How many drugmakers are delivering valuable new meds to the marketplace, saleswise? All too few, says innovation researcher and ex-Big Pharma manager Bernard Munos. In fact, the only two Big Pharmas with a decent track record these days are Johnson & Johnson ($JNJ) and Bristol-Myers Squibb ($BMY).
In an analysis published in Forbes, Munos looks at sales from products approved over the last 5 years and the last decade, and how much they're contributing to their respective companies' revenues. Both J&J and Bristol-Myers are delivering strong sales from newer meds, and they boast the larger number of drugs approved in the last five years. Far more than half their sales come from products approved over the last decade.
At the other end of the spectrum, half a dozen companies are getting less than 22% of their top line from drugs approved since 2006. Look at the drugs launched since 2011, and the number is even worse--11%.
These companies--which include AbbVie ($ABBV), Sanofi ($SNY) and Eli Lilly ($LLY)--don't deliver new drugs reliably, Munos says. "Instead, they depend on chance [for innovative meds], and marketing muscle to keep pumping aging drugs when chance is not forthcoming," he says.
AbbVie's Humira is one example: It's been the world's bestselling drug for several years now, and AbbVie is very dependent on that revenue. The drug is set to go off patent, and biosimilars are looming, so the company has been scrambling to get new products to market. One--the hep C treatment Viekira Pak--has launched, but tough competition is likely to limit its sales growth. To make up for pipeline scarcity, the company last year bought Pharmacyclics and its share of the fast-growing blood cancer med Imbruvica, for a whopping $21 billion.
There's a group of Big Pharmas that are pushing more drugs through the approval process--well above their historic output, Munos says--but they have large numbers of off-patent drugs, and so they're struggling with generic erosion to sales. Merck ($MRK), Pfizer ($PFE) and Novartis ($NVS) are among this small crowd, and they have a "scale problem" that has to be solved to keep growth coming.
That could require some dealmaking, actually; Pfizer, for one, is augmenting its stable of products and its pipeline by taking over Allergan ($AGN) in a $160 billion deal.
On average each year, the 13 companies Munos analyzes are spending about $75 billion on R&D, but the 77 drugs they pushed to market since 2011 only brought in $104 billion last year. That's just not enough revenue from new products to recoup the investment.
Is that a problem with the simple cost of developing a new drug? Not exactly. It's deeper than that; in fact, Munos figures that some Big Pharmas are too focused on churning out money from legacy products--which account for one-third to two-thirds of revenue for 8 out of 13 companies. "That in turn has slanted their leadership toward processed-focused leaders, who are deft at offsetting their innovation deficit with legacy sales, but not so good at boosting innovation to sustainable levels," he says, but there's hope. "It's a vicious circle that has been tough to break. Yet, it is not inevitable. J&J and BMS have found ways to escape it, and several other companies could soon join them."
- read the Forbes column