The Changing Face of the Top 10 Pharmacos


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How the major pharmacos have tried to adapt with the new healthcare environment.

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  • Note 2011 market size is from the October 2011 market prognosis report
  • Look at the 2007 protected sales, of all those protected sales that the Top 10 had in september 2007, if they lost everything the minute something lost patent, then at the start of 2013 they could have lost 110bn of those sales they had back in 2007 (ie about 1/3) But in the 2007-2012 period, in mega mergers alone (only 4 deals of the hundreds they’ve done in that time period) they spent $195bn So they spent almost double the amount they risked losing, and the result is they maintained share 
  • Roche enters top 10 in 2006 after acquiring 51% Chugai2011 highlighting: M&A deals greater than $10bn:Pfizer-Wyeth: $68bn in 2009Novartis – Alcon: $38.5bn in 2010/2011Sanofi-Genzyme: $18.5bn in 2011Merck-Schering: $41bn in 2009AstraZeneca-MedImmune: $15.6bn in 2007Roche-Genentech: $47bn in 20092001 sales according to IMS Health World Review 2002. Global Market $396.0bn, Audited market $351.810bnPfizer $26.316bnGSK $24.575bnMerck and Co $18.599bnAZ $16.051bnJ&J $15.593bnBMS $15.008bnNovartis $14.065bnAventis $12.242bnPharmacia $11.901bnAbbott $10.810bn2006 sales according to IMS Health World Review 2007. Global Market $644.9bn, audited market $606.776bnPfizer $46.036bnGSK $36.897bnNovartis $31.533bnSanofi-Aventis $31.040bnJ&J $27.256bnAZ $26.707bnMerck and Co $24.985bnRoche $23.424bnAbbott $17.646bnAmgen $16.139bn
  • Check with Graham re the Lechleiter point
  • Slide Created by: Carolyn Gauntlett, Dec 2012Endo Health Solutions Inc. is an American pharmaceutical company. It was created as a result of a management buyout from DuPont Merck in 1997. Three DuPont Merck executives (Carol A. Ammon, Chairman, President & CEO, and Mariann T. MacDonald, Executive Vice President, Operations, along with another colleague) purchased all of Endo Laboratories L.L.C.'s generic products along with 12 important brand products, including Percocet, Percodan, and Opana. The new company was called Endo Pharmaceuticals Inc. On 23rd May 2012, Endo's shareholders approved a resolution to change the company's name to Endo Health Solutions Inc.Endo is a specialty pharmaceutical company engaged in the research, development, sale and marketing of prescription pharmaceuticals used primarily to treat and manage pain.In 2009, Endo bought Indevus Pharmaceuticals to diversify into endocrinology and oncology. The company entered the male hypogonadism market later in 2010 with FORTESTA 2% gel.------------------------------------------
  • The Changing Face of the Top 10 Pharmacos

    1. 1. The Changing Face of the Top 10 Pharmacos IMS Thought Leadership, March 2013
    2. 2. Agenda • The Evolution of the Current “Top 10” − The changing face of the Top 10 pharmacos − Diversification • What does this mean for innovation? − − − − The switch to specialty medicine Introduction to fastest growing A different approach to growth The sub-blockbuster era • Alternative Business Models − Low Cost Offerings − Consumer Health • Summary 2 1
    3. 3. Pharma companies have tried to adapt their business models to a new healthcare environment Market Yesterday • Prescribers the key stakeholder • Distribution channels simple • Competition simple: other branded on patent agents Company • 4-6 major brands • 1-2 launches/year • Mature markets focus • Primary care focus 3 Today • Payers increasingly dominant • Distribution channels increasingly complex • Competition against generics as well as other brands •Larger number of smaller brands, many multiindication • 4-6 launches/year (new products and new indications) • Focus split between Pharmerging and Mature markets • Specialist care focus
    4. 4. Large Pharma has responded to these changes with consolidation and diversification A series of mega-mergers Sanofi Synthélabo + Aventis Acquisition Year 2009 •$68bn deal • Diversification into consumer health, biologics (Enbrel), strengthen vaccines and animal health Acquisition Year 2003 •$60bn deal • Primarily to attain Celebrex and other complementary assets Roche + Genentech Merck & Co + ScheringPlough Novartis + Alcon 4 Source: Press Releases *Novartis-Alcon deal made up of several deals over the year as majority ownership was bought in stages. Estimated total deal value in the region of ~$40bn Year 2004 “Acquisition” Year 2009 “Acquisition” Year 2009 “Reverse Merger” Year 2010 “Acquisition” •$65.5bn deal • Increase scale and US presence •$47bn deal • Increase pipeline and biologic assets •$41bn deal • Access to consumer health and biologics •~$40bn deal* • Provides entry to specialist eye care market
    5. 5. AZ has highest average deal value whilst Roche has been prolific in low-value deals Five year mean M&A total deal value excluding the key "mega deals"* 4,500 AstraZeneca Average Deal Value, US$m 4,000 3,500 3,000 Teva 2,500 2,000 1,500 J&J Sanofi Lilly Abbott* Novartis 1,000 500 Pfizer Merck GSK Roche 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Number of Deals Source: IMS PharmaDeals 2012. *Excludes Pfizer-Wyeth, Roche5 Genentech, Merck-Schering Plough * The former Abbott not the new spin off
    6. 6. Despite this the Top 10 have failed to clear the 50% global market share threshold seen in other industries Pharmaceutical Market Sales, US$Bn Revenue of Top 10 firms vs Global Pharma Market* Top 10 Players Remaining Market 900 800 715 700 359 600 500 400 300 301 428 184 414 200 100 857 498 244 0 Top 10 Share of Market 2002 2007 2012 43% 42% 42% Source: IMS Health World Review, IMS Health MIDAS Sept 6 2012. 2002 and 2007 are year end results whereas 2012 is MAT 09 2012 *Ten companies are different in each cohort
    7. 7. And they have failed to increase their share of the patent protected market Protected market often seen as stronghold of big pharma Protected Revenue of Top 10 firms vs Protected Pharma Market* 350 Protected Market Sales, US$Bn 330.5 169.5 172.8 Top 10 Players 156.6 157.7 Remaining Market 2007 2012 52% 52% 300 250 200 150 100 50 0 Top 10 Share of Market 7 326.1 Source: IMS Health MIDAS Sept 2012, Market Segmentation, Rx bound. Strips out any products subsequently acquired such as the Wyeth, Schering-Plough, Alcon, Genzyme acquisitions *2007 Top 10 includes Lilly; 2012 top 10 sees Lilly replaced by Teva
    8. 8. The Top 10 players have remained fairly consistent since 2002 with only slight fluctuations Novartis claims the top spot, Lilly falls out and Teva enters Top 10 Corporations based on Sales at ex-manf levels US$ Top 10 Corps 2002 Top 10 Corps 2007 Top 10 Corps 2012 1 Pfizer Pfizer Novartis* 2 GlaxoSmithKline GlaxoSmithKline Pfizer* 3 Merck & Co Novartis Merck & Co 4 Johnson & Johnson Sanofi-Aventis Sanofi 5 AstraZeneca AstraZeneca Roche 6 Novartis Johnson & Johnson AstraZeneca 7 Aventis Roche GlaxoSmithKline 8 Bristol-Myers Squibb Merck & Co Johnson & Johnson 9 Roche Abbott Abbott 10 Pharmacia Lilly Teva Disappeared through M&A Entry into Top 10 Source: IMS World Review, IMS Health MIDAS, Sept 2012. 2002 and 2007 are year end results whereas 2012 is MAT 09 2012. Includes 8 IMS audited OTC sales *If strip out audited OTC sales and just look at ethical market then Pfizer just remains #1 spot by $50m
    9. 9. The face of the Top 10 pharmacos has been changed by the entrance of Teva First non-Western, non innovative-core pharmaco into Top 10 Teva: Overview* +7% 24.4 Sales, US$bn, MAT 09 25 20 20.3 24.9 24.7 • Growth has outpaced many Top 10 pharma companies over the last 6 years • Benefits from strong vertical integration due to own manufacture of APIs 21.5 18.0 15 • Becoming a leader in the biosimilars field with this area targeted for strong future growth 10 • 40% revenue now from nongeneric business, up from 19% in 2007 5 • >20% company revenue derived from Copaxone but generic versions may launch in not-todistant future 0 2007 2008 2009 2010 2011 2012 *IMS data shows greater sales than Teva reports in its financial statements. For year end 2012 Teva reports $20.3bn revenue implying IMS overestimation of 25% 9 Source: IMS Health MIDAS Sept 2012, Teva Annual Reports, Press Releases
    10. 10. Teva has diversified from its early roots but still has a strong generics core Diversified into innovative pharma and consumer health Generics Traditionally a generics firm since founding: • 60% business is from generic pharmaceuticals and “others” (namely APIs) • Leading generics player in US accounting for >20% of all US generic prescriptions • Acquisition of Ratiopharm makes Teva largest generics player in Europe Innovative and Branded An area of focus since the launch of Copaxone in 1997 • 40% business from innovative and branded • Copaxone (MS) and Azilect (Parkinsons) main fruit of innovation • Also active in biosimilars, respiratory and women’s health • Many acquisitions, largest recently being Cephalon for $6.2bn Source: Teva Annual Reports, Press Releases 10 Consumer March 2011 announce alongside Procter and Gamble that they have created a consumer health care joint venture to be called PGT Healthcare. •Will operate in all markets outside USA to develop branded OTC medicines •Partnership expected to start with $1.3bn in annual sales; potential to grow to $4bn by end of the decade •Partnership will exploit opportunities to develop Rx-to-OTC switches to create new brands ...Future New CEO Jeremy Levin announces future strategy December 2012 • "Teva will be a reshaped company... We have a completely new organization, a completely new management team. We are focused on credibility. We are focused on new products. We are changing our pipeline“ • Teva will increasingly focus on new therapeutic entities, or NTEs. Those could be new uses, formulations, delivery methods or combinations of existing products
    11. 11. Top 10 now more differentiated: Biologics and generics key to most Current areas of play do not always represent future strategy Company Pharma (SM) Animal Health Vaccines Biologics BioConsumer Devices similars Health Diagnosti Generics Nutrition cs IPO Jan 2013 Pfizer Novartis Announced 2013 Sanofi Merck Alliance AZ GSK Roche J&J Abbott Teva Sold Jan 2013 = Company active in 2002 and 2012; = Company entered since 2002; Source: Annual Reports, IMS Company Profiles, Press Releases 11 = Company exited since 2002; = No presence
    12. 12. Has M&A and a push for diversification actually helped pharma? To what extent has deal-making been defensive? • M&A is a necessary strategic tool for pharma companies seeking to balance the impact of key growth restrictors on revenues and margins • Leads to a risk of “me-too” deals when companies think their shareholders are expecting them to undertake diversifying deals with the cash they have to hand • Hasn’t increased dominance of Top 10 in the global market Has consolidation and cost-cutting made pharma slower, more risk averse and less innovative? "The wave of consolidation leaves only about a dozen multinational pharma companies that have global reach... There's an innovation ecosystem, and like any ecosystem, it can get out of balance" John Lechleiter, CEO Eli Lilly, Wall Street Journal November 2011 Source: Wall Street Journal November 2011 12
    13. 13. Agenda • The Evolution of the Current “Top 10” − The changing face of the Top 10 pharmacos − Diversification • What does this mean for innovation? − − − − The switch to specialty medicine Introduction to fastest growing A different approach to growth The sub-blockbuster era • Alternative Business Models − Low Cost Offerings − Consumer Health • Summary 13
    14. 14. Only four products launched since 2009 have achieved sales of >$1.0bn globally Achieving >$1.0bn with a launch in the last 3 years: Victoza (Novo Nordisk) ($1.51bn, MAT 09 2012) Prolia (Amgen) ($1.07bn, MAT 09 2012) 14 Gilenya (Novartis) ($1.08bn, MAT 09 2012) Incivek (Vertex) ($1.54bn, MAT 09 2012) Source: IMS MIDAS Sept 2012. Annualized sales of >$1bn in the year September 2011 to September 2012, non-generic products only  Only one of these is the product of a Top 10 pharmaco (Novartis: Gilenya) All launched into areas of high unmet need: • Diabetes • Multiple Sclerosis • Osteoporosis • Hepatitis C
    15. 15. A continuing shift towards specialty medicine is highlighted by the forecast top TAs in 2016 20 18 Spending CAGR 2007-2011 16 Forecast Leading Therapy Classes in 2016 Global CAGR 20122016: 3-6% Specialty Traditional Autoimmune MS 14 12 Oncologics Platelet Aggr Inhib Contraceptives Global CAGR 20072011: 6.0% Narcotic Analgesics 4 Cephalosporins 2 Anti-Epileptics Lipid Regs 0 -2 Immunostimulants Asthma/COPD Antipsychotics 6 Vaccines Antidiabetics Angiotensin II 10 8 Immunosuppressants HIV Antivirals Antivirals excl HIV Anti-Ulcerants -4 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Spending CAGR 2012-2016 Source: IMS Institute for Healthcare Informatics; April 2012 15
    16. 16. New launches will be targeted to smaller patient populations Practically defined niche Sub population in a larger patient population (frequently guideline or payer defined) E.g. new diabetes agents Highly defined (narrow indication) niche Orphan, biomarker defined E.g. Cerezyme, Pulmozyme, Herceptin 16 • More blockbusters will be specialist focused, therefore naturally targeted to smaller patient populations in narrow indications • But even for primary care and other products with potentially broad indications, HTA-lead payer activities will limit the populations available for new products, pushing them to second line and more difficult patients
    17. 17. Where is Innovation still succeeding? Vertex has shot from nowhere into the pharma Top 50 in the last year after successful launch of Incivek 2002-2012: Top 10 Fastest Growing Corps by non-generic revenue to become part of Global Top 50* Fastest Growing 2002-2012 Rank in 2002 Rank in 2012 Jump in Rankings - 42 N/A 2 Actelion 322 50 272 3 Reckitt Benckiser 156 43 113 4 Celgene 103 31 72 5 Gilead 59 16 43 6 Endo HS 61 37 24 7 Shire 42 24 18 8 Otsuka 31 18 13 9 Allergan 39 32 7 10 4 6 1 Vertex 10 Roche Source: IMS Health MIDAS MAT, Sept 2012. Market Segmentation, 17 *Rx and Non Generics only. Methodology – Highest movement in rankings in 10 years to be part of 2012 top 50 companies by revenue
    18. 18. Incivek vs Victrelis provides an interesting case study of niche player vs “Big Pharma” Background: High Unmet Medical Need • Approximately 3 million people are infected with HCV in the United States − ~78% of patients are unaware that they have HCV • 70% of HCV patients are genotype 1 − Genotype 1 patients are poor responders to standard of care treatment (pegylated interferon and ribavirin) prior to introduction of protease inhibitors Setting: David vs Goliath • Incivek and Victrelis, who target genotype1 patients, launched 10 days apart by very different companies − Incivek  Vertex (first launch) − Victrelis Merck (prior HCV footprint) Source: IMS Consulting Group 18
    19. 19. Outcome: Vertex’ Incivek dominated Merck’s Victrelis 2.5 1,400 Cumulative Sales NBRx Volume 1,200 INCIVEK 1,000 800 600 2 400 LCUS$ sales, Billions 200 0 1.5 1 10,000 VICTRELIS 0.5 TRx Volume 8,000 6,000 4,000 2,000 0 0 Incivek TRx Source: IMS Sales & Prescription Data 19 Victrelis TRx
    20. 20. Other top “fastest growing” companies have remained committed to one specialist-led therapy area 2002-2012: Actelion growth 60% CAGR; Global “other cardiovasculars” market growth 32% CAGR •Almost entire company growth is based on one product: Tracleer. This was the first oral treatment approved for PAH and accounts for 92% company sales •Although there has not been a portfolio of equally successful products Actelion appear to have found a successor for Tracleer when it loses patent expiry in 2015 in the guise of Macitentan which has improved safety and efficacy profile 2002-2012: Celgene growth 41% CAGR; Global onco market growth 13% CAGR •Significant proportion of company growth is based on one product: Revlimid, which is indicated for the treatment of multiple myeloma •Vidaza and Abraxane (also indicated in oncology) have also shown strong growth •Has remained committed to the field of oncology with no apparent diversification •Three products account for ~90% company sales 2002-2012: Gilead growth 40% CAGR; Global HIV market growth 12% CAGR •Revolutionised treatment paradigm for HIV through single once daily pill HAART treatment •Increased life expectancy and geographic expansion led to overall market expansion •Organic growth in core competent TA while recent diversification has been seen in to other TAs. •Three products account for ~90% company sales Source: IMS Health MIDAS MAT September 2012, growth from 20 LCUSD. Company websites
    21. 21. If big pharma want to emulate this success they need to adapt to the sub-blockbuster era Fewer blockbusters and more subblockbusters Majority specialist blockbusters Blockbusters and sub-blockbusters focused on specific patient segments 21 • No company will be able to rely on the “one blockbuster pays for all” model of clinical development • All will be forced to dramatically improve their clinical development efficiency, and launch more, more often • Some companies will fail to achieve this – and will exit innovative research and development • Most blockbusters will be driven by a smaller, specialist doctor population, reached by fewer, more highly skilled sales reps • Blockbusters will continue to be driven by mature marketsbecause they will be the type of expensive, sophisticated therapy that only mature markets can fund • Innovative company portfolios will have a larger number of smaller products, focused on highly specific patient segments, often multi-indicational • Individual product expectations will be lower, but companies will be expected to be more consistently successful across a wider set of products
    22. 22. Which means to retain scale big pharma need to successfully launch multiple products The relationship between the number of non-generic launches captured in LEIV and the percentage of launches classified as successful by IMS launch excellence criteria 40 Each dot represents a major pharma company 30 (2009-2012) Number of launches included in LE IV study The more you launch, the less likely you are to be excellent 20 10 0 0 10% 20% 30% 40% 50% Success rate The percentage share of all non generic launches that were classified as excellent in at least one of the IMS excellence criteria (one launch can be launched across multiple countries) Source: IMS Launch Excellence Study IV 2009-2012 Global Study 22
    23. 23. Innovation is still a viable business focus but there must be a tight focus on unmet need and evidence Formula for successful innovation 23
    24. 24. Agenda • The Evolution of the Current “Top 10” − The changing face of the Top 10 pharmacos − Diversification • What does this mean for innovation? − − − − The switch to specialty medicine Introduction to fastest growing A different approach to growth The sub-blockbuster era • Alternative Business Models − Low Cost Offerings − Consumer Health • Summary 24
    25. 25. Companies focussed on cost-saving offerings have thrived through the post-LoE generic boom • Top 10 companies have lost $bns through LoE on key SM blockbusters such as Lipitor, Diovan, Plavix • This has created a boom for the generics companies who can offer substantial savings to payers • Despite this there are few truly international generics companies − Teva, Novartis (Sandoz), Sanofi and Mylan have greatest international reach − Emerging markets and Japan still remain the realm of local players • With the SM LoE cliff lessening significantly after 2015, these companies are now looking to specialty medicine to fuel their pipelines 25
    26. 26. Value Exposure at 2012 sales. USD bn With the SM LoE cliff lessening generics players need to ensure they have specialty skills to prosper 40 Global Biologic Sales (MAT 09/2012), US$ billion Global Generic Exposure (excludes biologics) 8.1 36.2 35 7.3 30 Etanercept (Enbrel) 7.1 27.2 Infliximab (Remicade) 6.2 25 20 Adalimumab (Humira) Insulin Glargine (Lantus) 5.9 20.4 18.3 Rituximab (Mabthera) 5.3 15 Bevacizumab (Avastin) 5.0 Interferon Beta-1A (Avonex, Rebif) 10 5.0 Trastuzumab (Herceptin) 5 4.9 Insulin Aspart (Novomix, Novorapid 4.3 0 2013 2014 2015 4.3 2016 4.0 Specialist Care ($48.2bn) Primary Care ($53.8bn) Total ~ US$ 67 billion 0 Glatiramer Acetate (Copaxone) Pegfilgrastim (Neulasta) Ranibizumab (Lucentis) 5 10 Twelve biologic compounds representing US$ 67bn in sales will lose product patent protection by 2020* Source: IMS MIDAS Sept 2012. *Enbrel US patent extended to 2028 26
    27. 27. Generics significant in both mature and emerging markets: Essential portfolio element for many Top 10 Top 10 Corps 2012 Novartis Pfizer Merck & Co Sanofi Roche Includes Sandoz sales: The number 2 generics player globally, accounting for 16% of the Novartis group revenue in 2011. Strong biosimilars play. Entering biosimilars (development phase) in addition to generics play Entering biosimilars (development phase) Includes generics sales: Generics accounted for 5% overall group sales in 2011. Recently announced plans to develop biosimilar insulins AstraZeneca Generics play will be emerging markets focussed GlaxoSmithKline Generics play will be emerging markets focussed Johnson & Johnson Abbott Teva 27 Includes generics sales: “Established Pharmaceuticals” will account for 25% sales of the “new Abbott” Still strong focus in generics and biosimilars: The most international generics player* Source: IMS MIDAS Sept 2012. *Based on being a Top 5 generics players in multiple regions globally.
    28. 28. Generics companies who aim to compete with the biggest players will attempt to drive margins higher High Growth, Low Margin Generics market growth is outstripping protected market but profit margins are decidedly lower Fragmented market with low barriers to entry Very few generics players are truly international, with many local initiatives 28 • Generics players who have ambitions to be the biggest and best will offer a value portfolio – including “supergenerics”, biosimilars and other value adds to protect against the lowest cost generic competition and to raise margins • Larger generic players will be trying to internationalise the unprotected business, which historically has been much more fragmented than the protected prescription business and compete effectively against local players particularly in emerging markets
    29. 29. OTC benefits from a number of growth drivers while Pharma faces significant constraints Top Corps contribution to growth falling rapidly Low number and quality output from R&D Generics dominating large therapy areas Demand constrained by payers PHARMA OTC Emerging markets have the critical mass to influence growth Companies seek to exploit switch opportunities Key players building strong brand identities 29 Increasing access through new channels Payers keen to promote self medication
    30. 30. But it’s not just about OTC: Even in innovation those who recognise the patient as the next stakeholder find ways to engage the patient directly Patient-centric model (strong relationship with patient) Patient “Pharma” A B2C style business which acknowledges the rise of the consumer 30 Consumer Health and Technology Based Solutions • As preventative healthcare plays a larger role in the life of the consumer companies who are poised to bring innovation into the market and continually expand the market with new offerings will thrive • New technologies will also play a large role in patient education and awareness • Social Media • Mobile Apps • Technology for remote monitoring and interaction
    31. 31. This provides pharma with a great opportunity for direct patient interaction and relationship building Adherence to treatment and recommended care “Education” “Engagement” • Condition explanation • Diary approaches • Raise awareness • Medication “alert” • Dispel myths programs • Interactive tools for condition management • Tailored interactions for paediatric patients 31 Lifestyle behaviour “Education” • Lifestyle education (e.g. health and nutrition info) • Product education (e.g. OTC product info and uses) “Engagement” Interactive tools for consumer health, such as: • Smoking cessation interaction • Weight loss interaction
    32. 32. What can pharma learn from other industries about being consumer centric? Source: IMS Consulting Group 32
    33. 33. Agenda • The Evolution of the Current “Top 10” − The changing face of the Top 10 pharmacos − Diversification • What does this mean for innovation? − − − − The switch to specialty medicine Introduction to fastest growing A different approach to growth The sub-blockbuster era • Alternative Business Models − Low Cost Offerings − Consumer Health • Summary 33
    34. 34. 4 Summary Today’s environment gives pharma more opportunities and options than ever before to become a Top 10 player Dominance for the protected product, mature market dependent pharmaco in the Top 10 is over Innovation-led companies will still have a place Shift in play • Specialty Driven • Biologics in Portfolio • Smaller patient populations • Compete on more level playing field with smallmid size pharma 34 Excellence in multiple launches • Absolute size in protected prescription market will fall • Companies wishing to retain size will need to launch a larger number of smaller products But non-innovation led companies will number more than Teva Low cost player Consumer-led player • Teva is the first Top 10 • OTC Consumer entrant, but may not be Medicines the only one in 5-10yrs • Lifestyle prescription • Drive internationalisation products of the unprotected • Medical Apps business • Value add through super generics and biosimilars
    35. 35. Thank you