Reinventing big pharma – a question of freshness

Data Insights

Big pharma has put the worst of the latest patent cliff behind it, but this does not necessarily mean that its future is secure, and at least on one measure of innovation a look across the peer group reveals a few surprising laggards.

One way of tracking industry’s novelty is to measure the rate at which it renews its sales engine, and thanks to EvaluatePharma this can easily be gauged using the freshness index under the "portfolio analysis" tab. An analysis of this metric reflects the view that Bristol-Myers Squibb and Lilly might do fine as they are, but also shows where bankers and business development departments could target deal money (see tables).

The concept of revenue freshness refers to the share of sales that is derived from drugs launched over recent time periods. EvaluatePharma’s analysis can be set to show the effect on group sales of numerous launch “vintages”, though looking at drugs introduced over the previous five years gives as good a basis as any.

Top innovator?

According to this metric Bristol stands as the top current innovator, with a healthy 23% of 2013 sales coming from the last five years' drug launches, but by 2018 it is set to lose this crown to Lilly.

Neither company features at the top of absolute pharma turnover but, thanks to products like Bristol’s cancer immunotherapeutic nivolumab and Lilly’s ramucirumab and solanezumab, their top lines are forecast to look remarkably youthful in five years’ time. Still, the Alzheimer’s disease project solanezumab is an extremely risky bet, so perhaps this shows just how bullish the sellside is in expecting Lilly to recover from the depths of its patent expiry woes.

Even the ultimate current laggard, AstraZeneca, might see its revenue freshen significantly, though it will need several phase III successes for this to pan out. But already in 2008 its top line was looking remarkably elderly, with no new launches in the most recent five years, showing the UK group’s rock bottom starting point.

Big pharma's freshness: drugs launched in the previous five years
Sales ($bn) Share of total pharma sales
2008* 2013 2018 2008* 2013 2018
Bristol-Myers Squibb 2.2 2.7 4.2 15% 23% 20%
Johnson & Johnson 1.0 5.5 0.3 4% 19% 1%
Pfizer 5.3 6.2 2.4 13% 13% 5%
Novartis 3.0 3.8 2.3 8% 8% 4%
GlaxoSmithKline 3.3 2.6 2.9 8% 7% 7%
Roche 6.9 2.1 3.0 21% 5% 6%
Sanofi 2.0 2.0 2.6 5% 5% 5%
Merck & Co 4.6 1.7 3.7 18% 4% 9%
Eli Lilly 4.0 0.7 4.4 22% 4% 28%
Abbott/AbbVie 1.4 0.4 2.4 8% 2% 11%
AstraZeneca 0.0 0.5 1.5 0% 2% 8%
*2008 excludes acquisitions of Wyeth and Schering-Plough

Meanwhile, GlaxoSmithKline, a company that has made much of its ability to replace longstanding product revenue with a “wall” of new launches, does not feature prominently in the freshness league table.

At the other end of the scale, Pfizer and Johnson & Johnson look set to lose significant ground, pointing perhaps to deal-making opportunities. In Pfizer’s case even this worrying scenario excludes the loss of Lipitor, which in 2008 had already been on the market for nine years. Nevertheless, in absolute terms Pfizer’s group sales will largely tread water while Johnson & Johnson’s are set to grow at 2% a year, at most pointing to potential problems beyond 2018.

Clearly this type of analysis is relatively simplistic, but this does not mean that it cannot be relied on to give a good general picture. For one thing, companies like J&J and Roche have less pressure to renew sales thanks to the high proportion of current revenue derived from biologicals, which will not suffer typical small-molecule-type erosion on patent expiry.

Interestingly, despite the comings and goings of waves of patent expiries, the five-year freshness of big pharma as a whole has not changed appreciably and tends to stay at 7-10% of turnover. While delving into individual companies’ prospects can reveal deal-making opportunities – especially given the looming threat of big biotech – overall the sector seems happy with the status quo.

Freshness index of big pharma combined peer group
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sales of drugs launched in previous 5 years ($bn) 34.7 28.8 34.8 29.4 24.8 28.2 23.4 29.6 29.6 32.0 29.8
Share of total Rx & OTC sales 9.7% 8.0% 9.5% 7.7% 6.8% 7.8% 6.4% 7.9% 7.7% 8.2% 7.4%

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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