Is the pharma industry weathering the
'perfect storm'?

Mark Larsen, President of Europe/Middle East/Africa for Wyeth Pharmaceuticals, described the challenges facing the pharmaceutical industry as being at the centre of the "perfect storm" In his analogy he describes it as "a once in a century convergence of various factors/elements which create an unprecedented storm of change," and posed the question - who will be the winners and losers?

The 9th Economist Annual Pharmaceutical Conference, held in London on February 12-13 2003, discussed the current challenges facing the pharma industry, and many experts gave their views on how it could become fitter in the midst of this storm.

Serious issues include:

• the imminent patent expiry of many blockbusters
• poor R&D productivity
• not enough new molecular entities (NMEs/NASs) coming to market...
• ... and even fewer with blockbuster potential
• uncertainty regarding the US market's ability to sustain double digit growth
• increasing cost cutting pressures in Europe encouraging generics and parallel imports
• the enlargement of the EU in 2004
• a poor image with the consumer

Licensing the way ahead?

Karin Dorrepaal, Vice President of consultants Booz Allen Hamilton, speaking at the Economist conference on 'Reinventing the pharma business model: the implications of in-licensing economics', believes that an important area to focus on is licensing activity.

Licensing in has already brought massive returns for pharmaceutical companies, and licensed-in drugs are, according to Dorrepaal's research, just as successful as internally-developed ones in terms of gaining blockbuster status. But, she stressed, most deals are done at a late phase of development, essentially to fill pipeline gaps due to failures of companies' own late-stage products. This is not leveraging the full potential of licensing opportunities.

Better utilisation of the early- to mid-stage development drug pool, and better integration of licensed-in products into the companies' own R&D strategy, will maximise potential, in her view. For instance, Dorrepaal pointed out that most licensed-in drugs are not given the full backing of the R&D teams in the company, and less money is usually available. The area of licensed-in versus home-produced drugs should be looked at in terms of what the company wants to achieve - not where the drug has come from.

New 20-year low for NASs

Many speakers at the Economist conference discussed the problems facing the industry regarding fewer new active substances (NASs) reaching the market - and even fewer achieving blockbuster status.

IMS' annual review of NASs bears this out, showing a new 20-year low of just 36 NASs in 2002, epitomising the woes of the industry - not enough new blood to counter the moribund blockbusters due to wither in the face of patent expiry.

NASs by year of launch

Once again the US topped the charts in terms of country of first launch, notching up 58% of world launches. Japan outstripped Europe to become the second most popular country with 22%, and Europe accounted for just 14%. By the end of 2002, only 10 NASs had reached multiple markets. As might be expected, all the drugs launched in Japan as their first market remained as sole launches in Japan.

Which were the most successful companies in 2002 for launches of NASs? In terms of numbers, Merck & Co topped the list with three, one of which (Zetia) was jointly marketed through the Merck/Schering-Plough joint venture. If you consider the Pfizer/Pharmacia merger as a done deed, then together these two companies also mustered three NASs: Pfizer launched one and Pharmacia contributed two. Third place was shared by five companies all contributing two NASs each - Novartis, Ortho (Johnson & Johnson), Eli Lilly, Ono and Meiji Seika.

Pharmacia appeared to be the most successful at launching its NASs in multiple markets, as its coxib Dynastat (parecoxib) reached 13 world markets by year-end 2002. Lundbeck was also successful, being the only company to market an NAS, Cipralex (escitalopram), in many European countries and the US; Forest markets escitalopram as Lexapro in the US.

Development times vary...

There was a wide range of development times when measured from priority product patent application to first world launch. Of the 33 evaluable NASs, the shortest development time was five years and six months, while the longest was in excess of 23 years.

In line with experts' predictions it is the biotechnology NASs that are at the lower end of the time span. The four biotech NASs took on average eight years from priority patent application to launch.

Years from priority patent application to NAS launch

Source: IMS LifeCycle

Perhaps a surprising result was the even shorter time shown by the three second-generation coxibs, taking just five years and six months in the case of Merck & Co's Arcoxia (etoricoxib) to traverse the research and development minefield. On average coxibs took six years to develop, with Pharmacia's Bextra (valdecoxib) taking seven years and three months.

The three quinolone antibiotics took 14-15 years, as did one of the two penem antibiotics, while the other took ten years. Meiji Seika launched its quinolone, Sword (prulifloxacin), in Japan in December 2002, Mitsubishi Pharma and Toyama launched pazufloxacin in Japan in September 2002 under the brands Pazucross and Pasil, respectively, and licensee Choong Wae introduced Q-Roxin (balofloxacin) in South Korea in September; pazufloxacin was licensed from Chugai, now 50.1% owned by Roche

...as does licensing stage

There is also a very wide variation in licensing patterns for the NASs. Some were developed and marketed by the originator company, which having multinational reach did not need to sign any licensing deals. At the other extreme, some drugs were the subject of early-stage licensing or co-development deals, though the majority were at the Phase III or filing stages.

Development stage at licensing

Source : IMS LifeCycle

At a recent IMS Licensing Forum, Guy Bate, Senior Consultant at IMS, said in his analysis of the licensing arena: "The market has seen a modest increase in the number of deals across the entire development pipeline over the last five years. However, what is most interesting is the fact that later stage licensing deals have emerged as the main value-drivers, with dollar value growth outperforming that of early-stage deals. In the mid-1990s, discovery and preclinical deals held a greater slice of the pie than they do today. Overall, companies are now showing a greater tendency to hold onto their pipeline compounds in order to realise greater deal value from them once they have matured."