After a sluggish period, growth in the biopharma industry is set to accelerate in the coming years, helped by the continued march of biologics and an expanding rare disease market.
The EvaluatePharma World Preview 2018, released today, forecasts prescription drug sales of $1.2trn in 2024 and a compound annual growth rate of 6.4% over the next seven years. But amid the optimism there are reasons to be cautious – not least the looming threat of biosimilars and continued pricing pressure in the US.
Novartis has kept hold of the top spot, based on forecast 2024 sales, after overtaking Roche last year. But there is little to separate the top three players – and a mega-deal, such as the long-rumoured takeout of Bristol-Myers Squibb by Pfizer, would shake up the leaderboard.
The chart below illustrates just how digestible the likes of Bristol or Astra would be for any of the big hitters – and also why, with their higher forecast growth rates, they might be attractive targets.
Things are already changing, with the biggest deal of the year so far, Takeda’s $62bn takeout of Shire, set to make the combined group a top-10 player by 2024. It is not a given that the transaction will go through, however, with a group of Takeda shareholders seemingly determined to derail the deal.
While such mega-mergers remain the exception rather than the rule, deals remain the lifeblood of the industry. A look at R&D spending trends suggests that M&A will be as important as ever in the future – perhaps even more so.
This is because companies are set to invest less money into R&D, as a proportion of their sales – which could impact in-house innovation and make bigger players even more dependent on buying in new assets.
There is another potential explanation for the R&D spending slowdown, however: there are hopes that artificial intelligence and new clinical trial models could make drug development more efficient.
This is one of the macro trends that could have a big impact on the industry in the coming years. But not all of these trends are positive.
Pricing pressure in the US is set to continue. While rare diseases have so far largely escaped the squeeze, companies in the space might not get a free pass for much longer, and Vertex looks particularly vulnerable. The company has the industry’s most valuable pipeline project in its cystic fibrosis triplet, VX-659 + tezacaftor + ivacaftor, which has a staggering net present value of $13bn.
Vertex’s existing cystic fibrosis therapies have already come under fire for being too expensive (Vantage point – Vertex and orphan drugs test limits of US payers, March 28, 2018). Should its new projects make it to market the company will have to tread carefully with pricing if it wants to avoid a backlash.
With other presumably pricey CAR-T and gene therapy projects also on the most valuable list, US payers will likely soon be making more hard choices about which treatments to cover – and surely something has to give eventually.
The biosimilar threat
And, while it is true that biosimilars have yet to fulfil their promise, in the US at least, it is just a matter of time until they make an impact (Spotlight – Forecasts tell a tale of two continents for biosimilars, June 5, 2018).
The company with the most to lose currently is Abbvie, whose mega-blockbuster Humira is set to face biosimilar competition in the US in 2023. But the drug is still expected to be the biggest product a year later, ahead of Merck & Co’s Keytruda, which is fast becoming the PD-1 inhibitor of choice.
Still, it often does not pay to be too reliant on one product as Abbvie, and now Celgene, are finding out. The top three big pharma companiesare largely missing from the chart below since they have a much wider range of molecules rather than a single big-hitter.
Download a free copy of the EvaluatePharma World Preview 2018 here.