The pharma industry as a whole might be scaling back investment in R&D, but the biggest spenders are not all cutting down. EvaluatePharma’s World Preview 2013 reveals that Novartis is projected to invest the most in drug research in 2018, with a huge $10.3bn outlay, followed by Roche with a $9.4bn budget – both boosting spending by 3% a year.
However, data on the top 20 spenders also shows that, mirroring the wider market, R&D investment as a proportion of drug sales will dip over the next five years (Selling more, spending less – the sunny outlook for the pharma industry, June 24, 2013). With the report also revealing a decline in the cost per NME for the second year running, this is unlikely to be viewed as a bad thing (see tables).
|Pharmaceutical R&D spend (2012/18): Top 20 companies & total market|
|Pharma R&D ($bn)||R&D as % of Rx sales|
|3||Merck & Co||7.9||7.9||+0%||19.2%||19.8%|
|7||Johnson & Johnson||5.4||6.2||+2%||22.8%||23.7%|
|Total Top 20||86.1||95.5||+1.7%||19.2%||18.3%|
That a list of the biggest R&D spenders is a roll call of big pharma names is not surprising, although how their investment as a proportion of sales is shifting reveals more about the individual companies’ strategies. At most groups the next five years sees this ratio staying pretty steady or dipping slightly – a sign of the ongoing pressures on big pharma to improve lab productivity levels.
AstraZeneca and Eli Lilly are expected to buck this trend with significant rises projected in R&D re-investment, as they both spend heavily to improve lacklustre pipelines. Indeed Lilly stands out as a substantial R&D stalwart, with spending in 2018 approaching 30% of drug sales – a huge vote of confidence in the ability of its labs to return this investment to shareholders.
Further down the list, the shifting finances of relatively small spenders reveal big boosts to budgets. Biogen Idec, for example, which has the fastest rate of spending at 9% a year, is continuing to invest heavily in its multiple sclerosis franchise with a series of large phase IV and III trials with existing and novel agents.
Celgene is not far behind, with a huge proportion of its R&D focus directed at its large blood cancer franchise, although solid tumours are increasingly a focus of the diversifying oncology company.
Gilead, meanwhile, having acquired two new key assets is putting both through their paces in phase III – sofosbuvir in hepatitis C and idelalisib in leukaemia and lymphoma – while continuing to invest heavily in HIV research. The $11bn acquisition of Pharmasset that bought sofosbuvir gives Gilead the most valuable R&D project, the table at the end reveals.
Lilly has also been rewarded for its investment with three candidates in the top 20, although LY2062430, the Alzheimer’s antibody solanezumab, remains a highly speculative asset. Biogen’s new MS pill Tecfidera would have been on the list two months ago – the product won approval at the end of March and has an NPV of almost $13bn.
In and out
Of course the amount of money going in is only one side to this story. The number of drugs coming out is the other, and on this measure the last couple of years have undoubtedly raised hopes that the industry’s productivity is improving.
|Number of NMEs||38||28||29||26||31||34||26||35||43|
|Cost per NME ($bn)||2.3||3.4||3.7||4.6||4.2||3.8||5.0||3.9||3.2|
|Cost per NME ($bn) (3-year lag)||3.4||3.1||3.2||4.6||3.7||3.0|
The table above reinforces the message that the industry has not achieved this by simply throwing money at the problem. The cost per NME approved dropped for the second year in running in 2012 – admittedly from a high seen in 2010, a year when a woeful 26 novel medecines were passed by the FDA.
Viewing the data with a three-year lag, which attempts to shift the cost of developing those novel medicines into the year they were approved, reveals a similar picture. At a cost of $3bn per NME, 2012 looks like the most efficient period of the past six years on this measure.
The result this year will reveal whether the industry has indeed got a grip on its productivity problem, or whether it still has more work to do.
|Top 20 most valuable R&D projects (ranked by net present value)|
|Rank||Project||Company||Status||Pharmacology class||Today's NPV ($m)|
|1||Sofosbuvir||Gilead Sciences||Filed||Hepatitis C nucleoside NS5B polymerase inhibitor||28,566|
|2||BMS-936558||Bristol-Myers Squibb||Phase III||Anti-programmed death-1 MAb||9,912|
|3||GS-7977/GS-5885||Gilead Sciences||Phase III||Hepatitis C nucleoside NS5A & NS5B polymerase inhibitor||6,845|
|4||IMC-1121B||Eli Lilly||Filed||Anti-VEGFr MAb||4,232|
|5||Ibrutinib||Pharmacyclics||Phase III||Bruton's tyrosine kinase (BTK) inhibitor||4,040|
|6||Reolysin||Oncolytics Biotech||Phase III||Oncolytic virus - Ras activated||3,887|
|7||VX-809 + ivacaftor||Vertex Pharmaceuticals||Phase III||CF transmembrane conductance regulator corrector||3,538|
|8||RG3638||Roche||Phase III||Anti-mesenchymal epithelial transition MAb||3,478|
|9||Palbociclib||Pfizer||Phase III||Cyclin-dependent kinase 4 & 6 inhibitor||3,151|
|10||LY2062430||Eli Lilly||Phase III||Anti-beta amyloid MAb||3,083|
|11||Odanacatib||Merck & Co||Phase III||Cathepsin K inhibitor||2,504|
|12||Dolutegravir||GlaxoSmithKline||Filed||HIV integrase inhibitor||2,473|
|13||Opsumit||Actelion||Filed||Endothelin receptor antagonist||2,421|
|14||BAX 817||Baxter International||Phase III||Factor VIIa||2,416|
|15||LY2963016||Eli Lilly||Phase III||Insulin||2,362|
|16||REGN727/ SAR236553||Sanofi||Phase III||Anti-PCSK9 MAb||2,100|
|17||Apremilast||Celgene||Filed||Phosphodiesterase IV (PDE4) inhibitor||2,018|
|19||Riociguat||Bayer||Filed||Guanylate cyclase activator||1,950|
|20||Anoro Ellipta||GlaxoSmithKline||Filed||Long-acting muscarinic antagonist (LAMA) & long-acting beta 2 adrenoreceptor agonist (LABA)||1,941|