Meantime, Merck is planning to knock on FDA's door with two controversial compounds: Phase III cholesterol-buster anacetrapib,
a CETP inhibitor whose first-in-class contender, Pfizer's torcetrapib, famously crashed and burned this time last year; and
taranabant, a so-called cannabinoid-1 receptor inverse agonist—an Acomplia competitor whose NDA is due this year. If Merck
wins, though, it will have scored a trifecta: launching first-in-class drugs in cholesterol, obesity, and, with Januvia, diabetes,
even though the compounds were number two coming into the home stretch.
Another first: The top-seven emerging markets (the old BRIC group—Brazil, Russia, India, China—plus Turkey, Mexico, and South
Korea) will make up one-quarter of global sales growth.
Rapid economic expansion in these countries is fueling a growing middle class demanding better healthcare and using private
insurance to obtain it. But their pharmaceutical consumption is mostly limited to generics, and, according to VOI Consulting's
Todd Clark, counterfeits make up as much as 75 percent of the market.
However promising these markets look, though, "there's a general sense that 'we'll wait a few years until there's a bigger
middle class able to buy brand lifestyle drugs,'" says IMS's Aitken. Companies will continue to make inroads, forming local
partnerships as the industry steps up outsourcing for manufacturing, IT, clinical trials, and even discovery.
Chronic threats to patents further darken the picture. Says Clark flatly: "Pharma must recognize that its global international
property rights are under greater threat now than at any time since the advent of the WHO system. Actions by Thailand and
Brazil have been met largely with silence from the Bush administration—a signal to the world that the US government will no
longer fight on behalf of pharma."
One solution is for drugmakers to price their own drugs at generic prices worldwide once they go off patent, says St. Joseph's
University's Bill Trombetta: "There's money to be made off the 4 billion people living on two bucks a day. But pursuing this
market requires a totally new orientation along with stripping out costs."
Analysts may be impressed with the new outspokenness of pharma CEOs, but they are underwhelmed by their actions. "Progress
is incremental," says Bain & Co.'s Farkas. "There are modest improvements being made to the existing model—rather than throwing
it in the trash."
Many analysts say that pharma has sacrificed innovation at the altar of size and sales. "It's not by chance that the pipelines
have dried up," says Bruckner Group's Michael Russo. "Advertisers and marketers have taken over from the innovators—researchers
and businesspeople—who do the real work of developing drugs."
David Windley of investment bank Jefferies & Co. agrees. "Companies are still going after blockbusters and even megablockbusters,"
he says. "They're just beginning to accept that they're likely to be smaller in the future."
One exception is Novartis' Dan Vasella. At his end-of-year briefing, Vasella specified exactly how much smaller—or "more nimble
and agile," in pharmaspeak—the drug giant would get: In 2008, every Novartis division will max out at six levels. "When things
get tighter, and you get more pressure, then it's much easier to say, Look, it's just not going to continue this way," Vasella
told the Financial Times.