Forecast 2007: At Sea - Pharmaceutical Executive

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Forecast 2007: At Sea


Pharmaceutical Executive


And as Pfizer's case shows, the bigger you are, the harder the job. "For companies built on blockbusters, it takes a lot more success to sustain success," says Lehman Brothers vice chairman Frederick Frank, pointing out that while 94 percent of industry R&D investment originates from pharma, but when it comes to approved drugs, biotech is credited with nearly 70 percent.

Carolyn Buck Luce, a partner in the Global Accounts Group at Ernst & Young, conducted roundtables with pharma CEOs this fall and returned with this report: "Everyone felt that the promises that the industry stands behind—safety, ethics, transparency—have gotten stronger. But with so many sweeping changes shaping the new landscape for pharma, no one knows what the model is going to look like in five years that would deliver on those promises." (See "Connecting the Dots,", for more on what industry insiders think.)

OLD PATENTS, NEW DRUGS

Such dire warnings make it easy to forget that the drug industry remains the nation's fifth most profitable. But 2007 sales will continue to slow. According to IMS, both domestic and global sales grew at an underwhelming six to seven percent in 2006, and market expansion this year will slow to four to five percent here at home.

A bigger spurt is expected in the developing world, notably Brazil, Turkey, and India. And China, the proverbial sleeping giant, is waking up to pharmaceuticals at a rate of 15 to 16 percent. Although local generics still dominate, Buck Luce says, "the branded market potential in China is growing by 30 million people a year. That's [twice] the size of the entire market in France."

In the real France, however, as throughout Europe, price controls, sharper cost–benefit drug decisions, and a jump in generics have slowed growth to three to four percent. To those who say trends like price controls can't happen here, Frederick Frank laughs. "It's already happening," he says.

In recent years, hard times have been defined by loss of patents on blockbusters and few new products to fill the revenue gap. This year is no exception. Compounding Pfizer's woes will be the loss of its allergy med Zyrtec ($1.4 billion in annual sales) and its anti-hypertensive Norvasc ($4.7 billion), though Novartis will keep it company when its own anti-hypertensive, Lotrel ($1.3 billion), goes generic. Sanofi-Aventis will lose sleep over Ambien's patent pop ($1.8 billion), and Imitrex's unbranding will give Glaxo a mighty migraine ($1.1 billion). The only silver lining is that the year's $16 billion in patent losses will be a mere two-thirds of the 2006 hit.

New product launches will probably exceed last year's total of 30, but they won't churn out turbo profits any time soon. Still, this year's crop is rich in the fruits of targeted drug design, marking significant treatment advances that will burnish pharma's bona fides with patients. Merck's Januvia and Novartis' Galvus are the first in a new class of diabetes drugs. Tykerb marks a breakthrough for Glaxo in breast cancer. Wyeth's desvenlafaxine offers a new option in the antidepressant category. AstraZeneca's Symbicort will make a bid for the big asthma market.

And, of course, all eyes will be on Sanofi's weight-loss (and diabetes, and smoking, and who-knows-what-else) drug, Acomplia, as it fights to fulfill its "miracle pill" billing—though first it has to survive its long-delayed date with FDA.

GENERICS AT THE TIPPING POINT

The global war between generics and brands got bloody in 2004, when the number of prescriptions for generics outnumbered brands' for the first time. And in 2007, "Generics will come out in a big way—not just more products, but more companies and more influence," says Albert Wertheimer, director of Temple University's Health Services Resource Center.


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