Only Bristol bucks big pharma’s drive for external reliance

Other data

It is by now pretty much accepted that biotech is pharma’s lifeblood, and the latest figures suggest that reliance on deal-making has reached a new high, with nine of the biggest 12 pharma groups showing a declining share of in-house projects in last year’s sales.

In fact, of this group of 12, only Bristol-Myers Squibb is bucking the trend, with in-house R&D making up 35% of its 2016 revenue, up from 17% in 2011, the EvaluatePharma data show. The numbers confirm the usual suspects – Allergan and Abbvie, for instance – as the leading deal-makers, but also throw up a few surprises (see tables below).

One surprise is Glaxosmithkline, which has long championed in-house R&D. Its in-house product share has fallen 11 points over the past five years, likely explained by the declining sales of its mega-blockbuster Advair; it will likely take a few more years before Glaxo’s own R&D picks up the slack.

Advair is big pharma’s third-biggest organically derived product, behind Roche’s Avastin and Herceptin. Of course, both Avastin and Herceptin are Genentech products, but since Roche has owned a majority of Genentech since 1990 this is being considered as an in-house strategy for the purposes of this analysis.

Although Roche has always kept Genentech at arm’s length – this is still true today even with 100% ownership – it is undeniable that all Genentech-derived drugs are examples of a long-term big pharma reliance on an external R&D strategy of sorts.

The declining share of in-house sales at Merck & Co might come as another surprise. Januvia is the company’s biggest in-house derived drug, but its importance has been eroded by Zetia and Keytruda – a drug that has helped reshaped the oncology landscape – both of which came via the Schering-Plough takeover.

Share of big pharma sales derived from in-house projects
2011 2012 2013 2014 2015 2016
Roche* 61% 61% 62% 61% 60% 60%
Lilly 73% 70% 68% 60% 57% 57%
Astrazeneca 64% 61% 61% 59% 57% 57%
Novartis 52% 51% 49% 47% 46% 44%
Glaxosmithkline 53% 54% 56% 56% 46% 42%
Merck & Co 40% 41% 37% 38% 38% 38%
Bristol-Myers Squibb 17% 25% 33% 32% 39% 35%
Pfizer 15% 15% 15% 16% 16% 15%
Sanofi 14% 15% 15% 15% 14% 14%
Johnson & Johnson 20% 19% 18% 16% 15% 13%
Abbvie 12% 10% 9% 7% 5% 3%
Allergan 16% 19% 13% 8% 4% 3%
*Products originated by Genentech are counted as organic.

Neither was Keytruda’s rival Opdivo derived by Bristol-Myers Squibb – it came via a deal with Ono Pharmaceuticals – but despite this in-house drugs like Sprycel, Daclinza and Baraclude have helped the group buck the overall big pharma trend.

Among other companies, falling sales of Symbicort and Nexium, combined with intense deal-making, have led to Astrazeneca’s share of in-house products declining from 2011 by seven points to 57%.

Meanwhile, groups at the extreme end of the external reliance trend include Allergan, which has grown largely through acquisitions, Johnson & Johnson, which gained Remicade and Stelara through its takeover of Centocor, and Abbvie, whose two biggest drugs, Humira and Imbruvica, are derived from BASF’s pharma business Knoll and Pharmacyclics respectively.

M&A fuels the trend

Looking beyond individual company numbers another interesting trend emerges: not only has the share of in-house products experienced a five-year decline, but so has that of products derived from licensing deals.

Instead, it is company acquisitions that have fuelled big pharma’s move to rely increasingly on outside sources of R&D, with combined sales of drugs derived from M&A surging from $123bn five years ago to $158bn in 2016.

This could give some solace to M&A bankers hankering after the days of rampant biotech acquisitions; if only valuations would come off a little more, perhaps they would be in business again.

To contact the writers of this story email Jacob Plieth or Edwin Elmhirst in London at news@epvantage.com or follow @JacobPlieth or @EdwinElmhirst on Twitter

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