THE EMPTY PIPELINE

So what is the problem? The industry has over 300 products in Phase 3, another 120 or so in pre-registration. I haven’t looked at the historical record, but this many products in the late stages of development cannot be bad news for the industry. I suspect that the problem most people are talking about is, of course, the pipeline of the major companies – the ones with all the current business, the engine that drives the industry (and all the industries that provide support services).

A closer look at the top 10 is a little worrisome; the top 10 represent over 40% of industry sales but they only have an interest in about 30% of the pre-registration products, and only about 30% of the Phase 3 products. Now I’m not about to discuss a complex and detailed analysis of all the forecasts for all of those compounds, but I think it is possible to explore some possible causes and likely effects that come from these top-line numbers.

By definition, if 30% of pre-registration products are with the top 10, then 70% are being developed by companies outside the top 10. Closer examination also shows that only about a third of the pre-registration products involve only one company. This is no surprise – we all know that there has been a huge increase in licensing deals in recent times, but you don’t necessarily expect to see small companies going it alone these days. I think this is actually not a surprise.

All small companies have to make a strategic choice regarding their development strategy, and some are clearly attempting to become the next Amgen (namely, a company that builds itself into a major force by developing its own products, supported by sales and marketing agreements in the early days if necessary). So, for example, we see Sepracor moving out of the licensing deals that were the foundation of company strategy and into the competitive world of COPD, first with short-acting beta agonist Xopenex, and now with long-acting beta-agonist arformoterol. With revenues growing at an incredible rate and further products in the pipeline, Sepracor is a perfect example of the new strength in the pharmaceutical industry – small companies growing on the back of a highly focused and well managed product development and marketing strategy.

Is Sepracor unique? Clearly not. Multiple companies are following growth strategies that do not rely on the big-pharma companies. In fact, I am sure that many of these up-and-coming companies are actively avoiding relationships with big Pharma as the latter are seen as behemoths in which you have to have a $2bn+ product in order to get any attention at all. In some respects the same is true within the big Pharma companies. As a colleague said to me recently “How do you move the needle to achieve double-digit growth when you’re losing 15% of sales to generics next year and sales are already over $25bn?” This is a tough challenge that I do not think big Pharma can meet with the current model (some might say that any model makes this an impossible task).

I don’t subscribe to the “end of the world” model espoused by some, but I certainly think that big Pharma (or most of them) have to rethink their structure and approach before they are going to be able to be able to effectively meet the multi-faceted challenges of the market as it evolves.