Global Pharma Industry Immune to Downturns

The pharmaceuticals sector is bursting with innovation worldwide. A growing tally of new developments is compensating for downward price pressure on established products and a boom in cancer drugs is strengthening confidence.
On the lookout for a new billion dollar baby.

The pharmaceuticals and bio-tech sectors wordwide seem to be immune to concerns about a weak economy that are dampening confidence in other industries at the start of the new year.

The mood is likely to be upbeat at annual  J.P. Morgan annual healthcare conference in San Francisco next week.

That's due to more than just the general cyclical resilience of the healthcare sector: The worldwide pharmaceuticals industry, with an annual turnover of around $800 billion, is currently enjoying a pronounced innovation boom.

The most recent signs of that boom are the licensing figures of the U.S. Food and Drug Administration, FDA. In 2015, the agency approved 45 new medicines – four more than in the previous year and more than in any year since the mid-1990s. Including vaccines, the tally of new drugs licensed on the market comes to more than four dozen.

In Germany, the industry body for research-based pharmaceuticals companies, the VfA, approved 36 new drugs last year. That's down from 49 the year before, but still well above average for recent years.

Skeptics, looking for a sign that the biopharma sector’s incredible momentum is about to falter, will not find much evidence in 2016. Lisa Urquhart,, analyst at EvaluatePharma

The approval figures are an important indicator of the ability of pharma companies to continually renew their product range and expand their business. Ultimately, it's only through new, patented medicines that they can increase both revenues and profit margins.

The strong figures for 2015 indicate that companies have become fare more efficient in product development over the past 10 years. Despite spending only slightly more on research and development, they have been able to pratically double the number of new drugs during that time. Based those figures, market researcher IMS Health expects the pharma sector to sustain growth of around 7 percent annually.

Swiss pharmaceutical company Novartis was last year's market leader with four new approvals. The U.S. biotech company Amgen came in second with three, while Switzerland's Roche and America's Johnson and Johnson and Bristol Myers each received approval for two new developments.

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In 2015, only one product from German pharmaceutical companies made it onto the list, the coagulant Praxbind from Boehringer. The drug is intended to be used as an antidote when the anticoagulant Pradaxa, which is also developed by Boehringer, initiates dangerous bleeding. Boehringer, Bayer and Merck expect to launch a number of new products this year.

The commercial potential of the new products in 2015 won't come close to what it was in 2014, which saw American biotech company Gilead develop Harvoni, the widely distributed hepatitis drug. Still, analysts expect at least 10 of the drugs approved in 2015 to deliver returns of $1 billion each.

Among them are the new breast cancer drug Ibrance from Pfizer, the heart failure medicine Entresto from Novartis, the cholesterol treatments Repatha and Praluent from Amgen and Sanofi, as well as the cystic fibrosis drug Okambi from U.S. biotech firm Vertex.

Experts say the positive trend is likely to continue. IMS Health expects at least 225 more registrations for the industry by 2020, corresponding to an average of more than 40 new drugs per year.

According to the British analyst firm EvaluatePharma, this year could see the development and first registration of around 12 new drugs with a sales potential of more than $1 billion per year.

EvaluatePharma analysts Lisa Urquhart and John Gardner wrote in the foreword to the EP Vantage 2016 Preview, that “skeptics... looking for a sign that the biopharma sector’s incredible momentum is about to falter will not find much evidence in 2016.”

They forcasted research and development productivity "to continue at a high pitch.”

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The pharma and biotech firms can thank advances in molecular biology for the boom in the development of new medications. Cancer therapy has benefited particularly strongly from progress in this field, becoming the top industry segment with a turnover of around $80 billion.

With a record 16 new registrations in 2015, cancer treatments represented a full third of successful new developments. This trend is expected to continue, with many new drugs under development in the field of cancer immunotherapy.

On the other hand, a shift in the R&D strategies of big pharma companies is paying off, as they react to the failures of the last decade. They're now directing their research toward more specialized treatments for smaller patient groups, cooperating strongly with biotech firms and concentrating more on fields where academic research is providing new entry points.

This is reflected by the fact that a relatively large number of new developments relate to fairly rare diseases with a relatively manageable number of patients. Sales worth billions of dollars can be achieved in those areas, thanks in part to exorbitantly high prices.

 

Siegfried Hofmann is Handelsblatt's chemical and pharmaceutical industries correspondent, reporting from Frankfurt. To reach him: [email protected].