This document summarizes changes in the global pharmaceutical market, including upcoming drug patent expirations and new drug launches. It finds that blockbuster drug sales make up a large portion of major pharmaceutical company revenues. It predicts that Roche will benefit the most from upcoming drug patent expirations at other companies. The largest growth areas for new drug development are seen as cancer, diabetes, hepatitis C, HIV, and multiple sclerosis. Companies with promising drug pipelines include Roche, GlaxoSmithKline, Biogen, Gilead, and some smaller firms.

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Performance Through Independent Research
Changes
in
the
Global
Pharma
Market:
new
drug
launches
and
drugs
coming
off
patent
EXECUTIVE SUMMARY: makeup.
Pharma blockbuster drug sales make up more There are several block-buster drugs that
of the overall sales of the large Pharma groups are being developed by the major
than ever before, as the winner takes all nature Pharma companies’ world wide that will
of the blockbuster drugs squeezes the rest of substitute the current existing top 10 drug
the market and intensifies the competition in earners. Pfizer will loose its dominant
the “generic drug” area. The rate of growth of position in the industry because its
prescription blockbuster drugs now accounts biggest drug, the cholesterol drug, Lipitor
for ¾ of the entire prescription drug market. currently worth $10.9 is off patent since
November 2011.
The new frontier for Pharma is so called
Pharmacogenomics. Pharmacogenomics aims However this trend is changing. As can
to develop rational means to optimize drug be seen in the table below, Roche in
therapy, with respect to the patients' Genotype, 2014 will be the biggest beneficiary of
to ensure maximum efficacy with minimal global drug sales, with the cancer drugs
adverse effects. Such approaches promise the being the biggest drugs in the world. This
advent of "personalized medicine"; in which is partially because of the loss of patents
drugs and drug combinations are optimized by Pfizer’s Lipitor and Bristol Myers
for each individual's unique genetic Plavix, both cholesterol drugs, and
Source:
IMS
Health
forecast,
World
Drug
Situation,
WHO

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time:
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partially a result of the shift away from small Sclerosis.
molecule drugs of the past to the larger protein
biologicals such as cancer and HIV drugs, The companies with the best drug
which are significant both for their ability to pipelines’ are Roche, Glaxo Smith Kline,
slow the rate of progress of cancer and other Biogen, Gilead, and several smaller
debilitating diseases, [HIV] and for their cost companies like Qiagen, Questcor,
which tends to be 10 times that of the early Spectrum Pharmaceuticals, and Vertex.
cancer drugs like Taxol, breast cancer. We will discuss the opportunities for
investment in more detail in this paper.
Introduction:
The other great area of growth is that of
vaccines. Prevnar, a conjugate This report examines the growth of
Biotech drugs relative to their more
pneumococcal vaccine, and Gardasil, for
tradition molecule drugs, which have
prevention of cervical cancer, are the first produced some of the greatest gains for
two blockbuster vaccines investors in the Pharmaceutical Industry
As mentioned, the greatest innovation in new over the last 20 years.
drugs has been in the area of Cancer The double promise of biotechnology and
treatment, which will become the biggest genomics, especially if delivered through
selling market for drug companies. This is molecule nanotechnology has been
because Cancer has proven to have endless perhaps oversold, as is usually the case in
mutations and can be treated effectively as for emerging technologies.
HIV, with cocktails of drugs that “tell” the DNA
in the affected cells to stop growing, reducing This paper attempts to lay out some more
if not completely arresting the disease. The sensible strategies that an investor might
other areas of development for drugs are pursue in this space.
Diabetes, Hepatitis-C, HIV, and Multiple
Source:
IMS
Health
forecast,
World
Drug
Situation,
WHO

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Exhibit
1.
Drugs
of
major
Pharma
Co.’s
off,
or
coming
off
patent
4
Source:
WHO,
IMS
Health
BIOTECHNOLOGY DRUG industry's fastest-growing market. The
DEVELOPMENT: costs of preventing and treating the
condition worldwide are forecast to rise
Biggest Markets for Drug Research: from $376 billion in 2010 to $490 billion by
1. Cancer: There have been very substantial 2030, says new research.
gains in the knowledge of how cancer actually 285 million people, or 6.4% of the world's
evolves. As cancer is a DNA disorder, the adult population, are currently estimated to
research into the evolution of the disease inside be living with diabetes, and this figure is
the cells that are affected has been the key to set to explode to 438 million (7.8% of the
detecting the changes in each patient. The global adult population) by 2030, Frost &
trigger of the DNA damage in a cancer cell can Sullivan has reported.
be random, a genetic weakness of the patient,
as well as external influences. The new drugs The world's biggest diabetes populations
that have been developed work on a cellular are in India, where 50.8 million live with the
level, and therefore cam be personalized, condition, and China (43.2 million). 70% of
aimed at particular changes taking place in cases are currently found in low- and
cells. In order for the genetic evolution in middle-income countries, with prevalence
cancer cells not to lead to cancerous cells that ranging from 10.2% in the western Pacific
are resistant to drugs, these new drugs, to 3.8% in the African region, according to
[Vemurafenib~Roche, Glaxo~Dabafenib] target K Srinivas Sashidar, research analyst at
a mutation in a gene called B-Raf, present in Frost & Sullivan.
more than ½ of malignant melanomas,
inhibiting growth beyond the point of healthy As well as the significant global burden of
cells, [reducing abnormal growth as with treating and preventing diabetes, the
cancerous cells]. These new dugs have condition imposes a number of economic
absolutely huge economic potential, dwarfing burdens, including lost productivity and
the Cholesterol Drugs from Pfizer and Astra foregone economic growth, he adds.
Zeneca.
The 40-59 age group is currently most
2. Diabetes: represents the pharmaceutical affected by diabetes, but by 2030 this

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dominance is expected to shift to 60-79-year- evidence on new drugs, we are taking
olds. An increase in the number of patients with an important step toward that goal."
the type 2 form of the disease, plus the (FDA News PO3-89, 2003)
emergence of a number of potential new drug
treatments, is expected to raise competition in The pharmaceutical industry is using
the marketplace, says the report. pharmacogenomics in its drug-
development pipeline by correlating
The main segments of the market are insulin
and oral anti-diabetes treatments. While
quantitative measures derived from
metformin remains the first line of choice treatment-specific diagnostic testing
among the latter segment, new forms of co- and the associated therapeutic
therapies, glucagon-like peptide (GLP) outcome, allowing for FDA Phase
agonists, dipeptidyl peptidase (DPP)-IV IIA/IIB of clinical trials with the aim of
inhibitors and sodium-dependent glucose (co) accelerating and facilitating the
transporter (SGLT) inhibitors are expected to development of new molecules. This
become strong competitors in the near future. has reduced costs, as there is less
need for defining diagnostic markers
ECONOMICS OF DRUG
DEVELOPMENT:
to select or predict individual patients
who will respond to therapies. Tests
“Pharmacogenomics holds great promise to based on the genotype of an
shed scientific light on the often risky and individual can be considered as a
costly process of drug development...we intend type of biomarker test. The term
to do all we can to use it to promote the biomarker can be referred to any
development of medicines. By providing characteristic that can be measured
practical guidance on how to turn the explosion as an indicator of a normal biologic
of pharmacogenomic information into real

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process, a pathogenic process or a effective method due to, accessibility
pharmacologic response to a therapeutic and management of data
agent. Biomarkers have been proposed as implementation into clinical practice.
powerful tools, given their capability of
bridging animal and human data, guiding The main criticism of the
drug dose and adjustments, increasing Pharmagenomics model is that it
safety in animal models and in early clinical creates more opportunities for high
development, and establishing initial proof of returns on capital for the “owners” of
efficacy in proof-of-concept studies. the discovery process, but it does
little in terns of disease prevention.
To be successful tools in clinical practice, In fact there is almost no incentive to
biomarkers should present high-positive and prevent disease, just find a
negative-predictive values, be simple, easy patentable cure for bad diseases that
to repeat, sourced from easily accessible arise from bad patient habits.
body fluids and tissues, and cost effective.
Cancer Drugs:
The predictive nature of biomarkers can be
translated in the field of pharmacogenomics. Cancer is very heterogeneous,
Contrast this with testing in human patients, varying both genetically and
which might reach a high level of accuracy phenotypically among patients who
and precision, but will be a less cost– have identical types and stages of

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the disease. Furthermore, a significant under development.
proportion of breast cancer patients are
Currently-available DPP-IV inhibitors include
not responding to chemotherapy
Merck & Co's Januvia (sitagliptin), Bristol-
uniformly, something that is likely to be Myers Squibb/AstraZeneca's Onglyza
genetically determined.[14] Individualized (saxagliptin) and Novartis' Galvus
therapies for various types of solid (vildagliptin), and others are in
tumors are now a reality. The first steps development. Also, numbers of SDLT2
have involved the evolution of tumor inhibitors and glucokinase activators - new
classification, disease prognosis, classes of investigational drugs for the
molecularly targeted treatment and treatment of type 2 diabetes - are currently
response to therapy based on molecular in clinical testing, says the study.
features. In this regard, diagnostic tests Turning to the insulin market, which is
have been developed and are now dominated by modern insulin’s and
readily available for several treatment analogues, Mr Sashidar says he expects
procedures in cancer patients. effective insulin analogues and long-acting
insulin’s to raise their market share in future,
with competition likely to increase with the
Diabetes Drugs: introduction of biosimilars.
The first drug from the GLP-1 pathway to The biggest gain in this market will accrue
receive European Commission approval was most likely to Novo Nordisk, which is set to
Eli Lilly/Amylin's Byetta (exenatide), while benefit the most from the huge epidemic of
Novo Nordisk's Victoza (liraglutide) is the diabetes, especially in emerging markets.
first GLP-1 analogue with 97% similarity to
natural gut hormone. Various longer-acting Hepatitis C:
formulations of GLP-1 analogues are now

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Hepatitis C is one of the most serious chronic hepatitis C virus infection, and
infectious diseases in the world. Hepatitis C leads to long-term eradication of the
virus infects an estimated 170 million virus in approximately 54% of people.
people worldwide. It is a major cause of Treatment response is dependent on the
liver cirrhosis, end-stage liver disease and infecting genotype, with 76 to 80% of
hepatocellular carcinoma. It is also a those with genotypes 2 and 3, but only
leading cause of liver transplant in the approximately 40% with genotype 1 or 4
USA. The virus is primarily transmitted achieving a sustained virologic
parenterally, but there is significant response. The company that has the best
mother-to-child transmission. Partly due to patentable pipeline for the treatment of this
the virus's genetic diversity, it evades the global epidemic is Vertex Pharamceutcals,
host immune response and it has been [VRTX].
difficult to identify candidate vaccines.
However, significant advances have been CONCLUSI ONS:
made in the treatment of chronic hepatitis
As molecule drugs come off patent, the
C virus infection. Currently, the
traditional Pharma blockbusters are
combination of pegylated interferon-alpha becoming more and more difficult to
and ribavirin is the standard treatment for substitute. The effect of this reduction I

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“patentable” molecules, has been the rise of 2007 there was a 22% reduction on drug
generics which have significantly impacted the costs as competition from generics has
cost of prescription drugs. It has been had a major influence on what patients
estimated that had Lipitor not lost their patent, consume, and their health outcomes.
overall prescription drugs, sales for Pfizer would
have 12% higher just for Lipitor in 2007, see 4. There will probably be more pressure
Exhibit 5. on FDA to relax some standards on
experimental drugs developed by new
The United States is the leader in medical start ups, and more focus on a “venture
research, including pharmaceutical approach to drug development, [as with
development. U.S. drug prices are among the Bristol Myers Squibb, buying into late
highest in the world, and drug innovation is stage Phase II pipelines of niche busters,
correspondingly high. In 2000 U.S. based firms that can be used in “drug cocktail
developed 29 of the 75 top-selling drugs; firms approaches” for serious diseases such
from the second-largest market, Japan, as HIV, Hepatitis and most of all cancer.
developed eight, and the United Kingdom
contributed 10. France, which imposes price 5. The focus on the reduction of the
controls, developed three. growth in healthcare spending costs,
suggests that since the greatest
Murray Aitken of IMS Healthcare Insight, the component of new costs in healthcare
premier economic research body in Pharma arise from specialists driven healthcare
economics has suggested that: and relative equipment, that the pressure
will be increasingly placed by private
1. Overall spending in drugs is going to rise healthcare insurers on specialist
less than 8% pa for period to 2017, as generics networks to justify the explosion of
become far more available. However an treatments which not always result in
increasing amount of the benefits to drug better patient healthcare results, which is
companies will come from very few blockbuster most cases are best if preventative
drugs. measures are used, rather than the latest
and most expensive technologies
2. This implies hard times for small molecule developed by specialist networks.
manufacturers. Sales growth us likely to slow
and put pressure on research budgets and
force many mergers. Reduced revenues are
constraining innovation.
3. Greater use of generics will bring costs
savings to the healthcare industry. From 2003-
Sources & References: IMS Healthcare Insight, Norwalk Connecticut, Murray Aitken. Ernst Berndt,
MIT Professor in Applied Economics. Professor David Cutler, Economics Dept, Harvard University.
Caves, M. Whinston, and M. Hurwitz, “Patent Expiration, Entry, and Competition in the U.S.
Pharmaceutical Industry,” Brookings Papers on Economic Activity 1 (1991): 1–48 ; E. Berndt, I.
Cockburn, and Z. Griliches, “Pharmaceutical Innovations and Market Dynamics: Tracking Effects on
Price Indexes for Anti-depressant Drugs,” Brookings Papers on Economic Activity: Microeconomic
2 (1996): 133–188 ; and E. Berndt, M. Kyle, and D. Ling, “The Long Shadow of Patent Expiration:
Generic Entry and Rx-to-OTC Switches,” in Scanner Data and Price Indexes, ed. R. Feenstra and M.
Shapiro (Chicago: University of Chicago Press, 2003), 229–267.

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Most
common
transmission
method
of
Hepatitis
C
10
Area
of
the
world
most
affected
by
increased
mortality
from
hepatitis
C
.
The
dark
red
are
>100
occurrences
for
100,000
inhabitants.
The
orange
>
30
for
100,000
inhabitants

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Gnostam LLC performance Graphs
Gnostam
was
established
February
4th
2004.
Since
inception
the
annualized
rate
for
return
for
a
client
portfolio
managed
by
Gnostam
LLC
has
returned
a
total
8.4%%
to
February
29th
2012.

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