Only Bristol bucks big pharma’s drive for external reliance

It is pretty much accepted that biotech is pharma ’s lifeblood with nine of the biggest 12 pharma groups showing a declining share of in-house projects in last year’s sales.

Only Bristol bucks big pharma’s drive for external reliance

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.

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.

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