A Very Specialty Moment

Big Pharma is on a shopping spree for biologics and other specialty products. It has the money to buy them. But does it have the mojo to develop and market them successfully—or will the midsize biopharmas make their big move?
Jun 01, 2007

Last September, at Bank of America's 36th Annual Investment Conference, Pfizer's new CEO, Jeffrey Kindler, made a point of singling out his company's specialty business as key to its growth plan. Kindler stated that Pfizer, the ultimate Big Pharma, is also the eighth largest biotech in the world—and aiming to become number one "in the not-too-distant future." Pfizer's biologics products would, he said, generate $1.5 billion for the company in 2006—its biologics pipeline has grown from one to 35 projects over the past decade—and he expected that revenue to triple by 2010.

Kindler is certainly not alone in identifying specialty pharmaceuticals as a strategic avenue of growth. AstraZeneca's CEO, David Brennan, recently projected that "by 2010, up to a quarter of our candidates for full-scale development will be biological therapeutic agents." True to form, the firm's record-breaking $15.6 billion deal with MedImmune in April delivered a fat crop of vaccines as well as late-stage products in oncology, infection, inflammation, and respiratory conditions—and upped the proportion of biologics in AstraZeneca's pipeline from 7 percent to 27 percent, putting it in the same company as Wyeth, Roche, and Lilly. And that's not counting small-molecule specialty products. Whether measured by the rise of biologics in pipelines, deals with large-molecule makers, or New Drug Applications (NDAs), Big Pharma has clearly gotten specialty religion. The reasons for this trend, in an industry that has long thrived on high-volume, small-molecule oral products, are complex. According to the Cambridge Healthtech Institute's Insight Pharma report "Specialty Pharmaceuticals: Driving Industry Growth into the Next Decade," pharma's shift is a strategic response to fierce pressures to reduce R&D costs, increase incremental revenue, and limit both premarket and postmarket risks.

Why Specialty Is So Special

According to IMS Health, specialty products contributed 62 percent of the market's total growth in 2006, compared with just 35 percent in 2000. The cancer market saw unprecedented R&D investment last year, not to mention 12 percent growth. Oncological-products sales are expected to reach more than $40 billion this year, and IMS predicts that it will become the largest single sector in terms of value by 2010. Major plans and payers are also reporting skyrocketing use of cytokines, recombinant products, and other biological classes. As for the total pharma pipeline, 27 percent of all compounds are biologic in nature. (For a definition of specialty products and biologics, see "What Makes a Drug a 'Specialty'?")

What makes a drug a "specialty"?
Revenue potential and risk management may be the prime drivers, but an industry-wide desire to improve public image is also accelerating the shift to specialty medicine. Whereas the public once prized pharma almost uniquely among businesses for its positive role in cutting-edge scientific research and lifesaving drug development, it now views the industry as a marketing juggernaut bent on maximizing revenue—even at the expense of the public's health. A barrage of negative news, ranging from drug withdrawals and rising drug prices to spinning and suppressing negative clinical data, has stretched public trust in pharma to the breaking point. In a 2004 Gallup poll that asked a sample of 518 adults to rate their perceptions of 25 industries, the pharmaceutical industry ranked 23rd—below the movie industry, advertising, accounting, automobiles, and government!

Although a greater emphasis on specialty drugs is anything but a quick fix, it will help get the industry back on track with its most important constituency: patients. Companies will be seen to be wrestling with important and exciting biomedical problems and producing innovative drugs that relieve the burden of disease in terms of societal cost and human suffering.

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