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The Unblockbuster – Speeding Cures with Specialty Drugs

For years, industry soothsayers have suggested the imminent demise of blockbuster drugs was upon us (here’s one from 2009 – Goodbye blockbuster medicines; hello new pharmaceutical business models).

But two short years ago, Humira reaped a windfall $16 billion in revenues for maker AbbVie, and was expected to garner $20+ billion in 2018. In fact, Humira is expected to well exceed the $150 billion in lifetime sales achieved by Pfizer’s Lipitor. Other top blockbuster drugs have posted only slightly less-impressive totals.

So are blockbusters really dead?

No, of course not. Here’s a chart from 2014 (right), and nothing has radically changed in the last few years.

But that doesn’t mean “Find the Next Blockbuster” is still the prevailing business model of your average drug company. In fact, business models have meaningfully shifted over the past few decades – especially in the last ten years.

Blockbusters Didn’t Go Away, They Just Got Siblings.
Today’s business model looks less monotone and more like a smorgasbord: M&A, licensing, blockbusters, generics, orphan, niche or expedited-review drugs, and more. In some cases it extends beyond pharma and biopharma, to include devices, diagnostics, healthcare, or other niches.

The trend away from a blockbuster-only model (fewer, bigger $1+ billion drugs) has been a long time coming.

Many companies – even Big Pharma – now use a diversified approach, combining fewer blockbuster-targeted drugs and a collection of niche therapeutics aimed at specialized or rare disease markets. In a SlideShare on LinkedIn, K. Gurjar pointed out the position taken by Glaxo’s former CEO on the blockbuster-only model: It’s a “business model where you are guaranteed to lose your entire book of business every 10-12 years.”

‘Rumors of the Demise of Blockbuster Drugs Have Been Greatly Exaggerated.’
While companies have adopted a multi-faceted approach to the pharma business, they have by no means abandoned the blockbuster drug entirely. In fact, 2019 is expected bring a diverse range of up and coming blockbusters, and even some top drugs that have already fallen off the patent cliff continue to perform well.

But with that being said, it is the niche (specialty) drugs that are attracting significant attention. Returns on investment are notably better, with the blockbuster model returning an estimated 5% ROI and only 1 in 6 drugs delivering returns above their cost of capital.

Specialized drugs, with targeted segments, offer some advantages along the path to market & commercialization. Orphan drug status, expedited reviews combined with smaller, less-competitive and higher-likelihood-of-return markets offer multiple opportunities to spread out and diminish risk. Such strategies are obvious winners in pharma forecasting & projections circles, where lower risk profiles can equate to better accuracy.

2018: The Year of Orphan and Special Drugs
2018 proved a banner year for niche drug approvals. In FDA Marks Record Year for New Drug Approvals (at PharmaTech), the subtitle says it all: “Orphan and cancer drugs continue to lead, but treatments for many common diseases were also approved in 2018.”

Faster Drug Approvals

Last year, about half of new drug approvals benefited from expedited FDA review, whether orphan drug status, Accelerated or Priority Review, Fast Track, or Breakthrough Therapy. Fully one-third of the approvals were designated as orphan drugs for rare diseases.

A banner year for shorter approval processes, however, does not spell doom and gloom for blockbusters. Rather, it highlights the shift towards a balanced drug commercialization approach in which drug companies aim a portion of resources at those big-dollar runaway success drugs while maintaining a substantive portfolio of candidates that benefit from less expensive, faster processes.

Cynthia Challener mentioned in the PharmTech article, “These results suggest that both pharma companies and FDA remain committed to leveraging the shorter approval pathways made possible in the 2012 Food and Drug Administration Safety Innovations Act.”

2018’s list of FDA approvals may have also been indicative of the progression of precision medicine. Clinical populations are being further segmented to deliver more targeted therapeutic responses to highly-specific disease states. Some of these are orphan indications for rare drugs – something with which Neuland is quite familiar.

And the Future Trend is…
At its start, 2019 looks to flip 2018’s script with a focus on common – rather than rare – medical conditions. From PharmTech:

Most of the drugs on FDA’s approval docket through early 2019 include treatments for many common conditions, including heart disease, immune deficiency, diabetes, and influenza.”

In spite of this data point, it’s a safe bet to assume we’ll be seeing more niche drugs – with enough blockbusters thrown in for good measure to keep us all guessing about their eminent demise.

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