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Salvation through Innovation

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One of the funniest things that I read last year was Ranbaxy’s CEO lamenting the lack of innovation in big pharma. The writer was unremarkable and did not see the joke at all. Sadly, there are many examples of articles about our industry which reveal a very superficial idea about what makes us tick.

An example that recently caught my eye added to the line of nonsense about innovation (Innovation Is the Pharmaceutical Industry’s Only Salvation, The InVivo Blog). If the “salvation” that was referred to had been about evil within big pharma, but that the Lord will forgive us if we just invent a couple more good drugs, then it would have been interestingly novel. Sadly, the piece was about the god of Mammon and consisted the sharing of thoughts from Mr Jay Markowitz, a biotech analyst.

After noting, believably, that “44% of Americans had an unfavourable view of the pharmaceutical industry”, the article veered rapidly off-piste proposing that, “the industry’s woes boil down to a single cause: inadequate innovation”. As a good friend of mine would say, this guy must be smoking the weed! Might not the BILLIONS of dollars in fines we keep paying for improper marketing practices have something to do with our reputation?

The author got himself further into trouble looking at our poor productivity: in spite of the inconvenient fact that the number of new drugs registered by the FDA last year was the highest since 2004, he noted that we need more than a “meagre” 24 new drugs to fill the patent hole.

People think of “the patent hole” as the result of some fundamental failure to innovate in our industry. This is nonsense.

The patent hole is a direct result of pharma management not doing their job very well. No company can generate the steady flow of blockbusters which are required to support a business that is overly dependant on a single big drug – or handful of them. The reason for this is simple probability. We do not know how to make one, and we do not know which of our drugs will become blockbusters even after we launch them. Sometimes we get lucky and a drug does better than expected. Sometimes a drug that was expected to do well does badly. Add to this randomness the fact that big firms tend to lose the ability to take risks appropriately, and you can see why it is unlikely that the big firms will generate a steady stream of blockbuster drugs. Management’s sin is that it fails to recognise this simple truth, and it fails to plan accordingly.

Like many people, the author confuses the few big pharma companies that he deals in with the drug industry as a whole. He confuses the need for the biggest of big pharma to produce bigger pipelines (to improve their chances of netting a big drug for themselves), with the reality that the industry as a whole is doing just fine. Innovation is apparently quite strong still, and record numbers of drugs are being registered. The question does remain, however, whether these drugs will generate the same sales as the biggest drugs today. Time will tell. There is also a real possibility that the biggest drugs among the 24 newly registered ones may not belong to today’s big players.

This analyst has failed to grasp the simple point that we do not make blockbusters, we make drugs, and if we are lucky some of them turn into billion dollar drugs.


Written by Pillhead

March 31, 2009 at 4:16 pm

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Sales of New Drugs – no more blockbusters?

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An article in Forbes (The Value Of New Drugs Is Dropping) cast an eye over the initial sales of new drugs launched in the last decade. The article looked at data from IMS, and found that drugs launched in 2008 sold only a tenth as much in their first 6 months on the market as did drugs launched in the banner year of 1999. Despite the good news that the FDA approved more drugs in 2008 than in 2007, “new medicines contributed much less than 0.5% to the growth of the global market, another way in which the first half of 2008 constituted six of the weakest months in a decade”

At first sight, this article appears to fit our gut feeling that the “low hanging fruit” are taken and few blockbuster drugs remain. It also fits and confirms the results of the drive espoused by several firms for more drugs of middle revenue.

But looking at the way this article presents data looks a little like cherry picking to me. The period of study is 1998 to 2008, but one of the big comparisons is made with 1999 a “banner year”. And using “six” as a statistical cutoff is odd: “2008 constituted six of the weakest months in a decade”?

How bad is it really looking for us from this data?

first 6 month sales for new drugs

first 6 month sales for new drugs

If there is a trend here, and I do not see a clear one, then it is equally valid to say that the last three years have seen a return to form. Never since the hayday of the late 90’s, when pharma launched Singulair, Vioxx, Viagra and Avandia, have we seen sales at these levels. 

I do not think this would be an accurate refection, but it is important not to see what we want to see in the data. 

What I do see in the graph is a remarkably stable picture of first 6 month sales in the region of 5-10 million USD. It would be interesting to look deeper to see why. 

There is certainly no strong indication here that the drugs launched more recently are any different from those 10 years ago. For that conclusion, we need more data.

Written by Pillhead

February 23, 2009 at 1:22 pm

Blockbuster Drugs and Innovation

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Sir James Black is a nobel prize winner for medicine and inventor of both propranolol (at ICI) and cimetidine (at Smith Kline and French). In an era when entire R&D divisions of big pharmaceutical firms have trouble coming up with a single drug of this caliber, a man credited with two of them must be taken seriously.

In a fascinating interview with the FT (An acute talent for innovation), he noted that we are an industry with “a reputation for development” but that “it keeps making promises”. I found this rather revealing in an elegantly understated way.

Our reputation for discovery is a deserved one. It talks to our past where significant headway was made against significant diseases. The interesting part is that Sir James feels that today we keep making promises that we do not keep. He is, in part, talking about the inflated sales projections for some of our pipeline products.

To emphasize just how off base our predictions can be, Sir James points out that the sales forecasts for propranolol and cimetidine (£250,000 and £5m respectively) were actually off by orders of magnitude. I know of another drug that was off by three orders of magnitude. Clearly even when we have a drug ready for market, even when it is in fact of the caliber to be a blockbuster, industry can be fairly clueless.

According to Steven Paul, President at Lilly Research Laboratories (WSJ, Big Pharma R&D: Things Are Tough All Over), only one in eight drugs in phase II trials will make it to market. It does not need pointing out that making it to market is no guarantee of commercial success. The idea of prospectively making bold predictions based on such unlikely bets is odd, both in the sense that otherwise intelligent people make them, but more so perhaps that nobody notes that this is daft.

As Sir James notes, “very few of the drugs classified as blockbusters retrospectively were designed in that way.”

Written by Pillhead

February 15, 2009 at 7:12 am

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