FirstWord Lists – Big Pharma's Blockbuster dependency rates

How dependent is the average Big Pharma company on its biggest selling product franchise? Furthermore, how has this level of dependency evolved over the past five years and how can we expect it to change by 2016?

The emergence of AbbVie as the newest Big Pharma player raises this question; based on 2011 sales the company will derive around 45 percent of its prescription pharma sales from the Humira franchise alone. Furthermore, by 2016 Humira will account for approximately 61 percent of AbbVie’s revenues, according to consensus forecasts.

Even in comparison to recent historical levels – reflecting Big Pharma’s love affair with multi-billion dollar products – this ratio is high. In 2006, when Lipitor was generating peak annual sales of $12.9 billion, the statin therapy accounted for 29 percent of Pfizer’s prescription pharma revenue.

On average, the largest product at each of the 10 leading Big Pharma companies accounted for 20 percent of total prescription pharmaceutical sales in 2011 (exclusion of the outlier AbbVie reduces this average to 17 percent).

In contrast to AbbVie, Merck & Co. and Novartis currently generate the smallest proportion of their total pharma revenues from an individual product franchise, with Singulair and Diovan both accounting for 11 percent of sales. In the case of Novartis, the company’s strategy of diversification has played a role in not only reducing dependence on individual product franchises but also branded pharmaceuticals in general (via expansion into the generics space, for example).

However, both companies have also delivered a higher than average number of new products to the market in recent years, which has helped to dilute dependency on an individual franchise. Demonstrating this, in 2006 the Singulair and Diovan franchises both generated smaller revenues (in dollar terms) but accounted for a greater proportion of Merck and Novartis’ pharma revenues – at 17 percent and 14 percent, respectively.

How dependency levels at Merck and Novartis develop over the next five years will illustrate the differing approach that these two companies have taken to ensure long-term growth. Despite multiple product launches from Merck, one franchise – the diabetes treatment Januvia – will dominate in terms of sales contribution over the next five years; thus by 2016, this product will account for 17 percent of Merck’s total pharma sales.

In contrast, by 2016 Novartis’ biggest selling product is expected to be Glivec, which will account for just 4 percent of the company’s pharma revenues (the lowest single product dependency of any Big Pharma player). This ratio is distorted by the fact that by 2016, Glivec revenues will be in decline – due to a combination of generic competition and cannibalisation from Novartis’ follow-on product Tasigna (see Spotlight On: How do you solve a problem like Novartis' Glivec patent expiry?). Nevertheless, that analysts do not expect another product to account for a larger percentage of sales is telling, particularly as most expect Novartis to be the industry’s largest player by 2016.

Indeed, analyst forecasts suggest that Novartis’ industry leading position in 2016 will not be overly dependent on a single product franchise – a sensible strategy that should make future exposure to patent expiries more manageable. This outlook also reflects Novartis’ decision some 10 years ago to "stop chasing blockbusters but instead chase breakthroughs," says Bernard Munos (see ViewPoints: The importance of R&D momentum - Novartis talks up pipeline.

At the other end of the spectrum, those companies who have delivered fewer new molecular entities to the market over the past five years or so are among those who are more reliant on a single product franchise. AbbVie is positioned most prominently among this group, with Eli Lilly and AstraZeneca other notable examples. Not reflected by this analysis of a single product in each company’s portfolio is AstraZeneca’s broader high-level dependence on a handful of multi-billion products, each of which will lose patent exclusivity over the next five years. Thus despite declining sales for Crestor between 2011 and 2016 (an approximate decline of $2 billion), this product will account for a similar percentage of the company’s pharma sales in both years.

The key, note analysts who have recently initiated coverage of AbbVie, is that if you are going to be overly dependent on a single product, it benefits that drug to have certain characteristics. Humira ticks a number of these; its biologic status acts as a deterrent towards generic or biosimilar competition, while its entrenchment as the gold standard anti-TNF therapy looks set to ensure that Humira is ultimately one of the industry’s biggest ever selling products.

A number of other biologic products retain similar importance at other Big Pharma players, such as Roche’s Rituxan and Sanofi’s Lantus, which represent brands that could conceivably have longer life cycles than that traditionally associated with small molecule products. Notably, the number of biologics or vaccines that are positioned as the biggest selling products across the Big Pharma peer set by company has increased incrementally since 2006 (three) to 2011 (four) and will continue through 2016 (six). The average peer set dependency on each company’s leading product will change little over the next five years (around 20 percent), however there will be a continued shift in the type of product valued most heavily by Big Pharma.

Further analysis:

ViewPoints: New AbbVie – same challenges

Spotlight On: Why biologics continue to attract Big Pharma

Spotlight On: Big Pharma’s continued love affair with the blockbuster model

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