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Back to the future

How pharma’s performance in 2013 sets the scene for the industry’s future growth

Top pharma

This article is based on data from PMLiVE's Top Pharma List

See the top 25 pharma companies by global revenues in 2013

See the top 15 pharma companies by biologic revenues in 2013

See the top 15 pharma companies by metabolic revenues in 2013

See the top 25 pharma companies by oncology revenues in 2013

At first glance, little appears to have changed at the top table of global pharma. The leading companies in 2013, by global sales, included all of the usual suspects - with only one new entrant to the top 10. But delve beneath the surface and it's clear that some subtle but important developments are not only redrawing the face of global pharmaceuticals, they're challenging the traditional approach of many of its leading players.

The backdrop for change is by now a familiar one; widespread constraints on the global economy, in tandem with an ageing worldwide population, is placing significant pressure on healthcare resources - and forcing a renewed emphasis on the pricing and reimbursement of medical innovation. In the value-based economy, pharmaceutical companies are desperately seeking efficiencies to optimise operations - but they're also investing heavily in health economic strategies to justify premium pricing and maximise their high-value technologies. And at the same time, the impact of generic erosion and the patent cliff continues to wipe billions of dollars off their shareholder value.

The industry's response has been variable. Some companies are completely redesigning their discovery and development strategies, or divesting previously successful parts of their product portfolios to focus on new therapeutic classifications. Others are investing in emerging markets and building infrastructure outside traditional regions to capitalise on moves towards universal healthcare access in developing nations. Meanwhile, the industry's penchant for strategic alliances remains, with co-marketing commonplace and growth by acquisition still popular. Moreover, as smaller, leaner and more specialist companies continue to benefit from their ability to innovate with speed and agility, progressive biotech companies are widely regarded as an attractive bed partner for pharma. Conversely, the era of the mega-merger could be due a comeback with major developments at AstraZeneca and Pfizer and Valeant and Allergan.

The top 10
So what impact are these embryonic strategies having? How are companies faring in the real world? It's fair to say that many experienced growing pains. 

“The exposure of large cap pharmaceutical companies to the success of its established blockbuster therapies and the impact of the patent cliff has driven significant downturns among pharma's elite,” says Josh Owide, director, healthcare industry dynamics, GlobalData. “Prescription pharmaceutical sales for the top five companies collectively declined by almost $7bn through 2013.”

Pfizer narrowly remains the industry's leading company by global sales, but 2013 was a challenging year for the company. The loss of exclusivity for Lipitor continued to have a major impact, but alongside this, a further 24 of its therapies suffered a drop in sales. This led to negative growth of -7 per cent. 

Novartis, who followed negative growth in 2012 with a 2 per cent uplift in 2013, significantly closed the gap on Pfizer. The successes of Gilenya, Afinitor/Votubia, Galvus, Tasigna and Jakavi - as well as its generics arm, Sandoz - mean that Novartis is now less than $500m behind Pfizer in second place.

Roche leapfrogged Merck & Co and Sanofi to reach number three, thanks largely to its industry-leading oncology portfolio and emphasis on biologics. Likewise, J&J had a strong year - with eight of its key products, including Zytiga, Xarelto, Remicade, Stelara and Invega Sustenna/Xeplion, driving collective growth of more than $3.5bn (10 per cent). 

Conversely, fourth-placed Merck (-8 per cent), fifth-placed Sanofi (-6 per cent) and eighth-placed AZ (-9 per cent) all suffered negative growth, while GlaxoSmithKline flatlined to remain in 6th. Likewise, Lilly - with 2 per cent growth - remained in its 2012 position of 9th. In 10th place, AbbVie swapped places with Teva.

Elsewhere, Amgen - like Roche, a major biologic producer - enjoyed considerable growth of 9 per cent, rising to 12th. Increased sales from its two biggest franchises, Enrel and Neulasta, as well as the late 2013 acquisition of Onyx, contributed to its growth. Likewise, Gilead and Novo Nordisk are identified as 'ones to watch' in the coming years. “Each possesses hugely successful therapeutic franchises for infectious diseases and diabetes, respectively,” says Josh. 

Biologics: the best form of defence?

The main challenge facing all major drug companies is the ability to replenish revenues eroded from maturing brands with newer, innovative therapies. Some companies have proven to be more defensive than others - notably biologics producers such as Roche and Amgen. “Companies producing biologics are less exposed to the impact of generic substitution and brand erosion due to the lack of a biosimilar framework in major markets such as the US,” says Josh. “As a result, companies such as Merck and Bristol-Myers Squibb, both of which have felt the force of patent expirations, are now placing significant hope on emerging biologic medicines, in an attempt to mirror the success of Roche and its Genentech subsidiary.”

Biologics remain one of the fastest-growing sectors of the market. Global sales of biologics reached $161.9bn in 2013, an increase of 9 per cent from 2012. Moreover, the total market has grown by almost $100bn since 2006, with a compound annual growth rate of 14.7 per cent across that period.

The leading biologics manufacturer is Roche, whose revenues in the sector have more than doubled since 2006. In 2013, Roche's biologics sales totalled $29.2bn. These were led by established oncology brands such as Avastin and MabThera/Rituxan, along with emerging breast cancer therapies such as Perjeta and Kadcyla. Global Avastin sales grew 8 per cent in 2013 to reach $6.7bn, while MabThera/Rituxan - which is indicated in rheumatoid arthritis as well as cancer - grossed global sales of $7.4bn last year.

Alongside Roche there are now an additional six companies whose annual biologics revenues exceed $10bn; Amgen ($16.8bn), Novo Nordisk ($13.3bn), Sanofi ($12.4bn), AbbVie ($11.9bn), Pfizer ($10.7bn) and J&J ($10.5bn). Behind them, Merck & Co, with 2013 biologics revenues of $8.9bn and CAGR of 32 per cent between 2006-2013, also appears set to break the $10bn mark in 2014.

The best-selling biologic - and still pharma's biggest global brand - is Humira, AbbVie and Eisai's anti-inflammatory drug. Total sales grew by 20 per cent in 2013 to reach $11.5bn - a $1.8bn increase from 2012. In fact, AbbVie sales of Humira have enjoyed compound annual growth of 26.6 per cent between 2006-2013 - and played a key part in the company's rise up the rankings.

The product also heads up the seven biologics that made the top 10 best-selling drugs in 2013; Remicade ($9.9bn), Enbrel ($8.9bn), MabThera ($7.4bn), Lantus ($7.3bn), Avastin ($6.6bn) and Herceptin ($6.5bn). Only Seretide/Advair ($8.4bn), Abilify ($8bn) and Crestor ($6.9bn) prevented a biologic clean sweep of the bestsellers. 

Emerging markets?

There has been much discussion in recent years about pharma's attempts to shift focus away from traditional markets and to look instead towards emerging and developing nations as a source of growth. But analysis of activity at some of the industry's main players suggests that this approach has yet to make a major impact on companies' overall sales performances. For example, Rest of the World (ROW) sales – i.e. sales excluding the US and Europe - have actually declined at Pfizer, falling from $21bn in 2006 to $18bn in 2013. Elsewhere, AZ's ROW sales grew by just $1.7bn in the same period, while Roche's also increased by only $2.1bn. 

However, Sanofi and GSK have fared better, with ROW sales increasing by $6.8bn and $4.8bn respectively. Although Pfizer's ROW sales remain the highest in the industry, Sanofi and GSK - who just seven years ago were around $14bn behind them - are now snapping at their heels.

Therapy area forecasts
Treatments for cancer continue to be a major engine for growth in the global pharma sector, with total oncology sales reaching $93bn in 2013. Curiously, however, only five of the top 20 best-selling treatments are indicated for cancer: MabThera, Avastin, Herceptin, Glivec ($4.7b) and Revlimid ($4.3bn). Nonetheless, oncology is forecast to be the fastest-growing therapy area in the next five years - with CAGR of 10.5 per cent taking its total annual sales to $170.3bn by 2019.

Similarly robust growth is predicted in metabolic disorders, where revenues are tipped to reach $104bn by 2019 - a $41bn increase from 2013, and compound annual growth of 8.8 per cent. Within this, diabetes is widely recognised as a major growth opportunity - not least due to the Affordable Care Act extending healthcare services to a broader US marketplace, the global obesity epidemic and a sustained incidence of lifestyle-related conditions. 

The diabetes market is currently dominated by Sanofi, Novo Nordisk, Lily and Merck. Sanofi's Lantus was the 7th best-selling product of 2013, with sales of $7bn, while Merck's Januvia ($4bn) also features in the top 20. Meanwhile, Novo Nordisk - the world's largest maker of insulin - has recently strengthened its promotion of Victoza ($2bn in 2013) in an attempt to capitalise on the growing US market. Conversely, Bristol-Myers Squibb, historically a main player in the diabetes market, has sold its global diabetes business to AstraZeneca - as well as announcing the end of broad-based discovery research in the disease. The introduction of a wave of SGLT2 inhibitors will further energise the market - with Novo Nordisk, J&J, Lily, Boehringer, AZ, Merck and Pfizer all due to compete in this space.

Infectious diseases is forecast to be another fast-growing therapy area in the next five years - predicted to increase from $57.3bn in 2013 to $86.3bn in 2019, with CAGR of 7.1 per cent. Though impressive, such growth is likely to be dwarfed by the progress of the hepatitis C market. Currently valued at just over $3.5bn, treatments for the hepatitis C virus (HCV) will grow annually by 39.5 per cent to reach $22.7bn in 2019. This will be led by Gilead's Solvadi/HCV franchise, whose sales are expected to grow from $133m in 2013 to $16.6bn in 2019 - CAGR of 122 per cent. AbbVie's HCV franchise, due for introduction in 2016, is tipped to gross revenues of $2.75bn, while treatments from Merck, J&J, BMS, Roche, Boehringer and Mitsubishi will make hepatitis C a highly competitive market.

Immunology products will also grow healthily, with global sales set to reach an estimated $84bn in 2019 - some $22bn higher than in 2013. This is perhaps not surprising; of the six best-selling brands in 2013, four - including each of the top three - are autoimmune products. In fact, predicted CAGR of 5.3 per cent will see immunology overtake the once-mighty CNS market in 2017 - with the latter experiencing flat growth of just 0.1 per cent in the same period. The cardiovascular market will fare even worse - experiencing negative growth of -0.2 per cent.

Back to the present

For now, however, pharma appears to be weathering the storm and consolidating through a sustained period of change. “The leaders in pharma showed high levels of resilience through 2013, despite the continuing fallout from the patent cliff in the year prior,” says Josh. “Despite losses suffered by a number of billion dollar, blockbuster brands, pharma has once again demonstrated its defensive nature as well as its continued desire to innovate.”

This article uses GlobalData's pharmaceutical revenue figures, which are based on sales of prescription medicines, including generic drugs.
They are featured in full in the PMLiVE Top Pharma List, which ranks the top companies in the industry by global sales and much more.

Article by
Chris Ross

a journalist specialising in the pharmaceutical industry and healthcare

3rd June 2014

Article by
Chris Ross

a journalist specialising in the pharmaceutical industry and healthcare

3rd June 2014

From: Sales

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