Novartis and Roche the biggest R&D spenders as NME costs fall

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
Company 2012 2018 CAGR 12-18 2012 2018
1 Novartis 8.8 10.3 +3% 19.4% 19.7%
2 Roche 8.0 9.4 +3% 21.4% 20.4%
3 Merck & Co 7.9 7.9 +0% 19.2% 19.8%
4 Pfizer 7.0 6.7 -1% 14.9% 14.4%
5 Sanofi 6.1 6.7 +1% 15.9% 13.6%
6 GlaxoSmithKline 5.3 6.3 +3% 15.9% 15.8%
7 Johnson & Johnson 5.4 6.2 +2% 22.8% 23.7%
8 Eli Lilly 5.1 4.5 -2% 25.7% 28.9%
9 AstraZeneca 4.5 4.3 -0% 16.4% 20.7%
10 Bristol-Myers Squibb 3.7 4.2 +2% 28.1% 19.3%
11 Boehringer Ingelheim 3.3 3.4 +0% 22.5% 26.5%
12 Bayer 2.5 3.4 +5% 17.1% 17.3%
13 Takeda 3.9 3.4 -3% 25.9% 18.9%
14 Amgen 3.3 3.3 -0% 19.9% 19.9%
15 AbbVie 2.8 3.2 +2% 15.1% 14.8%
16 Novo Nordisk 1.9 3.0 +8% 14.0% 14.0%
17 Gilead Sciences 1.7 2.6 +7% 17.9% 12.1%
18 Celgene 1.4 2.3 +9% 26.3% 21.4%
19 Astellas Pharma 2.2 2.3 +1% 19.9% 18.9%
20 Biogen Idec 1.3 2.2 +9% 35.1% 21.9%
Total Top 20 86.1 95.5 +1.7% 19.2% 18.3%
Other 51.7 53.9 +0.7%
Total 137.8 149.4 +1.3% 19.0% 16.7%

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.

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012
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
18 Afrezza MannKind Phase III Insulin 1,985
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

To contact the writer of this story email Amy Brown in London at AmyB@epvantage.com or follow @AmyEPVantage on Twitter.

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