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Small Pharma Steps Up

Here’s some good news, courtesy of DCAT Value Chain Insights:

“Smaller bio/pharmaceutical companies are accounting for an increasingly larger portion of new products as measured by recent new molecular entity approvals.”

The list of companies presented in the article reads like a Who’s Who of company names you might not even know. But they represent a groundswell of change happening in the industry.

Ironically enough, last month we published a post on blockbuster drugs, the lifeblood of Big Pharma (Blockbuster Drugs Hang On: Is a Post-Blockbuster World in Sight Yet?). And while billion-dollar blockbuster drugs are certainly not dead (or going away anytime soon), the constant stream of new small and virtual pharma companies is certainly a sign of a healthy drug industry.

According to the article, “The rise in product innovation from smaller companies comes as R&D productivity from larger bio/pharmaceutical companies declines.” More telling, however, is the data showing that small pharma companies now dominate drug innovation. An article at PharmaVoice also pointed this out last year:

“A report by HBM partners showcases this trend by tracking the NMEs that were originally developed by small, mid-sized, and big pharma companies. In 2009, small pharma was responsible for discovering 31% of NMEs; now jump to 2018, when 64% of all NME approvals originated from small pharma, a 103% increase over 2009.”

That smaller pharma companies have been hotbeds of innovation isn’t a surprise. What is different is the continuing shift in commercialization strategy. Not too long ago, Big (or at least larger) Pharma would be the partner-of-choice to help push a compound over the finish line and onto pharmacy shelves.

The recent data explored in the DCAT article, however, shows that more and more innovator drug developers are choosing to commercialize compounds themselves – albeit typically using a contract manufacturing partner with the requisite chemistry or biologic experience needed to get to scale.

This is a good thing for any number of reasons. From a purely self-motivated perspective, the growth of our Contract Manufacturing Services line of business over the last few years supports this apparent trend. Despite calls around the world clamoring for ‘reshoring’ and ‘onshoring,’ (including here in India), more attention is focused on the realistic supply chain security objectives of backward integration, supplier diversification, or geographical sourcing. For vigilant and proactive bulk suppliers, CMOs and CDMOs, the opportunities seem quite positive.

But more importantly, it is beneficial to the entire industry.

Big Pharma will be able to identify acquisition targets from a larger pool of drug discoverers and developers (though approved drugs will undoubtedly make them costlier targets).

Small and virtual pharma firms – the innovators – will benefit from the presence of similar-stage firms. From collaborative partnerships or innovation hubs to access to capital, innovation begets innovation. Which – in the pharma space – ultimately begets better human health.

Improving human health, of course, is one of the strengths of small and virtual pharma. They are more likely to tackle orphan indications and rare diseases, foregoing their spot at the blockbuster trough to solve some of the overlooked critical health challenges.

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