How oncology, vaccines and OTC will look after pharma’s game of musical chairs

Analysis

The unusual switcheroo pulled by GlaxoSmithKline and Novartis today will cause enormous changes to the landscape in the key areas of oncology and vaccines, as well as in the consumer health sector (Glaxo-Novartis deals show swaps not mergers are the new normal, April 22, 2014).

A look at EvaluatePharma’s data on company rankings gives an insight into the rationale for these moves. Novartis will forestall a predicted drop from second place in the oncology rankings last year to fourth place in 2018, and GlaxoSmithKline, currently the world leader in vaccine sales, could retain the crown it is forecast to lose to Sanofi, principally through the addition of Novartis’s newly approved meningitis vaccine Bexsero (see tables).

Total prescription & OTC oncology sales
  Sales ($m)   Market rank
  2013 2018 CAGR 2013 2018
Roche 25,026 32,921 +6% 1 1
Celgene 6,359 12,206 +14% 3 2
Bristol-Myers Squibb 3,279 9,407 +23% 5 3
Novartis 7,873 8,251 +1% 2 4
Johnson & Johnson 3,719 7,558 +15% 4 5
Pfizer 3,049 6,616 +17% 7 6
Astellas Pharma 681 4,314 +45% 17 7
AstraZeneca 3,193 4,253 +6% 6 8
GlaxoSmithKline 1,540 3,525 +18% 11 9
Eli Lilly 2,895 3,470 +4% 8 10
     Total market 72,767 129,848 +12%    

At $14.5bn and $5.25bn respectively, Novartis’s purchase of GlaxoSmithKline’s marketed cancer assets and the transfer of most of Novartis’s vaccine business in the opposite direction are nowhere near as big as the rumoured Pfizer-AstraZeneca tie-up or the deal that Valeant is trying to force onto Allergan (Pfizer has done it before, but an AstraZeneca bid would be a big surprise, April 22, 2014). The swap is noteworthy, though, in that this sort of arrangement is a new tactic in big pharma – and it is also important considering the seismic effects the move will have on the oncology and vaccine sectors.

On the oncology side the addition of Glaxo’s future blockbuster Votrient, among others, adds a predicted $3.5bn to Novartis’s 2018 cancer drug sales. This ought to enable it to leapfrog Bristol-Myers Squibb to take the third place ranking among oncology companies.

It may even find itself within spitting distance of second-placed Celgene. It will get no further; even though Roche’s share of the worldwide oncology market is forecast to shrink marginally in the coming years, its lead remains unassailable.

GSK top 5 oncology products
Rank Product Pharmacology class Annual sales
      2013 2018
1 Votrient Multi-kinase inhibitor 518 1,161
2 Mekinist MEK inhibitor 16 641
3 Tafinlar B-Raf kinase inhibitor 25 455
4 Arzerra Anti-CD20 MAb 117 356
5 Tykerb EGFr & HER2 (ErbB-2) dual kinase inhibitor 324 346
    Total 1,540 3,525
Novartis top 5 oncology products
Rank Product Pharmacology class Annual sales
      2013 2018
1 Afinitor Mammalian target of rapamycin (mTOR) inhibitor 1,309 3,126
2 Tasigna BCR-ABL inhibitor 1,266 2,378
3 Gleevec Tyrosine kinase inhibitor 4,693 974
4 Jakavi Janus kinase (JAK)-1/2 inhibitor 163 520
5 Signifor Somatostatin analogue 31 350
    Total 7,873 8,251

The situation is reversed in the vaccines field, with Glaxo acquiring most of Novartis’s vaccines business, which is set to rake in $2bn in 2018. However, the deal does not include flu vaccines, meaning that Novartis will keep assets including Celtura, Fluvirin and Flucelvax, which are expected to sell $367m, $359m and $153m respectively in 2018.

Total prescription & OTC vaccine sales
  Sales ($m)   Market rank
  2013 2018 CAGR 2013 2018
Sanofi 4,936 7,275 +8% 3 1
Merck & Co 5,184 7,122 +7% 2 2
GlaxoSmithKline 5,351 6,616 +4% 1 3
Pfizer 3,974 6,337 +10% 4 4
Novartis 1,416 2,063 +8% 5 5
Total market 25,670 36,173 +7%    

Barring any other acquisitions on this sort of scale, the UK company could elbow Sanofi out of the way to reach the top of the vaccines tree in 2018. In any case, it is sure to climb higher than the third place analysts currently expect it to hold. The vaccine arena is already very consolidated into the top four players - Sanofi Pasteur MSD, the joint venture between Sanofi and Merck in Europe, means these two companies effectively hold a tighter grip on the space than this table suggests.

Novartis at number was five was clearly sub scale in this space. Just behind these companies sits Johnson & Johnson, which bought Crucell a few years ago to boost its vaccines know-how, but remains a very small player. Considering that the top four players now control more than 80% of the market, anti-trust concerns are likely to prevent any further substantial consolidation.

GSK top 5 vaccine products
Rank Product Pharmacology class Annual sales
      2013 2018
1 Pediarix DTP, hepatitis B & polio vaccine 1,349 1,651
2 Hepatitis Vaccine Franchise Hepatitis A & B vaccine 984 1,065
3 Rotarix Rotavirus vaccine 587 860
4 Synflorix Pneumococcal vaccine 634 794
5 Boostrix DTP vaccine 451 567
    Total 5,351 6,616
Novartis top 5 vaccine products (excluding influenza vaccines)
Rank Product Pharmacology class Annual sales
      2013 2018
1 Bexsero Meningococcal B vaccine 28 631
2 Menveo Meningococcal A, C, W-135 & Y vaccine 303 558
3 Quinvaxem DTP, hepatitis B & Hib vaccine 140 140
4 Menjugate Meningococcal C vaccine 53 53
5 Ixiaro Japanese encephalitis vaccine 25 27
    Total 1,416 2,063

The deal in the consumer health space is different again, with the two companies forming a joint venture in a similar manner to the Viiv initiative Glaxo formed with Pfizer in 2009, into which it poured its HIV programmes.

This new company, 63.5% controlled by Glaxo, will become the second largest consumer health venture by 2018 sales, the data show. The baby powder-fuelled behemoth that is Johnson & Johnson’s consumer unit will remain out in front with nearly $16bn in 2018 sales, compared with around $13.5bn for the newly-created GlaxoVartis or whatever it may be named. 

Glaxo has been going through a shake up of its consumer unit - it sold Lucozade and Ribena to Suntory for $2.1bn - but it has long rejected calls to sell the whole division, pointing to its rich cash generation. The deal with Novartis shows that scale remains important in this business, particularly in fast-growing, emerging markets.

Total consumer healthcare sales
  Sales ($m)  
  2013 2018 CAGR
Johnson & Johnson 14,697 15,843 +2%
Abbott Laboratories 6,471 9,812 +9%
GlaxoSmithKline 8,231 9,422 +3%
Bayer 5,186 6,693 +5%
Sanofi 3,991 5,388 +6%
Reckitt Benckiser 3,796 5,192 +6%
Pfizer 3,342 4,346 +5%
Novartis 3,073 3,989 +5%
Perrigo Company 2,832 3,738 +6%
Otsuka Holdings 2,831 2,957 +1%

The various Novartis-Glaxo deals are not enormous in terms of dollar value, but they will exert meaningful influence on the three sectors they affect. These deals are unusual, but with megamergers apparently off the table, they may in future years come to be less of an oddity. It is not inconceivable that these sectors will undergo similar ructions before too long. 

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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