From blockbuster to nichebuster - Niche therapies drive future drugs growth and incentivize R&D investment over sales spending

CHAPTER 1 EXECUTIVE SUMMARY 4
Introduction 4
Scope and coverage of this report 4
Key findings from this report 5
CHAPTER 2 IS THE CHANGING R&D LANDSCAPE HASTENING THE END OF THE BLOCKBUSTER? 10
The R&D landscape is changing 10
Does a blockbuster-driven growth strategy stifle innovation? 11
Return on R&D investment plummets while drug sales soar 11
But is R&D productivity really falling? 12
Big Pharma’s R&D spending clout can shape the industry’s R&D focus 13
Why has the drug industry relied on blockbuster growth strategies? 14
Investors require double-digit growth 15
Blockbuster revenues are needed to help fund soaring drug development costs 16
The blockbuster growth model has weakened 18
Blockbuster-driven companies are open to significant risk 18
The market disincentivizes me-too development 19
Blockbusters face significant generic threat 19
Blockbusters have a tougher time when they reach the market 20
Is there a relationship between company size and R&D productivity? 20
There is still a role for blockbusters, but only as one of a drugs company’s growth strategies 21
CHAPTER 3 MARKET CHARACTERISTICS AND THE REGULATORY ENVIRONMENT IMPACT THE SUCCESS OF THE NICHEBUSTER 23
Approval pathways are accelerated for innovative therapies 23
The US provides a fertile market for innovator drugs 24
The US regulatory environment supports innovation 24
Effective use of the ’Orphan Drug Act’ drives nichebuster development 25
The oncology market is the archetypal niche market target 26
There are a range of strategies that are important in gaining a foothold in the selected niche market 27
CHAPTER 4 NICHEBUSTERS CHANGE DRUG MARKET DYNAMICS 28
Drugs companies turn to licensing to capture innovation and avoid stagnation 28
Dependence on blockbusters falls 28
Drugs companies turn to licensing, R&D collaborations and small-scale M&A to gain access to external sources of innovative technology and drugs 29
Dependence on licensing to drive future sales is set to rise 30
Targeting niche markets also encourages greater small-scale M&A activity 31
A study of recent collaborations shows that big Pharma is using early-stage R&D collaborations for capturing innovation 31
A greater number of drugs need to be approved to support revenue generation: the pressure on regulatory bodies grows 33
Nichebusters help to drive the emergence of targeted therapies 33
A burst of targets and the emergence of technologies that accelerate lead drug development are driving targeted therapies 34
Nichebuster development impacts the dominance of specific therapy areas 34
Targeted therapies have fewer side effects than traditional therapies 36
The use of diagnostics drives clearer market segmentation, which has a number of advantages 37
Personalized medicine requires greater health informatics 38
Business model evolution is required to capitalize on the nichebuster model 38
Different sales and marketing strategies are required for nichebusters: prioritizing cost-effective targeting of specialist physicians is needed for successful niche sales and marketing 38
The switch towards making marketing strategies customer-focused will help niche drug marketing 39
Fully-integrated pharma companies move into niche targeting: a case study on Baxter’s strategy to penetrate the haemophilia market 39
Companies developing nichebusters also need to modify R&D strategies 40
Big Pharma is adopting a range of strategies to harness innovation to support the transition towards the nichebuster model 42
CHAPTER 5 APPENDIX : BIBLIOGRAPHY 44
References 44
Publications and online articles 44
Datamonitor resources 46
Conference information 46
List of Figures
Figure 1: The bias towards a blockbuster growth strategy contributes to the inverse correlation between R&D productivity and sales 11
Figure 2: The number of priority approvals has risen consistently over the last 40 years 13
Figure 3: Merck has gone from needing no blockbusters in 1991 to maintain double-digit sales growth to needing the equivalent of more than two by 2005 15
Figure 4: A variety of different studies have shown that the cost of R&D has increased over time 17
Figure 5: There is an inverse correlation between company size (defined by sales) and R&D productivity 21
Figure 6: Early-stage collaboration type split by therapeutic focus, October 2002 - September 2004 26
Figure 7: Dependence on blockbusters generated by top-5 drugs companies is set to fall significantly from 2004-2010 29
Figure 8: Discovery-stage licensing by both top-5 and top-55 companies is set to generate a greater percentage of forecast sales than later-stage licensing 30
Figure 9: Early-stage collaboration deals are focused on lead product and/or target identification and/or validation, October 2002-September 2004 32
Figure 10: Therapy areas dominated by targeted therapies are the leading market growth drivers 35
Figure 11: Immune disorders and inflammation dominate R&D focus, based on a snapshot of the current patent situation 36
Figure 12: Advate successfully becomes market leader in France 40
Figure 13: GSKs CEDD model is designed to mimic smaller-scale biotech companies 41
Figure 14: Roche has a strong ’Networked Pharma’ model 42