Provide highly complex info Info exchange is possible High cost (continuous) Coverage is limited Latent effect Advertisement High coverage Messages can be transmitted quickly High impact High cost (depends on cost) Difficult to provide complex information Publicity Reliability is high Reasonable cost Difficult to control by company negative information may be spread Promotion Fast Synergy is expected (combine with sales force) Effect period is short High cost Word-of-mouth reviews Reliable and low cost Difficult to control by company negative information may be spread Internet Internet can be seen anytime, anywhere No restriction in amount of information Comparation and exchange is possible Weak impact Strengths and weaknesses of each promotion methods 71
- 72. Benefits • Finely responding • Provide advanced information • Information exchange • Prompt response and feedback Human Promotion Process 72 01 02 03 04 05 06 Discover existing customers' needs Search for new Attention-drawing, Interest facilitation Prescription occurrence Detail presentation Occurrence of desire (counterargument, differentiation) Follow-up (confirmation of customer satisfaction)
- 73. 73 Mass-market medicines Specialist therapies Marketing Implications Treat common illnesses Treat rare diseases and specific disease subtypes A much smaller target market Must generally be used with a diagnostic, which adds to the overall cost but improves compliance Relatively simple products Very complex products Require more scientifically educated sales representatives Typically prescribed by general practitioners Prescribed by specialists Require a much smaller sales force Low price per dose Very high price per treatment Require much more extensive proof of clinical efficacy Outcomes-based pricing Usually oral formulations Usually delivered by infusion or injection Require intensive patient education & monitoring Costs may be spread across different payment centres & budgets with different reimbursement procedures Relatively easy to manufacture Difficult to manufacture Less vulnerable to generic competition Easy to transport Require special distribution & storage facilities More expensive to ship & store Generally kept in stock Often delivered to order Must be supported by a much more flexible supply chain Specialist th erapies require dif f erent marketing and sales mo dels f ro m th o se used fo r mass-market medicines
- 74. 74 Blockbuster model Specialist model Strategy Development of mass-market blockbusters Development of specialist medicines for treating specific disease subtypes Generation of new prescriptions Cooperation with healthcare payers & providers to optimise the healthcare resource mix Responsibility for compliance & persistence Organisation Vertically integrated Networked Culture Fragmented, with separation of disciplines & brands Integrated, with collaboration across disciplines & brands R&D Restricted research agenda R&D silos Cumbersome decision-making processes Reward systems based on number rather than quality of candidate molecules Comprehensive research agenda Internal & external connectivity, partnering & adaptive trials Nimble decision-making processes Reward systems based on collaboration & commercial awareness Manufacturing Narrow product range Batch-based, “made to forecast”manufacturing Wide product range (including diagnostics, biomarkers & novel delivery technologies) Flexible, “assembled to order” manufacturing Distribution Traditional channels, primarily wholesalers Conventional distribution Multiple channels, including direct distribution to patients or their healthcare providers Chilled-chain distribution and storage Pricing What the market will bear, rebates & discounting Pay-for-performance Marketing & Sales Intensive detailing Individual negotiations with large healthcare payers; specialist advice for secondary & tertiary healthcare providers; & educational programmes for patients Based on differentiation of competing medicines Based on treatment of specific disease states and measurement of outcomes Specialist medicines requir y new organisational and cultural character istics
- 77. 77 價值計算：①市場基礎法 亦稱市場比較法、相對評價法 在於在市場內，具相當營業項目、成長率、財務特性與規模的公司，應有類似 的表現及價值。應用非常廣泛，許多股市的研究報告即用此類方法。 因此某一公司的價值應可由其它類似公司的價值估算而得。 有兩個基本的構成要素，市場乘數(Market Multiple)及類似可做對照的公司。 常用的市場乘數： 本益比：每股價格/每股盈餘 股價淨值比：每股價格/每股帳面價值 本銷比：每股價格/每股營收 市價現金流量比：每股價格/每股現金流量
- 78. 78 價值計算：②收益基礎法 公司的價值主要來自於公司未來所能創造的現金流量的現值總和。 企業經營之目的在追求股東價值最大化，此法同時考量公司所處的經濟產業環 境、歷史經營績效、未來成長率、市場風險、資金結構和賦稅等因素，因此最 能反應企業實際面臨的情境，而其結果亦最能代表公司的實際價值。 缺點在於未來現金流量不易準確估計，且方法中使用大量變數需要估計，操作 較為複雜，過程中主觀判斷因素亦較多。 有股利折現法、盈餘折現法、經濟利潤折現法、 自由現金流量折現法等。
- 80. Licensing activity - to tal upf ro nts paid & deal vo lume EP Vantage 2018 Preview 80
- 81. VC investment EP Vantage 2018 Preview 81
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- Recognising the interdependence of the pharmaceutical and healthcare value chains The relationship between pharmaceutical companies, healthcare payers and providers is at best wary – and sometimes downright antagonistic. Yet analysis of their value chains suggests that they have far more in common than might first seem the case. In its simplest form, a value chain is the series of activities an entity (either singular or collective) performs to create value for its customers and thus for the entity itself. The pharmaceutical value chain starts with the raising of capital to fund R&D and concludes with the marketing and sale of the resulting products. In essence, it is about making innovative medicines that can command a premium price (see Figure 3). The payer value chain starts with the raising of revenues through premiums, taxes or out-of-pocket payments. The payer then creates value for its customers (patients, policyholders and payers) by managing the administrative process and giving them access to medical care. The payer’s goal is thus to make a financial or political profit by maximising its revenues or reputation (with its customers or voters, depending on whether it is a commercial enterprise or government) and the quality of the service it secures, while minimising its costs (see Figure 4). The provider’s goal is to deliver a high quality of care efficiently. This usually means treating patients as economically as possible, for as long as required. The provider value chain therefore begins with an analysis of the factors affecting the health of a given population and the preventative measures that can be taken to forestall illness. Thereafter, it progresses through the various stages of treatment from primary care to longterm care (see Figure 5). However, although these three value chains are different, they are also heavily interdependent. The value healthcare payers generate depends on the policies and practices of the providers used. The value providers generate depends on the revenues payers raise and the medicines Pharma makes. And the value Pharma generates depends on getting access to the patients whom providers serve and income from the payers who fund those providers. In short, none of the three parties can do its job properly without the others and, while they continue to clash, they are struggling to attain their respective goals. The quality of the care they collectively deliver is lower, and the cost higher, than it would otherwise be – and society can no longer afford such inefficiencies. So, if mankind is to ensure that it gets the healthcare it needs, the three parties must be much more closely aligned.
- Investing in the development of medicines the market wants to buy One of the many areas in which Pharma needs to work much more closely with healthcare payers and providers is in determining the sort of medicines the market actually wants to buy. We have identified seven stakeholders who each play a key role in deciding whether a medicine is innovative, using different definitions of innovation at different points in the product lifecycle (see sidebar, What is innovation?).33 The process starts with the researcher, who identifies the scientific potential of a particular molecule. It continues with the investor, who backs that belief with capital; the regulator, who approves the labelling claim; and the pharmaceutical company, which commits resources to the production and promotion of the treatment. Once a medicine has reached the market, it is the healthcare payer, provider and patient, respectively, who adjudicate on its innovativeness: the healthcare payer by paying a premium price for it; the provider by choosing it over other therapies; and the patient by taking it as instructed or even pressing for a prescription (see Figure 7).
- China’s overhaul of regulations in recent years brought a fast-track approval process and a potential local study waiver for products targeting rare diseases or diseases with substantial unmet needs. Since then, China has experienced exponential growth in new approvals and a signifcant reduction in drug lag, compared with the US FDA and EMA (fgure 14).186
- • Prescription drug sales expected to reach $1.18trn in 2024. Immuno-oncology line extensions significantly contribute to growth; emergence of novel technologies such as cell and gene therapy mark an inflection point in pharma’s evolution • Pfizer will be the leading prescription drug company in 2024 with sales of $51.2bn, ahead of Novartis and Roche • Keytruda set to be the top selling drug worldwide in 2024, as Humira loses top spot due to adalimumab biosimilar entry in the EU and expected USA biosimilar competition from 2023 • Should Bristol Myers-Squibb complete its intended acquisition of Celgene and forecast projections for a combined portfolio hold, the combined entity would be the 3rd largest pharmaceutical company based on 2024 prescription sales • Vertex’s triple combination, VX-659/VX-445 + Tezacaftor + Ivacaftor, is anticipated to be the most valuable project in the pharmaceutical industry pipeline with an NPV of close to $20bn • Oncology is the area with the largest proportion of clinical development spending with 40% of total pipeline expenditure, with close to 20% market share of pharma sales in 2024 • R&D spend is forecast to grow at a CAGR of 3.0% to 2024, lower than the CAGR of 4.2% between 2010 and 2018, partially driven by companies focusing on smaller indications with lower clinical development cost burden • Roche leads the way in biotechnology, with a forecasted $38.7bn of biologic sales in 2024, despite a decrease in biotech market share of -5.4% owing to the effect of biosimilars • Johnson & Johnson are forecast to narrowly overtake Roche to be the biggest spender on pharmaceutical R&D in 2024
- Pfizer returns to top spot for worldwide sales of prescription drugs in 2024. As the top three continue to battle it out, EvaluatePharma® finds that Pfizer has once again pushed ahead of Novartis and Roche for the Worldwide Prescription Drug Sales number one spot in 2024. Novartis is also due to jump up to the number two spot after exhibiting 2.3% CAGR between 2018-24 as opposed to Roche’s 0.8% CAGR. Bristol-Myers Squibb has fallen out of the top 10 largely due to loss of Opdivo market-share to Keytruda and being beaten to the mega-merger table by Takeda with its acquisition of Shire in January 2019. As a result, Takeda leaps up seven places in the ranking between 2018 and 2024 with an impressive 10.8% CAGR. Bristol-Myers Squibb is unlikely to be outside the top 10 for too long however, as on January 3rd, 2019, the company announced a $74bn acquisition of Celgene that is yet to complete. AstraZeneca has also shown impressive 7.7% CAGR, long promised by CEO Pascal Soriot, due to breakthroughs in the Chinese market and high sales of its oncology products Tagrisso and Lynparza, rather than M&A. Only Takeda and AstraZeneca are able to increase market share between 2018 and 2024. The Top 10 Pharma companies showed -6.6% market share growth overall, with Roche alone contributing -1.4% to that figure.
- Keytruda knocks Humira off the top spot; Revlimid falls out of top 3. A $1.5bn increase in sales for Humira ensured AbbVie’s blockbuster remained the top selling product worldwide in 2018. However, following a number of biosimilar launches in Europe and biosimilars set to hit the US in 2023, the 2024 EvaluatePharma® consensus forecast for Humira has decreased by $2.8bn compared to that given in last year’s report. This decrease, coupled with a strong year for Keytruda in terms of product sales, positive data from ongoing clinical trials and further FDA approvals, will allow Keytruda to pip Humira to the post and take the number one spot for 2024 forecasted sales. As a result of this, Keytruda is forecasted to widen the sales gap between its competitor Opdivo to over $5bn in 2024. Sitting just outside of the top 3 with predicted 2024 sales of $11.3bn, the checkpoint inhibitor Opdivo continues to have strong sales in the anti-neoplastic MAbs segment despite contrasting analyst views with regards to its trajectory as we move towards 2024. Falling out of the top 3 and down the rankings, worldwide sales of Revlimid are expected to fall with a CAGR of -3.2% between 2018 and 2024 to $8.1bn, with generic versions expected to hit the US market in 2022. Gilead’s Biktarvy continues to outshine all other HIV medications and climbs a place to sit in the top 10 this year, boasting an impressive CAGR of +34.4% going into 2024 and sales of $7.0bn.
- •• Spending on oncology medicines globally is expected to grow by over 50% to exceed $100Bn in 2018 driven by increases in cancer incidence of up to 31% by 2020, and rising rates of melanoma and kidney cancers.1 •• Absolute growth is expected to be $25-45Bn, compared to $17Bn in the prior five years. •• High numbers of global drug approvals and launches in 2012 and 2013 and a strong pipeline will drive higher growth in developed markets in the forecast period. •• Greater use of multi-targeted, or “stacked,” treatments that demonstrate greater survival benefit will also increase spending levels in developed markets. •• Biosimilars will play a greater role in cancer treatment in pharmerging markets but are expected to have limited impact in developed countries over the next five years.
- •• The U.S. market will see dramatic growth in 2014, due to the launch of innovative products, lower impact from patent expirations and price increases that are partially offset by rebates and discounts and are not reflected in the forecasts. •• The implementation of the Affordable Care Act will have a positive impact on demand for medicines during the first half of the forecast period due to expanded enrollment in state Medicaid programs and increased use of tax credits to purchase private health insurance. •• However, expanded coverage will increase budgetary pressure on payers, with drug spending being a popular target for cost containment. •• Biosimilars will target a limited number of originator molecules during the forecast period, and contribute to lower medicine spending for those medicines, while biologics’ spending will continue to grow faster than medicines overall, driven by innovation.
- •• In 2014, scheduled average price cuts of 5-6% were offset by simultaneous value-added tax (VAT) increases of nearly 3%, and market growth was boosted by stockpiling prior to the VAT implementation resulting in growth higher than a typical price-cut year. •• Innovative medicines will be a key driver of growth as manufacturers are insulated from biennial price cuts in return for new drug development as part of reforms implemented in 2010. •• Steep reductions in branded drug pricing postexpiry and intensifying pressure on generic prices are also intended to reduce spend. •• Generic utilization remains low by international standards, but is slowly increasing due to policies and financial incentives aimed at doubling generic usage by 2018. •• Price cuts will deliver substantial cost reduction but the market will still grow 1-4%. •• While the population as a whole will decline, the number of retirees —already accounting for a quarter of all patients in Japan —continues to increase and is expected to drive up demand for medicines.
- Drug spending concerns in emerging markets In emerging markets, public health care programs generally focus on the provision of free or heavily subsidized generic drugs. While subsidized access to innovative medicines is being pursued in a number of emerging markets, it is also linked to increased use of more sophisticated cost-control mechanisms (fgure 19).241
- •• Spending level increases are tied to recently expanded access, with 95% of the population now covered by public health insurance plans. •• Improvements to the healthcare infrastructure and community health services are expected under the current Five-Year Plan (2011-2015) and will further grow the market through 2018. •• Reform of the hospital sector will continue to impact prescribing, as cost-containment measures limit drug budgets to a fixed percentage of total budget and reduce profits obtained by hospitals for dispensing medicines. •• Policy changes in 2014 will bring more drugs under the remit of the National Development and Reform Commission, including those to treat serious diseases, exposing them to price ceilings and in-market price cuts that will continue to exert downward pressure on prices. •• While public institutions remain the main providers of hospital care, the growing number of private hospitals is expected to drive demand, providing shorter waiting times and better conditions: the number of private hospitals increased 15.9% in 2012 and policy aims are to double private capacity to 20% of national volume by 2015.
- •• Latin America has the highest proportion of growth from generics of any region; generics are the largest driver everywhere but North America. •• Increases in low-cost generics will continue to be seen in Asia, including India and Pakistan, as efforts to broaden access to basic health insurance is pursued. •• Locally manufactured generics will be the main beneficiaries of rising demand in Latin America, with local manufacturers increasing their share of the market. •• Innovative launches and price increases in North America keep generic growth more tempered than in other regions by offsetting genericization. •• Locally manufactured generics are a key source of affordable drugs in African markets, where domestic manufacturers often enjoy preferential treatment to encourage domestic production. •• Demand for generics has outpaced overall market growth rates in both Australia and New Zealand, while the sector has also benefited from a succession of major patent expiries.
- •• The emergence of new therapies for hepatitis C have brought that therapy area into the top 20 for both developed and pharmerging countries. •• Oncology continues to be the largest category in developed countries, and the largest specialty area in pharmerging countries. •• Leading classes in pharmerging markets are dominated by pain, antibiotics and hypertension, while in developed markets specialty categories such as oncology and autoimmune diseases are more prominent. •• Six of the top 20 classes in developed markets will face patent expiration in the next five years and therefore declining growth.
- Of course these top-level looks are interesting only up to a point. The following charts drill down to the broader indication level, to pinpoint areas of over- and underinvestment. These analyses plot the number of novel molecules in development against the number on the market, with the first taking a 30,000 foot view. Oncology, specifically solid tumours, is once again in a different league, though the numerous organs that cancer can affect make this a very big therapeutic area. It should be remembered that this chart does not take account of epidemiology. The attention that blood cancers have received is also apparent, and the ratio between pipeline and marketed assets is actually pretty similar to the solid tumour effort. Not so cardiovascular disease, a setting that is mostly comprised of hypertension drugs and cholesterol or other lipid lowers. The huge number of drugs on the market in this field points to the challenges in this space for new entrants, as developers of the anti-PCSK9 antibodies found. On the flip side, eye disorders have a big pipeline of novel mechanisms coming through, as do dermatoses, a group which includes psoriasis and eczema. These looks like fields which will only get more competitive.
- The final analysis here zooms into the bottom left hand corner of the above chart, to find the indications where few useful mechanisms have been found. Again, incidence is not factored in here, but this area of the chart does not only feature small disease areas. Hepatic disorders, for example, include Nash, a potentially huge area. Dementia, which afflicts millions and on which the industry has been working for decades with very little success, is here too. Stroke has seen a few more drugs reach the market but remains poorly served; still, this remains a field for the bravest of developers. But this analysis also throws up autoimmune disorders, a rare disease space that has seen an explosion of interest in recent years. This is where Alexion has found huge success with Soliris, and therapies for other complementmediated conditions are chasing that same model. A lot of the smart money is still fishing for opportunities in this area of the chart: disease areas with inadequate standards of care and where big steps forward can be made, preferably delivered by a novel technology or mechanism. That many of these opportunities are rare conditions is all the better, the thinking goes, as this often means augmented regulatory pathways and greater pricing power. But pushback against the high prices that industry wants to charge for innovation is only growing stronger. This fact must not be forgotten as investors or acquirers seek out and attempt to put a value on the next big thing.
- Vaccines are not considered a particularly exciting area of biopharma but they remain a big growth area, albeit largely consolidated into the hands of three companies: Glaxosmithkline, Merck & Co and Sanofi. Remarkably, a rare disease now stands as a sector growth driver, though cystic fibrosis is dominated by one company, Vertex Pharmaceuticals, which is capturing all the sales growth here. Another rare disease, the childhood wasting condition spinal muscular atrophy, is also just outside this analysis with an anticipated $900m in new sales next year, the majority of which come from Novartis’s gene therapy Zolgensma. It is the huge cost of these products that places them in this analysis. Vertex’s new cystic fibrosis triple Trikafta was priced at $310,000 a year, while Zolgensma, a “one-and-done” treatment, comes in at just over $2m, making it the most expensive single payment drug in the world. It is notable how few brakes exist next year, to the extent that biopharma’s total prescription sales are expected to grow by $50bn next year, according to EvaluatePharma. This will not escape the notice of those attempting to keep a lid on drug prices.
- Oncology stands out once again: The anti-PD-(L)1 players continue to throw huge amounts of money at these drugs, to support approvals in new indications and gain a competitive edge. Once again, Keytruda is a league apart, though the billions that Merck is estimated to have spent on the drug are being returned in commercial success. Arguably, its smaller rivals in this space – Astrazeneca and Roche, for example – have yet to justify this level of spend. Diabetes projects that require huge cardiovascular outcome studies will inevitably be expensive programmes to run, hence Novo Nordisk featuring here. Eli Lilly and Sanofi’s work in this disease area features in the look at expensive R&D programmes, above; Lilly has yet to start an outcome study for tirzepatide, a move that will require the company to be supremely confident in this product’s potential. The cost of the Jak inhibitor programmes also stand out: the breadth of autoimmune conditions in which they are being tested, from rheumatoid arthritis to Crohn’s disease and ulcerative colitis, means these are expensive drugs to bring to market. Gilead and partner Galapagos are on track to launch the latest asset in this field next year; should filgotinib win approval, it is expected to quickly make a big impact, and its launch will be one of the most closely tracked next year.
- Forecast worldwide R&D CAGR lower in 2018 through 2024 and proportion of R&D spend to pharmaceutical revenue to reduce. Worldwide pharmaceutical R&D spend totalled $179bn in 2018 representing an increase of +6.5% on the previous year. Going forward, R&D spend is forecast to grow at a CAGR of 3.0% between 2018 and 2024. This is comparable with a CAGR of 4.2% between 2010 and 2018, with an average proportion of R&D spend to pharmaceutical revenue for the same period of 19.8%, compared to 20.2% for 2018-24. Despite an initial peak in 2019, the proportion of R&D spend to pharmaceutical revenue falls quickly in subsequent years. This reduction in R&D spend could be an indication that companies are investing now to improve their future R&D efficiencies. Use of real world data combined with machine learning techniques in addition to collaborative R&D programs, are a few of the initiatives being employed by companies to help them stay one step ahead in an era demanding more patient targeted drug development. Similarly, this reduction in R&D spend could be an indication that less revenue is being directed towards replenishing pipelines.
- One vital question remains, however; namely, what sort of model should companies use to effect these changes? We believe that two principal models– federated and fully diversified – will emerge. We have also identified two variants of the federated model. In the virtual version, a company outsources most or all of its activities; in the venture version, it manages a portfolio of investments (see Figure 3). The two models are not mutually exclusive. A fully diversified company might choose to use a federated model for certain aspects of its business, and vice versa. But we think that the federated model will ultimately dominate, primarily because it is quicker and more economical to implement.
- The huge takeovers of Celgene and Allergan in 2019 and Shire the year before has produced some record-breaking M&A years for the biopharma sector in terms of the amount of capital deployed. On deal volume the story has been slightly different. An uptick in M&A is typically predicted at the beginning of any new year, though the graph above suggests that this Christmas wish – on the part of that bankers and advisers at least – has failed to materialise in recent years. The volume of acquisitions happening has stayed stubbornly flat since 2016. Again, this analysis only concerns the deal making activity of drug developers – it excludes sectors like medtech and diagnostics, for example. It does however encompass all forms of acquisition, such as buyouts of business units or single product purchases. The availability of capital, both public and private, has kept options open for young companies in recent years, so it is not surprising that the deal volumes have stayed flat. The state of the equity markets next year will help determine whether any power shifts back towards the buyers. Some believe that the cash-rich bigger beasts of the sector, several of which are under pressure to find new sources of growth, will be forced to act next year. Gilead is frequently named as a group that needs to buy new growth.