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Track change

As 90's-style blockbusters near the end of the line, payers and regulators are demanding more from pharma than me-too sequels. A key part of the future rests on niche success, says freelance pharmaceutical and healthcare journalist, RobSkelding.

Who knew anything about the sport of curling before five women from Scotland triumphed to steal Great Britain an Olympic gold at the '02 Winter Games in Salt Lake City? The world watched, well we all did here in the UK anyway, as our girls put on a dazzling display of oddly mesmerising, frenetic broom-sweeping mastery down the ice strip. It was brilliant, and we won. For the subsequent month or so, curling was our new national sport; goodbye football - it was good while it lasted but it became too big and expensive to deal with. For a brief moment, our entire collected nations stepped into the curling niche. Ultimately, in this case football didn't disappear and probably few of us have kept up the curling, but it was indicative,in a wider sense, of the potential appeal of a previously unheard of, perhaps slightly overlooked area given some appropriate attention.

Get everyone within a niche excited, and you've got a powerful hold on a significant marketplace. By and large, the general blockbuster concept - mass appeal, most people in most places have got one, huge revenues for the maker - is starting to be sidelined to make room for the emerging nichebuster business model - only a small segment of a population is interested, but just about everyone in that segment is gripped. It's like anything else that's like that: cars, music, films, sports and now medicines. In medicine, nichebusters, targeted products aimed precisely at specific users, are not the death knell of blockbusters but a natural strategic move by companies to spread risk more evenly across their product portfolios.

Access all areas
One-hit wonders are becoming scarcer, and companies both inside and outside pharma are acting upon that knowledge. People who needed a car 30 years ago were likely to have bought the popular Ford Escort. If they wanted a bigger one, they bought a Cortina. Most people in Britain had one of the two, and that was pretty much it. Today, people might choose a Ford Focus, but a bigger car is the Focus C-max, with more room and clearly defined extras, such as cup-holders. Bigger still is the Ford S-Max, a fatter, longer version of the C-max, with different options again, designed bespoke for those with large families. Then, above that, is the Ford Galaxy, a super-long seven-seat, jumbo-sized version of all of the previous options, and so on. These options can be applied in reverse too, with each model getting increasingly smaller. Each individual variant appeals only to a specific sub-segment of the car buying populous, distinguished by their idiosyncratic needs and desires, so the products must be tailored and, forgive the pun, clearly focused.

Creating and filling specific niches has kept Ford alive. It couldn't be the big fish any more due to competition, notably cheaper Eastern rivals undercutting its prices, and so today it tries to be the biggest fish in numerous much smaller, but nonetheless important, revenue-generating ponds. Pharma is thinking along these the same lines, says corporate analyst at Wood Mackenzie, Valerie Lee, who has seen clear evidence of drug companies buying into niche therapy areas. 'The trend really started in the late-1990s, but it has certainly accelerated over the last couple of years to where we are now - which is probably at a peak in terms of the number of transactions, relative to the last 10 years. I don't think any company would walk away from the chance of marketing a big primary care blockbuster, given the significant growth margin and contribution such a product will make over its life, but companies are probably more aware of their structural risk profile, and the blockbuster model comes with known risks.' She refers to the plight which, on top of the illimitable R&D costs and the uncertainty of seeing the return on that investment, sees pharma lose up to 95 per cent of sales within a fortnight following loss of exclusivity for a branded product in a key market, such as in the US or UK.

It's easy to see how the time-worn 'eggs', 'one basket' and 'don't' idiom would apply. 'Blockbusters are also rare and the period of exclusivity between the first, second and third to the market has shortened over the last decade, so from a pricing perspective products are probably less valuable than they were - the follow-on drugs no longer command a premium.' Lipitor, whose market protection ends in 2011, could by then be a $14bn-a-year medicine and will almost certainly constitute the most substantial patent expiry in pharma's history. One analyst speaking to Pharmaceutical Marketing suggested that Lipitor would be one of the last bastions in the pharma industry's campaign to secure significant long-term growth and stability by marketing a true '1990s-style primary care blockbuster'.

'I don't think the blockbuster model is dead, but companies are certainly turning to niche products as a way of lowering the structural risk in their portfolios,' Lee notes. How would you fill a $14bn-sized gap? 'It's a huge issue for Pfizer, but if you asked the CEO whether he would rather not have had Lipitor, the answer would definitely be 'no'.'

Niche marketing
The transition from block to niche appeal, some might say, is a matter of carrot and stick motivation for pharma. The sticks include the fall away of significant earnings as patents expire on big drugs, the intensifying pressure on first-in-class blockbusters to add value when regulators and payers are shifting favour away from me-too drugs, plus of course fierce generic rivalry. On the other hand, the swinging carrots of niche drugs include substantial sales potential driven by lower marketing costs, limited competition and the justification for setting higher prices. 'The economics of developing and launching new medicines into an increasingly satisfied 'primary care' setting are well known to chief executives,' admits David Fisher, commercial director at the Association of the British Pharmaceutical Industry (ABPI). Yet, the move to nichebuster-fuelled growth is unlikely to take the form of a direct and sudden switch, even given the notable patent expiries impending over the next 36-48 months.

Companies are more likely to rely on a range of strategies to drive future sales, including targeting fruitful niches which, in turn, require different marketing activities from primary care methods. Author of the Datamonitor report From Blockbuster to Nichebuster, Dr Mark Belsey, told PM that because of the low sales potential associated with targeting a small patient population, cost-effective strategies and well defined spending in sales and marketing are absolutely vital in ensuring that niche drugs yield a strong return on investment. 'Perhaps the most important change to sales and marketing strategies when moving from blockbusters to nichebusters is the need to bring in a different physicians detailing strategy - recognising that specialist physicians drive their prescriptions since they are more likely than primary care physicians to treat niche indications. Success depends on prioritising cost-effective targeting of specialists, using targeted marketing spend to access them, to drive clinical trial progression, approval and successful uptake.'

There's 'no doubt,' says the ABPI's Fisher, 'that in the same way as nichebusters promise the chance to target specific diseases cost-effectively, marketers also have the opportunity to do the same. Targeting high-impact campaigns built on addressing unmet medical need is a highly cost-effective strategy and works to many of the industry's strengths - clear communication, targeting resources smartly, building campaigns on a good educational foundation.' Dr Belsey also notes that with greater attention being paid to niche opportunities, the industry is becoming increasingly R&D focused. 'Rather than being centred around sales and marketing, which has driven the success of many current blockbusters, much greater emphasis is being placed upon R&D because it has to generate a number of drug candidates.'

Choosing a niche
In this respect, maximising the value from the nichebuster model will impel pharma companies to be fastidious in the selection of geographical and disease markets to target. Dr Belsey highlights the US as a 'fertile ground for innovative therapies' and, as such, should be considered a prime venue and indeed an 'optimal' launch market for nichebuster developers. As for making choices regarding niche therapy areas, depending on what any particular company may have sitting in its pipeline - or is able to buy in - the world, as Shakespeare wrote, is your oyster. GlaxoSmithKline (GSK), for example, reportedly now makes between £200m-£300m a year from the restless leg syndrome therapy area. The firm is driving good sales there and, says Lee, it could end up ultimately having a 'billion dollar drug from an area which three or four years ago would have been laughed at'.

Fisher notes too: 'Increasingly patients tell us that if they could wave a magic wand, they would put more energy and resources into therapy areas like cancer, Alzheimer's and diabetes, which of course contain niche opportunities - and some of them not such small niches. Areas of unmet need is a key driver, and the industry pipeline currently contains more than 600 cancer treatments.' Oncology is probably seen by most as the archetypal niche market target, with a variety of indications falling under the 'cancer' umbrella, many of which have a high unmet need. 'Companies like Roche and Novartis have always recognised that cancer is a huge number of different diseases,' Lee notes. 'From the two main indications for Novartis' Gleevec - chronic myeloid leukaemia and gastrointestinal stromal tumours - given the prognosis of the patients without access to the drug, you can create huge sales out of a product in a fairly small area, because these are diseases that kill you.' Four words which, in niche market terms, underpin the profound demand for effective new products in oncology.

With the attainment of improved health for patients being the cardinal raison d'etre for the entire pharmaceutical industry - no ill people, no medicines required - companies worldwide are embracing the challenges of developing new medicines for specific, perhaps difficult to treat, diseases and variants of them. Yet, the R&D costs don't come in much below those associated with developing blockbusters, so pharma will be compelled to set higher prices for nichebusters in order to be able to produce them at all. 'From that perspective, oncology is the best example of a niche where, in a relatively small disease area - compared with hypertension or high cholesterol - the outcome is so significant that you can charge higher prices and not run into problems,' says Wood Mackenzie's Lee. 'Where you might run into problems from a payer's point of view would be with an oncology drug like Avastin, which is applicable potentially across so many cancers. It could become such a large drug that the cost will become an issue.' It is quite clear, however, that companies with just a single niche product exist quite happily and have done very well, indicating that for truly effective specialised medicines the payer system will support the developer.

Furthermore, a significant number of nichebusters are biologicals, such as monocloncal antibodies, and as yet there is no defined pathway for generics to develop and potentially co-exist, which again lowers the risk from a strategic perspective. 'There may be some form of generic-type competition appearing within a five-year timeframe, but it's unlikely that we're ever going to have fully substitutable biologicals, as we do for small molecules,' Lee says. 'Potentially, companies get a much longer product life.'

Identifying your patients
Also true is that the role of diagnostics is becoming progressively more central, as the cost-effective use of new, targeted - and hence relatively expensive - medicines for treating 'niche' diseases will require the identification of those patient populations in whom there's a high likelihood of them working. This is another consideration driving the industry's intensified focus on covering all bases, relying less on fewer, bigger products. There's nothing revolutionary about the concept of nichebusters of course; arguably HIV/AIDS is one of the biggest niches to be addressed by medicine manufacturers. The impetus for companies now is bedded in regulatory issues, including the big patent expiries, as well as a lack of fresh primary care blockbusters coming through, which may well be a rarity in 10 years' time.

'We shouldn't lose sight of the fact that patent expiration is one of the known challenges for the industry. Everyone knows that there's a defined patent life, and new products have to come along,' Lee sums up. You can find examples in most areas of life where the benefits of spreading risk and assessing all opportunities available makes for a stronger, more stable environment than relying on one sole, star performer. Ultimately, blockbusters are becoming outmoded, but only in the same way that England's rugby-playing luminary Jonny Wilkinson sits on the bench these days; he still has an incredible impact on the team and remains a key player without being centre- stage. Everyone's always on the lookout for Jonny Wilkinsons, but it certainly makes sense to build a team which is strong in all areas - and in particular, those where competitive teams are not.

9th May 2007

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