Big Pharma's Blockbuster Battle

One billion dollars. It has a nice ring to it, doesn't it? That's the amount of annual sales needed for a drug to become a blockbuster. Every small biotech in the industry is scrambling to prove their drug will be the next blockbuster. Every big pharma in the industry wants yet another one.

The world of blockbuster drugs is changing, though, thanks largely to the patent cliff that many companies have gone over. How do the big pharmas stack up in the battle for blockbusters? Let's take a look at the top five pharmaceutical companies by market cap to see how their billion-dollar franchises are doing these days.

Big five blockbuster club
Who are the biggest of the big pharmas? Johnson & Johnson (NYSE: JNJ  ) stands as the leader with a market cap of more than $212 billion. Pfizer (NYSE: PFE  ) comes in second at $200 billion. Next is Roche (NASDAQOTH: RHHBY  ) with a market cap of $193 billion. Novartis (NYSE: NVS  ) places fourth with a capitalization of $162 billion. Last of the big five is Merck (NYSE: MRK  ) , with a market cap of $130 billion.

These companies are valued way up there, so most of us would probably expect that each one of them would bring quite a few blockbuster drugs to the table. We would be correct, although there perhaps aren't as many blockbusters in the group as some might think.

Sources: Company 10K filings and annual reports.

Interestingly, the largest company is tied for the fewest blockbuster drugs, while the No. 5 pharma has the most. Looking at sales for those blockbuster drugs, though, tells a slightly different story.

Sources: Company 10K filings and annual reports.

Roche had three drugs that topped $6 billion in sales last year -- Mabthera/Rituxan, Herceptin, and Avastin, catapulting the company to the top spot in terms of blockbuster sales. Remicade brought in over $6 billion in sales for Johnson & Johnson in 2012 (plus another $2 billion for Merck.) However, none of the other big five pharmas had a drug that made more than $6 billion.

Did the impact of the patent cliff result in fewer blockbuster drugs for the big five last year? Not much, although there were some different drugs in the mix. The total number of blockbuster drugs between all five pharmaceutical companies was 43, only one less than in the previous year.

Big and bad
An old expression says that "the bigger they are, the harder they fall." That saying holds true for big drugs. While the loss of patent protection didn't significantly impact the number of blockbuster drugs for the top pharmas, there was a larger efffect on sales for those drugs. Total combined blockbuster revenue decreased in 2012 compared to the prior year by more than 4%.

Merck and Pfizer were particularly affected, with both companies experiencing decreased sales from blockbuster drugs. Merck's Singulair dropped from $5.5 billion in 2011 sales to $3.9 billion in 2012. Sales for Pfizer's Lipitor plunged from $9.6 billion in 2011 to $3.9 billion in 2012. 

These steep drops highlight the potential dangers of a company becoming overly reliant on a handful of blockbuster drugs. Several big pharmas that didn't make our top five group have been hit hard in recent years by heavy dependence on one or two major moneymakers. Are the biggest of the big pharmas at risk? Some definitely are.

Sources: Company SEC filings and annual reports.

Any blockbuster drugs from 2012 with U.S. patents already expired or expiring by the end of 2015 are included in the "blockbusters expiring" category. Of course, just because a drug goes off-patent doesn't mean that sales will necessarily fall immediately. However, the data does point to potential risks in the years ahead for some companies.

Pfizer carries the most risk related to blockbuster drugs that have either already lost patent exclusivity or soon will do so. Declining Lipitor sales continues to be the biggest challenge for the company. Novartis appears to have the second-highest blockbuster risk, due in large part to Gleevec. The cancer drug, which had 2012 sales of $4.7 billion, loses U.S. patent exclusivity in 2015. Novartis is already experiencing a dent in sales with the patent expiration of Diovan last year. 

Busting loose
Looking ahead, the big pharmas also stand to gain new drugs in the billion-dollar club. While Novartis will likely see sales decline, the company has two drugs, Tasigna and Galvus, that are on the verge of becoming blockbusters. J&J is close with Zytiga. And there are plenty of other rising stars.

It can be easy to place too much attention on the biggest drugs, though. The reality is that for most of these pharmas greater revenue is generated from the many drugs that won't ever be blockbusters. Investors, therefore, should focus on the big picture for these companies and not just the big drugs. Five $200 million drugs are just as good -- and maybe even better -- than a single billion-dollar drug. One billion dollars still has a nice ring to it, no matter how it comes.

Is bigger really better?
Involved in everything from baby powder to biotech, Johnson & Johnson's critics are convinced that the company is spread way too thin. If you want to know if J&J is nothing but a bloated corporate whale -- or a well-diversified giant that's perfect for your portfolio -- check out The Fool's new premium report outlining the Johnson & Johnson story in terms that any investor can understand. Claim your copy, and a year of free analyst updates, by clicking here now.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 04, 2013, at 2:48 AM, montanus wrote:

    Intellect Neurosciences Issues Letter to Shareholders

    Wed, Feb 13, 2013 12:32 PM EST

    NEW YORK, Feb. 13, 2013 (GLOBE NEWSWIRE) -- Intellect Neurosciences, Inc. (ILNS), a biopharmaceutical company engaged in the discovery and development of treatments for the prevention and treatment of neurodegenerative diseases, issued the following Letter to Shareholders from Dr. Daniel Chain, Chairman and CEO.

    Dear Shareholder,

    I am quite pleased by the progress we made in 2012 despite various challenging setbacks we experienced during the year. We put the funds we received from ViroPharma to good use, on the one hand by significantly reducing our liabilities and on the other with the following achievements:

    We filed several new patent applications to protect our product candidates and technology platforms;

    We in-licensed new technologies, including two antibodies that target early neurotoxic forms of tau protein, which have application for therapeutic and diagnostic uses;

    We initiated an important collaboration with the University of California, Irvine's Dr. Frank LaFerla, Chancellor's Professor and Chair, Neurobiology and Behavior School of Biological Sciences, Director, Institute for Memory Impairments and Neurological Disorders, as well as Dr. Kim Green and his team;

    We appointed world-renowned antibody drug developer, Dr. Dan Shochat, as Consultant, VP Development;

    We developed a detailed road map and signed a Letter of Intent with Lonza regarding the manufacture of our antibody drug conjugate, CONJUMAB-A, which is being developed for age-related macular degeneration.

    We signed a Research Service Agreement with iNovacia to evaluate lead compounds for the CONJUMAB-A program;

    We initiated testing of our TauC3 monoclonal antibody in an Alzheimer's preclinical model; and

    We mounted a strong appeal against the patent challenge we face in Europe from Pfizer & Johnson & Johnson.

    We also initiated a lawsuit against one of our global pharmaceutical licensees to seek remedy for its failure to pay the $2 million milestone that was due upon the May 8, 2012 issuance of our ANTISENILIN patent by the USPTO. Based on discussions with our counsel following the recent motions and submissions by the defendants, our ability to prevail remains unabated.

    In 2013 we plan to move forward aggressively with our CONJUMAB and tau immunotherapy programs. These activities are expected to generate data that will increase the enterprise value of each program and attract new partnership opportunities that could result in substantial license revenues. This strategy is based on recent discussions with global pharmaceutical companies, several of which have expressed high levels of interest in these preclinical programs.

    An important event to anticipate in 2013 is the initiation of Phase 2 clinical trials with OX1 (VP 20629) in patients with Friedreich's Ataxia ("FA"), which we expect to occur mid-year based on statements Vincent Milano, CEO of ViroPharma, made during his presentation at the JP Morgan Health Care Conference in January. ViroPharma intends to file for Orphan Drug Designation upon review of the Phase 2 proof-of-concept data. February 28 marks the sixth international Rare Disease Day in 24 European countries. We are pleased ViroPharma is collaborating with FARA (Friedreich's Ataxia Research Alliance) to raise awareness about FA and Rare Disease through the media. Intellect helped forge the alliance between ViroPharma and FARA and we are proud of our role in developing OX1 and highlighting its potential for FA.

    Pipeline activities:

    CONJUMAB:

    I am excited about the potential of our CONJUMAB antibody drug conjugate platform and the therapeutic potential of the lead program, CONJUMAB-A, for treatment of age-related macular degeneration (AMD). CONJUMAB is designed to empower chaperone-like monoclonal antibodies with cytoprotective properties for treatment of various forms of amyloidosis and other types of proteinopathies in which irregular accumulation of abnormally folded proteins causes oxidative stress and inflammation, resulting in irreversible damage and death of cells. This relates to many different diseases, including diseases of the eye (AMD, glaucoma, diabetic retinopathy), brain diseases (Alzheimer's disease, Parkinson's disease (PD), Huntington's disease, motor neuron disease (ALS) and Creutzfeld Jacob disease (CJD)) and peripheral diseases (multiple myeloma, systemic amyloidosis, familial serum amyloid neuropathies and isolated atrial amyloidosis). Numerous proteins, including, amyloid beta (Aβ), tau protein, huntingtin protein, superoxide dismutase, prion and transthryetin, become abnormally folded, making them potential targets for the CONJUMAB approach.

    Our lead program, CONJUMAB-A, offers an important advantage to the Aβ antibodies currently in clinical development for both AD and AMD by several large pharmaceutical companies. This is because those antibodies (e.g. solanezumab, bapineuzumab, gantenerumab, crenzeumab, RN6G and GSK33766A) are designed for a single purpose, namely to clear Aβ, while none act on the important secondary neurotoxic mechanisms, such as oxidative stress that causes most of the damage from Aβ. By contrast, CONJUMAB-A is empowered with a potent antioxidant. An important step in establishing proof-of-principle was the initial data generated through our collaboration with iNovacia to evaluate compounds synthesized by Lonza for Intellect. The data demonstrated the conjugation of the antioxidant molecule to an amino acid does not reduce its antioxidant activity. Pending adequate financial resources, these studies, which are almost complete, will allow us to select a drug candidate to take into development, providing the trigger for us to move forward with LONZA into an expanded manufacturing project, bringing us closer to the submission of an Investigational New Drug application.

    In principle, our approach could be applied to improve many different types of antibodies, such as those that previously disappointed in clinical trials. However, currently we are focused on optimizing CONJUMAB-A using our own humanized antibody IN-N01, which targets the N-terminus of Aβ. We believe IN-N01 to be superior to bapineuzumab because of its reduced potential to cause inflammation that results from our reengineering into an IgG4 class antibody.

    Among several potential indications, we have decided to focus on AMD since both AMD and AD share several similarities, while the eye offers less challenge for delivering the drug. Indeed, physicians routinely perform injections into the eye cavity. Moreover, AMD is the leading cause of blindness in people over the age of 55, most of who respond poorly or not at all to existing therapies. While the relatively recent introduction of anti-vascular endothelial growth factor agents, such as intravitreal bevacizumab and ranibizumab, appear to have improved the prognosis for patients with wet AMD, preclinical studies have raised a potential red flag on anti-VEGF therapies, suggesting that increasingly aggressive use in eye disease could trigger side effects and potentially cause long-term damage. Moreover, no one has been able to develop an effective treatment for dry AMD, which is a significantly larger population, as it is the precursor to wet AMD.

    Ample evidence has established oxidative stress as an important contributor in the pathogenesis of AMD and several studies have indicated antioxidant molecules can help reduce damage to the retina. Various Aβ-lowering and Aβ-neuroprotective strategies have demonstrated the ability to protect against damage in various models of retinal degeneration, including Aβ-specific antibodies. Two such antibodies, GSK933766A and RN6Gare being tested in Phase 2 AMD trials having demonstrated an ability to reduce damage to RPE cells in animal models following systemic administration. These data lead us to believe CONJUMAB-A has the potential to become a strong leader in the field based on its combined properties to remove Aβ and reduce oxidative stress when delivered in high concentrations directly to the eye.

    Tau Programs:

    Tau immunotherapy is gaining traction in the Alzheimer's field, and it has potential applications for many orphan indications, such as the many types of frontotemporal dementia, among other tauopathies.

    TauC3 is a monoclonal antibody that uniquely targets a shortened form of tau protein known as ∆ tau that nerve cells produce after exposure to Ass. ∆ tau forms fibrils much faster than full-length tau and has been demonstrated to be a precursor of tangles commonly found in the brains of AD patients, as well as in the spectrum of diseases classified as frontotemporal dementias. The experiments we are conducting with our collaborators at UCI aim to validate ∆ tau as a therapeutic target and establish the potential of TauC3 for the treatment of AD and other tauopathies. As recently announced, we have initiated in vivo studies from which we anticipate data in the third quarter of 2013. If positive, we could develop TauC3 either as a single molecule or antibody-drug conjugate using the CONJUMAB platforms.

    TOC-1 is a monoclonal antibody that selectively targets yet another pretangle form of tau known as oligomeric tau. Oligomeric tau are small aggregates of tau that are thought to be extremely toxic and occur very early in Alzheimer's disease and other tauopathies. We currently are working toward re-engineering TOC-1 to produce a more druggable form of the molecule. This work is being undertaken in collaboration with two separate contract research organizations in Switzerland and China.

    Patent news:

    Tau patents: Intellect has established its position as a leader in tau immunotherapy with the publication of two Tau patent applications, which are accessible on the Internet: Patterson et al. 2011 Antibodies Selective for Pathological Tau Timers and Prefibrillar Tau Oligomers and their use in Treatment, Diagnosis and Monitoring of Tauopathies, published March 3rd 2012 under Publication No. WO 2012/1493653 and Chain, 2011: Treatment of Tauopathies, WO 2012/106363 published November 15, 2012. We have received a Written Report in each case, but we do not generally respond to such reports that are non-binding until there is an action from a foreign patent office during the national phase filings based on the PCT applications. We plan to enter the national phase filings next summer.

    ANTISENILIN patents:

    For reasons that are unclear to us, Johnson & Johnson and Pfizer are continuing in their opposition to our ANTISENILIN patent in Europe, having responded quite aggressively to our appeal notice and submissions even after the bapineuzumab Phase 3 results were announced. We are considering our response and strategy leading up to the Oral Hearings in Munich, which we anticipate will be scheduled for early next year. Meanwhile, we are waiting for an Official Action from the EPO with regard to our pending divisional patent application that aims to overcome the formalistic objections raised in the opposition. If the EOP grants us a patent on this second application, the opposition becomes moot.

    We received a first official action from the USPTO to our continuation-in-part application in which we are seeking additional claims, including to the amino terminus of Ass. We believe the arguments from the Examiner are quite straightforward to address and we are preparing our response. If successful, the issuance of this second patent would trigger another $2 million milestone payment from certain of our global pharmaceutical licensees.

    Increased Public Awareness:

    We continue our efforts to increase public and investor awareness of Intellect through media outreach and other activities, including my participation as presenter at several international industry and investor conferences. These activities also comprise an important component of our business development strategy as it gives us the opportunity to meet potential pharma partners face-to-face. Intellect was selected to give a presentation at BIOEUROPE in Barcelona March 11-13 and I have scheduled several meetings with potential partners. I also am an invited speaker at the Asian Antibody Conference in Singapore, June 17-20.

    Recent articles about Intellect include in the January edition of Merger Markets, part of the Financial Times Group, and the Jerusalem Report carried a profile this week paralleling some of the challenges I have faced in developing treatments for Alzheimer's disease to those experienced by my father, Ernst Chain, who discovered the therapeutic properties of penicillin in 1939. Also in January, Neurotech Insights published my article regarding the highlights of the 2012 Alzheimer's Drug Discovery.

    One of our stakeholders recently told me he thinks Intellect is the cat with nine lives! Indeed, we have overcome quite a few setbacks that may have put an end to many of our peers. However, despite those setbacks - and being chronically underfunded - our pipeline has continued to grow while a myriad of important achievements give us hope for the future. We continue to suffer from an enormously undervalued stock which I believe is the result of a few shareholders who for some reason are not invested in the long-term growth of the company. This single factor -- their lack of support - is the largest hindrance to raising the new capital needed to advance our drug programs to points of value accretion where they can be partnered. My biggest hope for 2013 is for all of our stakeholders to recognize the tremendous inherent value of Intellect's remarkable discovery engine, intellectual property portfolio and pipeline and license agreements that are the envy of many much larger companies. We urge them to help reverse the previous trend and make the good news events really count!

    Thank you for your continued support of Intellect and its important mission to create a world without Alzheimer's disease and other debilitating neurodegenerative diseases.

    Sincerely,

    Daniel Chain, PhD

    Chairman and Chief Executive Officer

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2282611, ~/Articles/ArticleHandler.aspx, 9/20/2014 8:18:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement