Recent innovation in pharmaceuticals has prioritized so-called “first-world problems”; that is, disease areas primarily affecting wealthy countries. Emerging or novel drugs are often designed to target some of the most stubborn ailments, or disease settings, in first-world nations—with new products iterating on past successes and focused on improving patient quality of life. Demographics aside, biopharma companies have achieved notable and substantial breakthroughs in these therapeutic areas, as new advances in particular in the categories of weight loss, osteoarthritis, Alzheimer’s disease, chronic obstructive pulmonary disease (COPD), and psychedelics demonstrate leaps forward in efficacy, tolerability—or both. 

’s 19th Annual Pipeline Report dives into the most promising innovations in these five disease areas, with supporting data provided by Clarivate Analytics.

Obesity treatments have entered the mainstream in recent years, with major breakthroughs in glucagon-like peptide-1 (GLP-1) receptor agonists attracting investment in new research. Clarivate data shows over 350 weight-loss drug candidates currently in various phases of development, with many of them in Phase III clinical trials.

Several of these therapies are being repurposed from other indications such as non-alcoholic fatty liver disease or diabetes, and their mechanisms of action range from peptide agonists to insulin sensitizers and beyond.

Sara Mallatt Stahl, director of research, healthcare at Stream by AlphaSense, says weight-loss drugs have attracted a buzz not seen in other areas.

“People know these drugs by name,” she tells 

. “The breakthrough came in 2018, but the momentum has taken off 

in the last year or two. These GLP-1s slow stomach emptying, so patients feel fuller for longer, which facilitates weight loss.”

Mallatt Stahl says that GLP-1s were originally developed for patients with diabetes, as they also regulate insulin secretions; as the treatments evolved, though, researchers discovered the weight-loss benefits. Now, manufacturers are repurposing these diabetes medications to combat obesity.

“The drugs that are approved right now are showing 15%-20% total weight loss when utilized, which is a big change from the previous category of weight-loss drugs, which showed only 3%-4%,” notes Mallatt Stahl. “However, one major drawback is that these drugs are injectable [rather than oral].”

Mike Ward, global head of life sciences and healthcare thought leadership at Clarivate Analytics, says use and activity around GLP-1s are growing across the globe, even in unconventional places such as China. Ward says that as a result of Novo Nordisk’s branded semaglutide injection, Ozempic, the Danish-based drugmaker is now the largest pharma company in Europe.

“One of the major drivers is that people are looking for more convenient approaches to treating weight loss,” says Ward. “A lot of the first-generation products were taken more than once a day, whereas what we’re looking for is long-acting formulations. The holy grail for any medicine is something you don’t have to take too often and that is the least invasive. Orals are obviously less invasive than injectables, which are less invasive than intravenous.”

Several of the major weight-loss drugs currently on the market are injectable; Novo Nordisk’s Ozempic comes in 0.5 mg, 1 mg, and 2 mg injections, while the company’s Wegovy is a 2.4 mg semaglutide injection. Currently, in the US, Ozempic is approved as a treatment for type 2 diabetes (and is sometimes prescribed off-label for weight loss), while Wegovy is approved as an obesity treatment.

In May 2022, FDA approved Eli Lilly’s branded tirzepatide injection Mounjaro for type 2 diabetes. The drug had also been prescribed off-label for weight loss, but on Nov. 8 it was cleared by FDA to treat obesity, sold under the name Zepbound.

These early successes in weight-loss drugs are inspiring further research and development, with a number of second-generation obesity candidates currently in the pipeline. Lilly is currently developing retatrutide, a once-weekly injection that attaches to GIP, GLP-1, and glucagon receptors; one Phase II trial on 338 overweight adults sponsored by Lilly found that 1 mg of retatrutide per day resulted in a 7.2% decrease in body weight after 24 weeks; the drop was found to be dose-dependent, with higher doses of retatrutide resulting in greater weight loss.

Meanwhile, the search for an oral weight-loss solution continues. Novo Nordisk is currently trialing an oral semaglutide tablet; in May, the company announced Phase IIIa results demonstrating that a 50 mg tablet once per day resulted in 15.1% weight reduction in overweight and obese adults.

Lilly is also pursuing an orally-administered option in this setting. The company’s drug candidate, orforglipron, a once-daily GLP-1 pill, is undergoing Phase III trials for both diabetes management and chronic weight management. Recently, a Phase II trial found that orforglipron resulted in up to a 14% decrease in body mass after 36 weeks, compared to just a 2.3% decrease with placebo.

Other candidates currently in development for weight loss include danuglipron, a twice-daily pill similar to orforglipron; APH-012, a once-daily pill designed to imitate gastric bypass surgery; and bimagrumab, a monoclonal antibody infusion that blocks activin receptors.

The most common type of arthritis, osteoarthritis (OA) is a degenerative joint condition with no cure. Now, though, emerging drug treatments are showing promise in not only reducing symptoms, but modifying the disease itself.

One 2023 study examined the effects of a recombinant Link module of human TSG-6 protein on cytokine-induced cartilage degradation in human knee cartilage cultures. The study determined that Link_TSG-6, developed by Link Biologics, inhibits aggrecanase and collagenase activity, thereby protecting cartilage. In a rodent model, Link_TSG-6 reduced pain behavior and cartilage damage.

Another investigational drug, R805/CX-011, has been found to reduce inflammation in animal models of osteoarthritis and is moving into human clinical trials. The drug was found to modulate GP130, an immune cell receptor that instructs antibodies to attack. The animal study demonstrated that the drug can manage stiffness and pain.

Other treatments are further along in the development pipeline. One plant-based OA drug, known as APPA, is being prepared for a Phase IIb clinical trial. APPA is a Nrf2 and NFkB modulator consisting of two synthetic plant metabolites. The drug has been shown in rat and dog models to reduce cartilage degradation, pain, and bone turnover. Phase I and II studies showed that APPA is well tolerated and generally safe for humans.

Another Phase II trial is currently examining the efficacy of CNTX-6970, a small molecule CCR2 antagonist developed by Centrexion Therapeutics, on knee osteoarthritis pain in osteoarthritis patients aged 40 to 90. The study, estimated to be completed in May 2024, will employ a crossover design; subjects will be randomly assigned to receive CNTX-6970 or a placebo for six weeks before crossing over to the opposite condition for six weeks.

Meanwhile, researchers at UC San Diego are studying the effects of bone marrow aspirate concentrate (BMAC) on knee osteoarthritis in a pilot open-label, non-randomized study. This pilot study began in 2020 and is estimated to be completed by the end of 2023.

Other emerging drug candidates in osteoarthritis treatment include lorecivivint, CYP 004, JTA-004, and SMUP-IA-01. Lorecivivint is a Wnt pathway inhibitor that acts on kinase 2 and kinase 1A. While a recent Phase IIA trial failed to meet its endpoint, lorecivivint is currently undergoing Phase III studies in particular subgroups.

 One Phase III long-term extension trial on patients with knee osteoarthritis found that lorecivivint significantly improved Western Ontario and McMaster Universities Osteoarthritis (WOMAC) pain scores and WOMAC function scores compared to placebo. The study results also indicate that lorecivivint may delay structural progression of knee osteoarthritis.

CYP-004 is a mesenchymal stem cell produced by Australian company Cynata Therapeutics. In 2020, Cynata launched the SCUlpTOR trial, a Phase III clinical study funded by the Australian Government National Health and Medical Research Council and sponsored by the University of Sydney. The trial is examining the effects of CYP-004 on knee pain and cartilage loss in knee osteoarthritis subjects.

Developed by Bone Therapeutics, JTA-004 is a plasma protein solution containing clonidine and hyaluronic acid. The investigational drug was recently acquired by BioSenic. In March, BioSenic announced that it had reevaluated the results of its Phase III trial on JTA-004; this post-hoc analysis found that a single injection of JTA-004 was more effective than placebo at relieving pain, particularly in the subset of patients with the most painful form of osteoarthritis. The company expects JTA-004 to reach the market in 2027.

SMUP-IA-01, developed by South Korean biotech Medipost, is an injectable mesenchymal stem cell treatment that is currently in Phase II trials. In a Phase I study, the injection was found to be safe and effective at relieving pain and improving joint function. The Phase II trial, which started in December 2021, is following 90 patients with mild-to-moderate knee osteoarthritis; subjects will receive a single injection of SMUP-IA-01 and will be followed for one year.

Drugs for Alzheimer’s disease (AD) are undergoing a revolution, as the search for disease-modifying medications continues. Clarivate data shows 750 AD candidates in various stages of development. These drugs include monoclonal antibodies such as BIIB-076, a Phase I drug developed by Neurimmune Holding, as well as repurposed therapies, such as montelukast, an asthma treatment that is currently in Phase II trials for AD. Other notable drugs in clinical testing include the placenta-derived stem cell treatment CBAC-02, made by CHA Biotech, currently in Phase II trials, and NTRX-07, an investigational cannabinoid receptor agonist developed by NeuroTherpia.

Ward says that AD is an interesting space to watch, given that there is now an established route for drug approval. He explains that because the first products for AD have already been approved, the space has attracted much more interest in recent years from pharma companies.

“There was a paper published in the past few weeks that suggested the concept of cell death in Alzheimer’s patients,” notes 

Ward. “It’s one of those diseases we knew was a problem, but nobody had created any acceptable solutions. We’re going to see a lot more effort put into neurodegenerative diseases, so the prospects over the next decade certainly look promising.”

Ward adds that there are several products in clinical development right now, some of which appear to be disease-modifying efforts, which represents an important breakthrough. Prior AD drugs such as Aricept, he says, merely slowed disease progression; an approved, effective disease-modifying AD treatment is something of a holy grail for the life sciences industry.

One of the newest AD candidates undergoing clinical testing is zagociguat (CY6463), a CNS-penetrating soluble guanylate cyclase (sGC) stimulator. Developed by Ironwood Pharmaceuticals subsidiary Cyclerion Therapeutics, zagociguat recently underwent its first human trial, which examined the safety, pharmacokinetics, and pharmacodynamics of varying dosages of zagociguat in a group of healthy adults. The trial found that zagociguat was well-tolerated in the study group and penetrated the central nervous system, resulting in sGC stimulation. The study validated the drug’s mechanism of action, paving the way for future studies.

Other hopeful therapies are closer to potential market entry. One Phase III clinical trial completed this year examined the effects of Lilly’s biologic drug donanemab, a monoclonal antibody that targets amyloid beta protein, in 1,736 subjects with early symptomatic AD, including mild cognitive impairment and mild dementia. Subjects were randomly assigned to receive either donanemab (n = 860) or a placebo (n = 876) intravenously once every four weeks for 76 weeks. The subjects were scored on the integrated Alzheimer Disease Rating Scale (iARDS) at baseline and on study completion; secondary outcomes included Clinical Dementia Rating Scale (CDRS) scores. After 76 weeks, the subjects in the treatment group exhibited significantly better CDRS and iARDS scores than the placebo group. The study authors concluded that donanemab slowed the clinical progression of AD.

 Lilly completed its FDA submission for approval of donanemab in July, and an agency decision is expected by the end of the year.

Monoclonal antibodies have attracted significant attention in AD treatment, particularly since the COVID-19 pandemic. In July, FDA granted accelerated approval to the Eisai/Biogen drug Leqembi (lecanemab), an antibody intravenous infusion therapy that targets removal of amyloid beta from the brain.

 Leqembi underwent a 2023 Phase III trial on 1,795 subjects with AD; subjects were randomingly assigned to receive either 10 mg/kg of intravenous lecanemab once per day, (n = 898) or a placebo (n = 897), for two weeks. Subjects were assessed via the Clinical Dementia Rating-Sum of Boxes scale, through PET scans for amyloid plaque, on the Alzheimer’s Disease Assessment Scale, the Alzheimer’s Disease Composite Score, and the Alzheimer’s Disease Cooperative Study-Activities of Daily Living Scale for Mild Cognitive Impairment. All of the subjects were followed for 18 months. After this period, the patients receiving lecanemab exhibited significantly reduced amyloid plaque markers as well as moderately less decline on measures of cognitive function compared to placebo.

Other notable drug candidates in development for AD include mecripyrine hydrochloride, an acetylcholinesterase and tau protein inhibitor in Phase I trials, [18F]-AM-PBB3, an investigational tau tracer in Phase II studies, and donepezil, a cholinesterase inhibitor currently in Phase I.

It’s been several years since a new drug for COPD came to market. To date, the major therapies for the debilitating condition, often linked to smoking, have consisted primarily of corticosteroids, bronchodilators, methylxanthines, and biologics; these drugs typically aim to reduce symptoms.

Today, however, therapies are in the pipeline that target specific COPD biomarkers. One such candidate, dupilumab, holds promise as a disease-modifying drug for the condition. The monoclonal antibody, already a blockbuster seller, branded as Dupixent, for several indications, including atopic dermatitis and asthma, recently underwent a Phase III trial in patients with COPD with 300 blood eosinophils per microliter and an elevated exacerbation risk. In this study, subjects were randomly assigned to receive either 300 mg of dupilumab via subcutaneous injection (n = 468), or a placebo (n = 471), once every two weeks. The subjects were assessed for number of COPD exacerbations after one year, as well as for forced expiratory volume (FEV) and St. George’s Respiratory Questionnaire (SGRQ) scores at baseline and after one year. Finally, subjects had blood taken at baseline and after one year, and were assessed for blood eosinophil count. After one year, those who received dupilumab had superior lung function, a better quality of life, and fewer exacerbations than the placebo group.

Meanwhile, several other biologics originally designed as asthma treatments are in the midst of human trials for COPD,

 including mepolizumab, benralizumab, and itepekimab. These treatments are in various stages of clinical development for COPD based on their strong effects on asthma exacerbation frequency.

But monoclonal antibodies aren’t the only major investigational efforts underway hopeful of reshaping COPD therapy. Ensifentrine, a PDE3/PDE4 dual inhibitor, has completed two Phase III trials and has been submitted for US approval with a PDUFA date of June 26, 2024. During Phase II studies in subjects with COPD, ensifentrine was found to have bronchodilatory properties, to improve symptoms in COPD patients, and to improve quality of life. These findings held, regardless of whether ensifentrine was administered alone or in combination with other drugs.

Combination treatments are also a growing trend in COPD research. One Phase III trial examined the effects of a triple-combination of inhaled budesonide, glycopyrrolate, and formoterol relative to dual therapies. The study found that triple-therapy resulted in a lower rate of moderate-to-severe COPD exacerbations after one year compared to dual therapy.

Big Pharma organizations such as AstraZeneca are continuing to innovate in COPD research, having identified various proteins, such as IL-33, myeloperoxidase, and forkhead box O4, as major disease pathways.

This primary research is illuminating potential new mechanisms of action that could warrant pharmaceutical development.

PSYCHEDELICS ATTRACT ATTENTION AND CAPITAL

Psychedelic medicine has sparked notable advances in mental health treatment, and is considered the first major innovation in the field since the rise of selective serotonin reuptake inhibitors (SSRIs) in the 1980s. While much of the research around psychedelics has been in existence since the 1970s, the Nixon Administration’s War on Drugs put a significant chill on psychedelic research for several decades. Now, though, psychedelics are once again coming to the forefront of medical research, given their promising therapeutic results.

“Psychedelics are quite hot in terms of their potential for mental health,” Ward tells 

. “I think that’s going to be a challenge for regulators. We’re seeing a lot of venture capital going into the psychedelics space, which is a proxy for what will be hot in five or 10 years’ time.”

Clarivate data shows more than 270 psychedelic drugs currently in various stages of development. These treatments are primarily focused on mental health and addiction conditions, including depression, eating disorders, post-traumatic stress disorder, and alcoholism.

David Cavanaugh, founding partner at DeciBio Consulting in Los Angeles, says several of these drugs are now coming to market. FDA approved ketamine several years ago, he notes, and methylenedioxymethamphetamine (MDMA)-assisted therapy is slated to enter the market within the next 18 months.

“There are a lot of interesting uses for these drugs,” says Cavanaugh. “There are several challenges, though, because they’re not the typical pharmaceuticals. This model is very different because of the fact that it’s drug-assisted therapy.”

Cavanaugh explains that psychedelics enable patients to interact with their trauma in ways they couldn’t before, enabling a superior benefit of psychiatric therapy when medication and therapy are combined.

This combination approach is a new and different model for pharma companies; Cavanaugh notes that the Multidisciplinary Association for Psychedelic Studies (MAPS) protocol for MDMA requires 40 hours of therapy. He adds that therapy is required 

before, during, and after drug-assisted procedures; while this is very intensive and burdensome for providers, Cavanaugh says the clinical results are excellent.

“Most of the drugs in the mental health space are decades old,” he tells 

. “If you look at drugs for PTSD, they don’t really work well. They don’t resolve the PTSD. The psychedelics are game-changing.”

Cavanaugh points to the MAPS trial as proof of psychedelics’ potential; in this study, a majority of patients on the treatment protocol no longer qualified for the definition of PTSD after treatment. However, he notes there are several barriers to entry that psychedelics face.

“The go-to-market for these drugs is quite different,” says Cavanaugh. “We have a shortage of mental health clinicians, so how do you bring these drugs to market when the therapists aren’t available? Plus, finding spaces to do the drug intervention sessions will be challenging. The sessions are eight hours long, and they’re typically done in a place with a bed so the patient can relax.”

Cavanaugh also notes that because psychedelics are controlled substances, there are significant restrictions around who can administer them. He says MDMA-assisted therapy will likely require an FDA risk evaluation and mitigation strategy (REMS) due to the addictive nature of psychedelics. Furthermore, therapists will require specialized training in administering the therapy. The most substantial barrier to access, though, will be reimbursement.

“For commercial private-pay insurance, there are even more challenges, because the drug and the therapy are insured in different groups within these payers,” says Cavanaugh. “The groups who evaluate whether a drug is part of their formulary would make decisions around the drug, but there are different groups who make decisions around therapy. And, frankly, therapy isn’t well-covered in the United States.”

As a result of these challenges, according to Cavanaugh, there will likely be substantial restrictions around who can access psychedelic therapy. For instance, insurers will likely require patients to try and fail conventional treatments first before covering a psychedelic option. There will also be a question of copays; those associated with psychedelics could be prohibitively expensive.

Still, these drugs are demonstrating strong efficacy in clinical trials. One 2023 open-label trial examined the efficacy of ketamine therapy (n = 195) relative to electroconvulsive therapy (n = 170) in treatment-resistant depression. The patients received either electroconvulsive therapy (ECT) three times per week, or a 0.5 mg/kg ketamine infusion twice per week. Subjects were assessed for scores on the Quick Inventory of Depressive Symptomology Self-Report, as well as memory tests and self-reported quality of life.

Fifty-five percent of patients in the ketamine group showed a response, compared to 41% of patients in the ECT group. The latter was also associated with memory impairment and adverse musculoskeletal effects, while ketamine therapy was linked with disassociation. The study authors concluded that ketamine therapy was noninferior to ECT for treatment-resistant depression.

There are several other psychedelic candidates currently in various stages of clinical and preclinical development, including midomafetamine, mebufotenin, esketamine, and mescaline, to name a few.

The emerging drug development pipeline is full of advanced therapies designed to target so-called “first-world problems” or afflictions. From obesity, to Alzheimer’s disease, to COPD, to osteoarthritis, to psychedelics for mental health conditions, these promising medications are pushing the boundaries of science and building on innovative paths to deliver promising results. As the research activity continues and intensifies, the opportunities to reshape these disease settings—from treatment outcomes to quality of life—should be ample.

Mike Straus is a freelance writer based in British Columbia, Canada. His work has appeared in Nutritional Outlook, Hoist, and Massage Therapy Canada, among other publications.

Chen, E; Garde, D. Eli Lilly Gets FDA Approval to Sell Mounjaro as Obesity Drug Called Zepbound. STAT. November 8, 2023. https://www.statnews.com/2023/11/08/obesity-eli-lilly-mounjaro-zepbound-fda/

Jastreboff, A.M.; Kaplan, L.M.; Frias, J.P.; et al. Triple-Hormone-Receptor Agonist Retatrutide for Obesity – a Phase II Trial. 

389 (6), 514-526. https://pubmed.ncbi.nlm.nih.gov/37366315/

Novo Nordisk A/S: Oral Semaglutide 50mg Achieved 15.1% Weight Loss (17.4% if All People Adhered to Treatment) in Adults with Obesity or Overweight in the OASIS 1 Trial. Novo Nordisk. May 22, 2023. https://www.novonordisk.com/news-and-media/news-and-ir-materials/news-details.html?id=166110

Wharton, S.; Blevins, T.; Connery, L.; et al. Daily Oral GLP-1 Receptor Agonist Orforglipron for Adults with Obesity. 

389 (10), 877-888. https://www.nejm.org/doi/full/10.1056/NEJMoa2302392

Drummond, S.P.; Bartnik, E.; Kouvatsos, N.; et al. The Recombinant Link Module of Human TSG-6 Suppresses Cartilage Damage in Models of Osteoarthritis: A Potential Disease-Modifying OA Drug. 

. 31 (10), 1353-1364. https://www.sciencedirect.com/science/ article/pii/S1063458423008026

Abrams, Z. Potential Relief for Osteoarthritis Moves to Clinical Trial After Animal Studies. Kerck School of Medicine of USC. March 22, 2023. https://keck.usc.edu/potential-relief-for-osteoarthritis-moves-to-clinical-trial-after-animal-studies/

Sullivan, D. Plant-Derived Osteoarthritis Drug Ready for Further Phase II Trials. Longevity.Technology. March 7, 2023. https://longevity.technology/ news/plant-derived-osteoarthritis-drug-ready-for-further-phase-2-trials/

Wallace, M. A Study to Evaluate the Safety and Efficacy of CNTX-6970 in Subjects with Knee Osteoarthritis Pain. UC San Diego Health | Clinical Trials. October 2021. https://clinicaltrials.ucsd.edu/trial/NCT05025787

Kalunian, K. Bone Marrow Aspirate Concentrate (BMAC) Treatment for Knee Osteoarthritis. UC San Diego Health | Clinical Trials. July 2020. https://clinicaltrials.ucsd.edu/trial/NCT04716803

Sabha, M.; Siaton, B.C.; Hochberg, M.C. Lorecivivint, an Intra- Articular Potential Disease-Modifying Osteoarthritis Drug. 

29 (12), 1339-1346. https://pubmed.ncbi.nlm.nih. gov/33096010/

Biosplice Announces Interim Data from Phase III Long-term Extension Clinical Trial in Knee Osteoarthritis and the Initiation of a New Phase III Trial. Biosplice Therapeutics. December 15, 2022. https://www. biospace.com/article/releases/biosplice-announces-interim-data-from-phase-3-long-term-extension-clinical-trial-in-knee-osteoarthritis-and-the-initiation-of-a-new-phase-3-trial/

Cynata Therapeutics Limited Announces Phase III Osteoarthritis Clinical Trial Commences. Market Screener. November 10, 2020. https://www.marketscreener.com/quote/stock/CYNATA-THERAPEUTICS-LIMIT-14942262/news/Cynata-Therapeutics- Limited-Announces-Phase-3-Osteoarthritis-Clinical-Trial- Commences-33625612/

BioSenic Reacquires Global IP Rights and Provides Update on JTA-004 Development. GlobeNewswire. May 17, 2023. https://www.globenewswire. com/news-release/2023/05/17/2670629/0/en/BioSenic-reacquires-global- IP-rights-and-provides-update-on-JTA-004-development.html

Articles

Feature

Pharm Exec’s 19th annual report on the trends of the day in drug development examines the surging investment in new treatments and advances for so-called “first-world” conditions, capturing the landscape of five expanding therapeutic areas: weight loss, osteoarthritis, Alzheimer’s disease, COPD, and psychedelics.

2024 Pipeline Report: First-World Focus

The life sciences industry often faces unique struggles, but there’s one aspect of the modern world where it faces the same dilemma as everyone else.

Ask any office worker how they feel about the number of logins and passwords that they must keep track of, and you’re almost guaranteed to get a negative response. As more and more companies move every aspect of working into the digital world, an increasing number of programs and apps become necessary. With each new app comes a new password that must be maintained. As most would agree, it’s simply not safe to use the same password for every login, which means that employees are expected to remember and regularly update a growing roster of passwords.

This issue came up during a recent conversation I had with Paige Bingham, CEO of Meeting Protocol Worldwide.

“One time, a coordinator at a clinical trial site showed us a binder that was just for one study and it’s all of the logins and the passwords for all of the technology that she had to use,” she said. “That was just one study that that site does, and if you multiply that out, of course they’re overburdened.”

This issue also was raised repeatedly at Veeva’s R&D Summit in Boston, MA, in September. While there, I was able to speak with several industry professionals about ushering the pharma industry into the digital age.

For example, during a roundtable event with Merck’s Cortney Gilbert, senior director of business system management and innovation, he discussed the company’s digital transformation journey. This involved bringing various departments online, each with their own unique needs and issues. These departments then need to be able to communicate this digital information to each other.

“The bulk of the effort is just using brute force to keep everything synthesized that we need, because we don’t have a unified platform,” he said. “We have disparate systems. You must patch them together. That’s where a lot of our time and effort goes.”

Organizations like Veeva offer unified platforms designed to be used across multiple departments. While being able to limit the number of passwords that employees need to keep track of, this also helps solve another problem that’s unique to pharma.

Not every department in a company is going to look at data the same way. This can be due to a variety of reasons, such as logistical or regulatory reasons.

Gilbert offered this example: “Gender is a data element that is evolving. In some cases, regulations will say that gender must be called A,B,C,D, and E, and other regulations might say it’s something else. Then there might be regulations that say we need a data point like gender identified at birth versus gender identified later in life. When you get into that, it’s not even a matter of organizational resistance in any way. It’s a matter of having two things that are super related, and we have to call them something; so how do we do that?”

This isn’t just a theoretical dilemma, either. According to Bingham, this is an issue that workers in the life sciences industry are already struggling with.

“We hear the clinical trial sites and their concerns and issues that they’re having with all the tech that is being thrown at them from every single sponsor,” she said. “Every single study has multiple forms of technology, so things like a single sign-on can just make it that much easier for them to sign on once to access multiple platforms from a single site.”

Bingham points out that that this is an issue that she’s seen raised by everyone from clinical trial site coordinators, investigators, and researchers to even CEOs of major companies.

She continued, “It would be fantastic if there was some way that all these pieces of technology that we’re asking the sites to use for these studies could all talk to each other much more seamlessly, so that the sides aren’t having to enter the same piece of data and information into 20 different systems. We’re not there yet.”

Technology is supposed to make life easier, and in many cases, it can. At the same time, as is the case for most enterprises, including pharma, adding and merging in an overabundance of disconnected programs and apps can create entirely new problems. Workers can find themselves being forced to enter the same piece of data multiple times into different programs, spending more time than they should resetting forgotten passwords, and logging in and out of different programs just to perform simple tasks.

Columns

There is no cure for having to remember countless logins/passwords.

Pharma Should Embrace the Single Sign-On

22nd annual Pharmaceutical Industry Audit. We present a unique financial performance analysis of the top 15 publicly traded biopharmaceutical companies (“The Nifty Fifteen”) based on 2022 sales revenue and other financial metrics. We focus on a number of financial performance metrics, especially critical metrics such as growth in shareholder enterprise value, enterprise value to sales (EV/S), and return on invested capital (ROIC). Regarding the last metric, we introduced the impact of weighted average cost of capital (WACC) in September 2019. WACC adjusts ROIC by assessing the difference between ROIC and WACC. The difference measures the range of creating shareholder value among companies.

This year’s Audit relies on secondary reported information for the 2021–2022 time period. The metrics are also weighted reflecting their relative importance in assessing a company’s performance. Some metrics are more important than others. For example, sales growth is important, but sales growth can occur as a result of mergers and acquisitions and in-licensing. So it takes a back seat to more critical metrics such as ROIC, which measures how well a company is managed, including margin management (the profit and loss or income statement) and asset management (the use of assets on the balance sheet), and most importantly, whether ROIC exceeds the cost of capital (the cost of debt and the opportunity cost of stock equity, which are reflected by WACC).

Two metrics are included that are not weighted: sales, general, and administrative (SG&A), or overhead; and profit per employee.

The higher a company performs on a metric is reflected in a ranking based on the number of points it receives per metric. The highest metric for this year’s Audit is 15 based on the number of firms in our Audit. For example, if a company places 14th (second highest) on the critical metric EV/S, it receives 42 points on the metric (14 rank x weight of 3). In another example, if a company comes in at a ranking of five (five places from the bottom), on the metric gross margin (pricing power), its total points would be 10 (5 rank x weight of 2). The three major financial metrics (enterprise value or shareholder value growth; EV/S; and ROIC) have a weight of 3; the remaining metrics are weighted 2.

Basic indices are the growth of the US economy and inflation. You have to be able to grow faster than the US economy: around 3% in 2022 and higher than inflation as measured by the Consumer Price Index (CPI), about 4% for 2022. Other important benchmark metrics for 2022 include:

Standard & Poor’s (S&P) 500: down 19.4%

Table 1 shows sales in US dollars along with sales growth for our 15 pharmas. It is good to grow, especially organically, compared to just acquiring companies. But that’s easier said than done for companies at high sales levels such as Johnson & Johnson (J&J), Novartis, and Roche.

The average dollar sales for our 15 companies was $45.1 billion in 2022, vs. $41.9 billion in 2021: a growth rate of 7.6%. The key metric in Table 1 is sales growth, with Pfizer increasing the fastest, due in part to its outstanding vaccine numbers. Of our 15 companies, six showed a sales decrease for 2022, while four companies posted double-digit sales growth.

The Fortune 500 combined revenues grew 12.8% in 2022, outpacing our Nifty Fifteen.

ENTERPRISE OR SHAREHOLDER VALUE AND GROWTH

This is the first of the three crunch metrics; EV/S and ROIC are the others. There are other worthy performance metrics (e.g., corporate responsibility, sustainability, the best places for women and minorities to work,etc.), but our focus is financial performance and enterprise value and growth. Did a company create or add to shareholder (enterprise) value or destroy shareholder value?

EV is the sum of an organization’s market capitalization; then add in debt and adjust for cash and other current assets. Simply put, EV is the market value or market capitalization of a company. Table 2 shows the pharma with the highest EV is J&J at $441.2 billion, a slight drop from 2022, likely due to the upcoming split off, breaking out pharma and devices from consumer health products. The company that grew its EV the most was Merck & Co. To put that in perspective, the average EV for our 15 pharmas in 2022 was $234.1 billion, an increase of 17.3%. Seven of the companies increased shareholder or enterprise value by double digits.

Noteworthy EV performers in addition to Merck were Eli Lilly, Novo Nordisk, Novartis, Gilead, and Biogen. In terms of biggest companies by market value, J&J and Lilly place 9th and 17th, respectively, on the Fortune 500.

EV and EV growth are very important performance metrics. EV/S supplements that metric by assessing which firms are still climbing 

so-called “value” stocks—stocks that, if not growing in upside market cap, still pay noteworthy dividends and are solid businesses.

Table 3 lists EV/S. The average EV/S for 2022 is 5.25. At the top for 2022 is Lilly at 12.68. Coming in a close second is Novo Noridisk at 9.28, followed by Amgen, AbbVie, and AstraZeneca. The higher the EV/S ratio, the more likelihood the company’s performance is going to get better.

Combining tables 2 and 3 encompassing EV, we see that Lilly and Biogen are lifted by progress on Alzheimer’s disease drugs. And Lilly and Novo Nordisk are riding high on their diabetes/obesity therapies, Mounjaro and Wegovy, respectively. AstraZeneca’s oncology franchise, comprised of Lynparza, Tagrisso, and Enhertu bode well, according to Evaluate Vantage. Though not nearly at the same pace as in the last two years, COVID-19 vaccine and antiviral, Cominarty and Paxlovid, respectively, will keep Pfizer’s sales growing.

EV/S is impacted by factors on the horizon for a drug manufacturer. According to a column by Evaluate Vantage’s Lisa Urquhart published in May 2022, these relatively high EV/S ratios are due to a fresher stockpile of recent introductions, or as she terms it, better prospects reflected by a company’s “freshness index”—what percentage of products is less impacted by patent erosion. It is good to be fresh. By definition, a company with two-thirds or more of its revenue coming from relatively new products is an innovator. New products would command higher prices when they come to market. According to Evaluate Vantage, the “freshest” among our Nifty 15 are Pfizer, Novo Nordisk, Roche, Lilly, Gilead, and AstraZeneca.

Yes, there is net-net and list price vs. net price, but at the end of the day, there is gross margin, which is tantamount to markup. As Warren Buffet would call it, “the moat around your castle.” Gross margin reflects an organization’s power to maintain or, even better, increase price.

This metric represents total revenue minus cost of goods sold from the income statement. This is quintessential margin management: how price is managed while simultaneously managing operating costs to produce net income. The higher the gross margin is, the more a company is able to cover operating expenses, including SG&A.

Table 4 shows Novo Nordisk at the top with a gross margin of 82.5%, a slight increase over 2021. The biotechs rule pricing as they have ever since the first 

Industry Audit in September 2002. The gross margin average for our 15 for 2022 averaged 69.7%. Only three companies experienced a decrease in gross margin.

Staying with margin management, Table 5 shows pre-tax operating income, or profit to sales. Again, the higher the gross margin is, the more that contributes to improving pre-tax operating income. Operating income is total revenues minus cost of goods sold and minus operating expenses related to a firm’s typical business. It excludes one time gains and losses, dividend income, and interest income.

At the top in this metric is Novo Nordisk with pre-tax operating income of 39.1%, a slight drop from 42% in 2021. The average figure for 2022 was 24.7%. Only eight of our 15 pharmas saw their pre-tax operating incomes rise for the year.

Note the extraordinary profitability of Novo Nordisk, Biogen, and Pfizer, all in the 30s on the percentage scale. Comparing our Nifty 15 to the Fortune 500, while the latter sales increased, their combined profits dropped by 15%. In terms of absolute dollar profits, Pfizer at $38 billion, J&J at $17.9 billion, and Merck at $14.5 billion would place 7th, 13th, and 18th, respectively, on the Fortune 500 list.

Gross margin and pre-tax operating income have to do with margin management; sales to assets has to do with asset management. If a firm is at $70 billion in sales, for example, it won’t be doubling revenue anytime soon. If the company has also curtailed SG&A and disposed of assets, it won’t be cutting operating expenses in half anytime soon either. Then it turns to asset management to do a better job making use of, not necessarily owning, assets.

When you multiply profit to sales (pre-tax operating income) by sales to assets (asset management), you get a far more important measure: return on assets. A company can have a relatively low profit margin with a relatively high sales-to-assets ratio that will result in a better performance in terms of ROIC. J&J, for example, stands out for its impressive combination of margin management and asset management.

As seen in Table 6, Novo Nordisk’s sales-to-assets ratio is 0.78. For every dollar invested in assets, Novo Nordisk gets back 78 cents. Roche comes in at No. 2, getting back 67 cents for every dollar invested in assets. In our latest Audit, only six companies rank at the average sales-to-assets ratio or above regarding how productive they are in managing their assets.

Now we come to the mother of all metrics: ROIC. ROIC is net income left over to shareholders as a percent of debt and common stock. According to longtime organizational consultant Mark Van Cleaf in 

, the best measure of business performance is ROIC—how much is a company generating on its capital investments, plant and equipment, minus the cost of that capital, debt, and equity? Combine this with our relatively new addition to the Audit: weighted average cost of capital (WACC). According to Van Cleaf, management should be providing value that exceeds its cost of capital. For example, two organizations can have a ROIC of 10%, but company 1 has a WACC of 12% while company 2 has a WACC of 7%. The first firm is creating shareholder value while the second one is destroying shareholder value.

Prior to the mid-1980s, the conventional wisdom was that debt had a cost (the rate you pay for borrowing), but issuing stock was free. But what if the peer groups an organization competes with have a higher ROIC than the company? Even though the firm shows a profit, it is destroying shareholder value if its profit is below its peers’ average. What return could an investor get by investing in an organization of equal risk? This was the brainstorm of Stern Stewart, a consulting firm based in New York City.

Our source for WACC this year is gutu.com, which relies on three years of income statements and balance sheets to arrive at a company’s WACC. Table 7 shows Novo Nordisk far out in front with a ROIC of 55.9%, a drop from 64.1% for 2021 but still a heady performance. Roche ranks second at 26.1%. Average ROIC decreased to 18.1% in 2022, from 19.1% in 2021. To avoid overstating the impact of ROIC and double-counting its value, we use the ROIC number to come up with the rankings on this metric. But the inclusion of WACC in Table 7 tells an interesting story: The greater the difference between ROIC and WACC, the greater the return to shareholders. Aside from Novo Nordisk’s outsized ROIC, the firms with the most impressive creation of shareholder wealth for 2022 (spikes of at least 10 percentage points) were Roche and Lilly, followed by Pfizer. Merck, Biogen, J&J, and Amgen. In fact, all placeholders in our Nifty 15 created shareholder value in 2022.

This metric is not weighted in the rankings. It is interesting, however, to show how profitable the pharma sector is. According to FactSet, for 2022, Pfizer produced the most profit per employee at $377,904 each, as indicated in Table 8.

SELLING, GENERAL, & ADMINISTRATIVE EXPENSES TO SALES

SG&A (see Table 9) is another metric that does not impact the rankings. It is still important because the expenses in this category are necessary to run an organization and constitute routine spending such as rent, salaries, advertising, marketing, legal, and more. Laying off and firing workers costs money in severance before it begins to pay off. It’s also important to keep in mind that this is a one-year comparison. A company can be making investments in advertising, training its sales force, etc., and that will pay dividends down the road. One swallow does not a season make.

Opportunities exist to cut advertising costs by being more efficient with agencies and revamping supply chains. Also, SG&A can increase, but it is the goal for sales growth to grow faster, thereby lowering the SG&A-to-sales ratio. Ballooning overhead leaves

The average SG&A-to-sales ratio for our 15 pharmas in 2022 was 40.5%, a slight increase from 39.6% the previous year.

Table 10 on reveals the winner of this year’s Audit: Novo Nordisk, which captured the top spot for the fifth straight year. Merck finished a close second, followed by Lilly, Amgen, and AbbVie rounding out our “Fab 5.”

Finally, I want to return to a performance discussion we touched on in the past: The Dr. Bill Trombetta Hall of Fame for Outstanding Management Performance. In a few editions of the Audit we focused on two measures: profit to sales multiplied by sales to assets = profit to assets, a crude version of the more powerful performance metric: ROIC. I want to go back to such a year capsule evaluation, but in terms of a new metric, PSE— profit grows faster than sales/and sales grow faster than expenses (SG&A). I am calling this “Dr. Bill Trombetta’s Annual 

Pharmaceutical Industry Audit Trifecta.”

What doth it profit a firm whose sales growth is exceeded by its growth in SG&A (overhead, burden)? And what if sales growth is lower than the growth in profits? Again, it would be unfair to penalize or reward a firm for its SG&A spend in a given year: the variable cost spend could be an investment that will pay off in the near future or it may be a sign of overhead bloat.

But in a given year, if a company can grow its sales faster than SG&A spending and grow its profits faster than the growth of its sales, this is worth recognizing.

Sales should grow faster than SG&A spending over time. And profit growth should exceed sales growth. What does it mean if revenue grows faster than profit? It suggests that the organization is profiting less from each dollar of sales revenue. Perhaps sales growth is growing in strategic business units or product lines that carry lower profit margins. It also could mean increasing competitive pressure.

Given the rationale above, our top Trifecta performers in no particular order for 2022 are Lilly, Sanofi, Amgen, and GSK. Hats off to this foursome for a well-managed financial performance for 2022.

Bill Trombetta, PhD, is Professor of Healthcare Strategy & Marketing at St. Joseph’s University Haub School of Business in Philadelphia. He can be reached at trombett@sju.edu

A look at the performance of the top 15 companies across seven business-key metrics, including the latest standouts in market capitalization and creating shareholder value.

22nd Annual Industry Audit: The Pharma Value Picture

Artificial intelligence (AI) analytics are fast becoming essential in laboratories that want to optimize processes and make better decisions. A McKinsey report

 revealed that over a quarter of companies with proactive AI strategies credit at least 5% of top-line profits to AI. On the other hand, Gartner found that implementing AI could fail—leading to “erroneous outcomes”—as much as 85% of the time because of bias in data, algorithms, or the teams managing them.

How can labs get AI right? How do they reduce the risk of failure and access the deep domain expertise needed to get results from their data?

The problem isn’t technology—it’s the approach. To reap the rewards of AI analytics, every lab must define its own unique pathway from its current state to the digitally advanced, data-driven ideal. This article outlines five steps for the successful implementation of AI analytics.

Successful AI implementation requires commitment. Companies that approach AI with an idle attitude of “testing it” or “playing with it” are not likely to see demonstrable success. We recommend asking hard questions about your AI plans:

Which talent and what technology will get me there?

How much will this cost, and what will be the return?

Working with an industry-experienced technology partner can help you answer these questions and more, starting your AI journey off on the right foot. Once you are committed to implementing AI with a business mindset, there are five key steps we recommend following.

Successful AI implementation begins with an appropriate use case. Unlike mere experimentation, identifying a specific use case establishes a clear intention for your AI integration and links it to measurable returns on investment (ROI) and business results. Define your objectives and secure stakeholder buy-in by developing a detailed plan, including timelines, milestones, and dependencies.

This process of defining a use case provides the structure needed for appropriate financial planning, the creation of actionable steps, and the ability to map out a forward-looking path.

AI doesn't have a one-size-fits-all application; the most suitable scenario for your laboratory will heavily depend on the specific tasks you're conducting and the business goals you're pursuing.

However, a common objective for labs just beginning to incorporate AI is to maximize output while minimizing effort and risk. Within this context, there are several functions that will further this objective, including:

 AI-driven performance analysis allows you to sift through the intricacies of your lab's operations swiftly, pinpointing problematic areas such as quality issues, time delays, or overall efficiency bottlenecks.

Integrated modeling enables you to conduct statistical analyses, such as calibration curves, immunogenicity assessments, and stability evaluations, without the need for constant data transfer, preserving crucial process insights.

Harnessing AI to extract formulas from existing data substantially reduces the number of physical studies required, potentially cutting them down to a fraction of the original count.

In this vein, there are a number of practical use cases a lab might begin with.

This supports drug development, individualized treatment planning, and research on the factors influencing drug metabolism, ultimately contributing to the improvement of healthcare and the development of safe and effective drugs. PK analysis could take the form of:

 For generic drug manufacturers, a PK modeler can be used to demonstrate the bioequivalence of their products to brand-name drugs, ensuring that generic medications are as effective as their counterparts.

 During clinical trials, the solution can assist in dose selection, helping to strike the right balance between therapeutic efficacy and safety. It can also aid in designing adaptive trials that adjust dosing regimens based on ongoing data analysis.

This allows researchers to quantitatively analyze the relationship between drug concentration and its effects, leading to more effective drug design, optimized dosing regimens, and better-informed decisions throughout the drug development process. PD analysis could take the form of:

 By selecting the appropriate model type, researchers can determine the most effective dose that achieves the desired therapeutic effect while minimizing side effects.

 Researchers can use different models (e.g., linear, Emax, sigmoidal) to explore the underlying pharmacological mechanisms of a drug's action.

 Researchers can use modeling to estimate the sample sizes needed, choose appropriate endpoints for efficacy evaluation, and design dosing schedules that maximize the chances of detecting a therapeutic effect.

In this analysis, automatic cut points assist in enhancing precision and optimizing assay performance. Immunogenicity analyses could help to:

 Comprehensive analysis, including multiple cut points and sensitivity calculations, reduces the chances of false positives or negatives in immunogenicity testing. This is vital for making informed decisions about drug development and patient care.

 The module's integration into lab workflows simplifies and automates the cut point calculation process. This increases efficiency, reduces human error, and speeds up the overall testing process.

AI can measure and enhance the efficiency, quality, and financial sustainability of a clinical testing lab. For example:

 enable lab managers and analysts to quickly access critical metrics and key performance indicators (KPIs).

Analysis of on-time completion of testing requests

 can identify which tests are consistently delayed and why, helping the lab improve its workflow and meet patient expectations.

Analyzing pending requests and average delay statistics

 can help in resource allocation, ensuring that critical tests are prioritized and completed promptly.

Tracking on-time deliveries and providing insights into billed and unbilled costs

 can improve the testing and reporting process while also assisting in financial management and identifying areas where cost-saving measures can be implemented.

Ultimately, the best use case is the one that solves a pressing pain point—one that, with the right results, can demonstrate to leadership and the rest of the team that AI can be of practice use in lab settings.

Data challenges can hamper even the most promising AI projects. Data is the most important element of any new AI system but is simultaneously the biggest challenge for pharmaceutical companies, many of which maintain data logs that go back more than a century.

The purity and organization of your input data determines the quality of your results. High-quality data is data that has been thoroughly cleaned, formatted, and prepared for analysis.

Most data challenges are not technology problems. Rather, they originate further up the organizational hierarchy and stem from broader corporate vision issues. This means better data begins with improved data management practices and strategic data design. Labs must have a clear understanding of the metrics they’re tracking and the parameters that define them.

A substantial number of labs have not yet integrated their library information management systems (LIMS), electronic lab notebooks (ELNs), and other digital resources with their financial and production systems. Grasping these interconnections and constructing an informatics ecosystem that facilitates seamless data movement is vital for AI success.

The technology required to handle data effectively already exists; what's lacking is the business acumen and the framework to utilize the data effectively. We recommend that clients initiate the process with a designated project leader and collaborate across the organization to construct a “digital twin” of their laboratory—a comprehensive digital record of all activities for ongoing monitoring. Laboratories can rapidly progress through their AI journey by ensuring that data is clean, current, and well-prepared.

Find the most appropriate tools and technologies

With data protocols in place, look for the knowledge and skills gaps that need to be filled—most likely through a mix of technology and human expertise. Most labs won’t have the in-house skills required to implement AI from scratch and guide it through to success, so it’s important to seek out a knowledgeable partner at the start of your AI journey.

The right partner can help you understand the technology, models, methodology, and language your project requires. In fact, your use case’s specific needs and requirements will lead you to fit-for-purpose AI tools and techniques, such as statistical analysis, machine learning, or data visualization. The AI landscape is constantly evolving. A partner can help you keep up with the latest tools and technologies while ensuring that your data quality, privacy, and security measures are up to standard.

Look for a partner at the intersection of AI and your industry. An organization familiar with your industry's distinctive tools, processes, and applications can help you bridge the gap between technical implementation and your specific business objectives—it can mean the difference between success and failure with AI.

To acquire the best results from AI, you must first identify the points within your lab’s workflow where AI can add the most value. This is where the strength of your commitment will get tested as it may require organizational level changes and a certain degree of training and up-skilling.

How pharma companies can reduce the risk of failure with AI-based innovations.

Pharmaceutical Executive: November 2023

2024 Pipeline Report: First-World Focus

Pharma Should Embrace the Single Sign-On

22nd Annual Industry Audit: The Pharma Value Picture

Changing the Paradigm in AI Implementation

Reading the Tea Leaves for Biotech As 2024 Approaches

Pharma Giving is Still Strong Despite Post-Pandemic Shifts

Equity for Women in Healthcare: 131 Years is Too Long to Wait

A Peek at Potential

Pharmaceutical Executive: November 2023 Issue (PDF)