Pharma R&D Efficiency: Mid-Sized Companies Excel

Datamonitor Healthcare's recent review of R&D efficiency using new product launch success rates as a proxy shows that Mid Pharma companies outperform Big Pharma and Japan Pharma firms, thanks to multiple blockbuster drugs. The first in a two-part series evaluating R&D productivity.

Development of innovative pharmaceuticals is a time-consuming and costly process. Budget cuts, R&D facility closures as a result of industry consolidation, pressure from investors to deliver returns and other economic conditions have put a strain on the ability to fund the development of new drugs. There is also increased pressure to develop products in the most efficient way possible, especially as the more mature brands in a company's portfolio are susceptible to generic competition and present the reality of impending decreased sales. About $115 billion in total US brand sales is expected to face generic competition from 2014 to 2018, not including the additional loss of sales to biosimilars, according to the Pharmaceutical Research and Manufacturers of America. More than half of those sales ($60 billion) subject to generics are from the portfolios of the Big Pharma, Mid Pharma and Japan Pharma peer sets, groups of leading pharmaceutical companies globally. (See sidebar, Pharma R&D Efficiency: Big, Mid and Japan Pharma Peer Sets.) Compounding that, the pharmaceutical industry traditionally has high failure rates, with only about one in every 10 drugs (across all indications) beginning Phase I likely to be approved by the US Food and Drug Administration. (Also see "Clinical Trial Success Rates Still Dismal, But Certain Sectors Outperform" - In Vivo, 15 Jun, 2016.)

Big Pharma, or those defined by Informa's Datamonitor Healthcare as having $10 billion or more in annual revenue, excluding generics, biotechs or leading Japanese pharmacos, spend roughly seven times as much in research and development (R&D) annually as Mid Pharma or Japan Pharma firms, which are comparatively smaller companies in terms of revenue – Mid Pharma is defined as those with annual revenues of less than $10 billion (and that are not generics, biotech or Japan Pharma) and Japan Pharma includes leading pharmaceutical companies headquartered in Japan. In terms of drug approval numbers, Big Pharma has also been the most productive; it achieved one-to-two times more US drug approvals annually during 2011 to 2015 than the Mid Pharma and Japan Pharma peer sets combined. The US Food and Drug Administration (FDA) approved 207 Big Pharma products during the five-year period, compared with 79 from Mid Pharma and 64 from Japan Pharma, according to Informa's Biomedtracker and Pharmaprojects. The Big Pharma group averaged 41 drug approvals per year, more than double Mid Pharma's 16 approvals and Japan Pharma's 13 approvals (drugs may be counted in more than one peer set total if there were partners in each group). But while Big Pharma is outspending in R&D and has been more productive recently in terms of US regulatory approvals, when it comes to research and development (R&D) efficiency, the Mid Pharma group outperforms, thanks to multiple blockbuster drugs.

As a proxy to determine how successful new drug launches have been, average per-drug aggregated sales were reviewed based on the drug's performance for the first seven years on the market. The products included in the sample were those approved by the FDA during 2011 to 2015, and out of that group, those for which reported and forecasted sales were available in Datamonitor Healthcare's PharmaVitae database. Sales included worldwide reported and forecasted figures. Sales of some drugs are so low they are not reported by the companies; therefore, the seven-year aggregates for some products are not complete, and sales for some drugs were not available at all. In addition, the seven-year aggregate sales figures include mostly forecasted sales, as opposed to actual sales. For that reason, actual sales may not be as high if the forecasts are not met, or may exceed estimates in some cases. Despite the limitations, the analysis provides some insights into the performance of new product launches. As a group, all three peer sets together saw, on average, $4 billion in aggregate seven-years' worth of sales per drug for those launched between 2011 and 2015. (See Exhibit 1.) The Mid Pharma group outperformed the other peer sets with an average of $6 billion, supported especially by drugs introduced by Gilead and Biogen.

Exhibit 1

Mid Pharma Peer Set Excels At New Product Launches: Average Aggregated Per-Drug Sales For First Seven Years On The Market, By Peer Set, 2011–15

Note: Seven-year aggregate sales include historical and forecasted sales; covers drugs approved in the US for the first time between 2011 and 2015, and those with sales information available from Datamonitor Healthcare. The sales data may include sales outside of the US. If the lead and partner companies cross more than one peer group (or within the same peer group), the drug's sales may be counted in more than one peer group's total, as determined by Datamonitor Healthcare.

Source: Datamonitor Healthcare | Pharma Intelligence, 2016

Big Pharma’s R&D Efficiency

New drug launches by Big Pharma companies over the last five years had an average of $4 billion in aggregate first seven-year sales per product. On an annual basis, one minor outlier was 2012, which yielded an average of $2 billion. In comparison with the other four years in the time period, 2012 featured fewer drugs aggregating over $1 billion in seven-year sales, as well as more niche products, which drove down the average. On the opposite end, 2015's average of $5 billion was the highest among the five years in all of the peer sets. Many drugs that launched that year and are forecasted to achieve high sales increased the average, and these included Ibrance (palbociclib; Pfizer Inc.), Entresto (valsartan/sacubitril; Novartis AG), Toujeo (insulin glargine U300; Sanofi) and Praluent (alirocumab; Sanofi/Regeneron Pharmaceuticals Inc.). Each product is expected to have greater than $10 billion in seven-year aggregate sales during 2015 to 2021.

The Big Pharma peer set averaged one to two drug launches per company per year during the five years reviewed (drug launches where sales data and forecasts were available). While the number of drug launches per year did not vary much from company to company, there were differences in the firms' average per-drug aggregated first seven-year sales. (See Exhibit 2.) Bristol-Myers Squibb Co., for example, had the highest five-year average of $7 billion in per-drug aggregated seven-year sales from six products, including existing top-sellers Yervoy (ipilimumab), Eliquis (apixaban) and Opdivo (nivolumab). Bristol-Myers Squibb had better success than Merck & Co. Inc., which had a comparable set of six drugs. Merck had about the same number of multibillion-dollar drugs in terms of seven-year aggregated sales – Victrelis (boceprevir), Keytruda (pembrolizumab) and Bridion (sugammadex) – but only averaged $2 billion per product. Johnson & Johnson's totals, on the other hand, consisted of 11 products, most of which have over $1 billion in seven-year aggregated sales. Its average per drug is $4 billion, in between Bristol-Myers Squibb’s and Merck & Co's figures. Pfizer's six approved products with available sales data yielded a seven-year average of $5 billion per drug, second behind Bristol-Myers Squibb. Pfizer's figure was heavily weighted toward Ibrance, which was approved in 2015, but the average also included older drugs Xalkori (crizotinib) and Inlyta (axitinib).

Exhibit 2

Big Pharma’s Five-Year Averages Of Aggregated Seven-Year Sales Of New Product Launches Per Drug, By Company, 2011–15

Note: Seven-year aggregate sales include historical and forecasted sales; covers drugs approved in the US for the first time between 2011 and 2015, and those with sales information available from Datamonitor Healthcare. The sales data may include sales outside of the US.

Source: Datamonitor Healthcare | Pharma Intelligence, 2016

Mid Pharma’s R&D Efficiency

The Mid Pharma peer set generally had higher seven-year aggregate sales per drug annually than the Big Pharma group, but with more variation during the five years, ranging from a low of $3 billion in 2011 to a high of $9 billion in 2014. The 2014 peak was mainly due to Gilead Sciences Inc.'s Harvoni (sofosbuvir/ledipasvir), which is forecasted to have $62 billion in sales for its first seven years on the market. The 2014 figure was also boosted by Celgene Corp.'s Otezla (apremilast) and three big drugs from Biogen Inc.: Alprolix (eftrenonacog alfa), Eloctate (efraloctocog alfa) and Plegridy (peginterferon beta-1a).

Across all five years, Gilead secured the highest average seven-year aggregated sales per drug in the Mid Pharma group at $14 billion. (See Exhibit 3.) In addition to Harvoni, the company had several other leading products, including Sovaldi (sofosbuvir). Biogen's trio of products (Alprolix, Eloctate and Plegridy), all of which launched in 2014, and its top-seller Tecfidera (dimethyl fumarate), introduced in 2013, contributed to the company accounting for the second-highest average of $9 billion.

The Mid Pharma peer set's average over the five-year period of new product launches was $6 billion per drug, $2 billion higher than Big Pharma’s average. The increased average Mid Pharma figures were mainly due to several more successful blockbusters in the sample, led by Gilead's Sovaldi and Harvoni, and Biogen's Tecfidera. The seven-year aggregates for Sovaldi and Tecfidera are $26 billion and $25 billion, respectively, whereas Harvoni's is $62 billion. If these three outliers are excluded, Mid Pharma's average seven-year aggregate sales per drug drops to $3 billion, which is lower than the Big Pharma peer set's $4 billion average. It also significantly reduces Gilead’s and Biogen's per-drug averages to $5 billion and $3 billion, respectively.

Exhibit 3

Mid Pharma’s Five-Year Averages Of Aggregated Seven-Year Sales Of New Product Launches Per Drug, By Company, 2011–15

Note: Seven-year aggregate sales include historical and forecasted sales; covers drugs approved in the US for the first time between 2011 and 2015, and those with sales information available from Datamonitor Healthcare. The sales data may include sales outside of the US. The chart excludes CSL, Merck KGAA and UCB because either sales data were not available or the drug's sales for those companies were counted in the partner's totals, as determined by Datamonitor Healthcare.

Source: Datamonitor Healthcare | Pharma Intelligence, 2016

Japan Pharma’s R&D Efficiency

Annual seven-year average aggregates for the Japan Pharma peer set were generally lower than for the other peer sets, suggesting that this group had the least successful launches. The overall five-year average of new product launches for the Japan Pharma group was the lowest of the peer sets at $2 billion. Within the peer set, Astellas Pharma Inc.achieved the highest five-year average in new product launch sales at $4 billion. (See Exhibit 4.) Among the company's seven products that launched between 2011 and 2015 (for which sales data were available) were Xtandi (enzalutamide), Astagraf XL (tacrolimus) and Myrbetriq (mirabegron). Takeda Pharmaceutical Co. Ltd. also surpassed the Japan Pharma total average, just slightly, at over $2 billion. Its top-selling drugs included Nesina (alogliptin) and Entyvio (vedolizumab).

Exhibit 4

Japan Pharma’s Five-Year Averages Of Aggregated Seven-Year Sales Of New Product Launches Per Drug, By Company, 2011–15

Note: Seven-year aggregate sales include historical and forecasted sales; covers drugs approved in the US for the first time between 2011 and 2015, and those with sales information available from Datamonitor Healthcare. The sales data may include sales outside of the US. The chart excludes Mitsubishi Tanabe because either sales data were not available or the drug's sales were counted in the partner's totals, as determined by Datamonitor Healthcare.

Source: Datamonitor Healthcare | Pharma Intelligence, 2016

Editor's note: This article is excerpted from R&D Trends 2016: Mid Pharma Peer Set Excels At R&D Productivity, published in August 2016 by Informa's Datamonitor Healthcare.