3 Hallmarks of a Megablockbuster

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Reaching the coveted $1 billion mark in annual sales is no small feat for a drug. Look at the performance of any company's portfolio at the end of the year and you will notice that only a handful of drugs become blockbusters. Aside from developing and marketing the drug, sustaining that level of sales can be challenging as well. How, then, do some drugs grow to become megablockbusters?

To answer that question, let's take a look at three successful anti-inflammatory drugs: Humira from AbbVie (NYSE: ABBV  ) , Remicade from Johnson & Johnson (NYSE: JNJ  ) , and Enbrel from the trio of Amgen (NASDAQ: AMGN  ) , Pfizer (NYSE: PFE  ) , and Takeda. The three drugs combined for more than $23 billion in 2012 sales and offer a great blueprint for investors looking for the next big drug. Here are three characteristics of a megablockbuster.   

1. Treat causes, not symptoms
The emergence of biologics has allowed the pharmaceutical industry to treat the underlying causes of diseases more effectively, rather than simply treating the symptoms that arise from a condition. This isn't a staple of blockbusters, but future billion-dollar drugs that treat causes will have an efficacy edge over others that don't. A study published last summer demonstrated that rheumatoid arthritis patients taking one of the three biologic treatments above saw mortality rates drop by half. This and an early start have allowed Amgen, Johnson & Johnson, and AbbVie to capture huge swaths of the immunology market.

Another characteristic of successful drugs is that they treat chronic diseases -- in this case, autoimmune diseases. Patients will likely need to take medication for years or even the rest of their lives to maximize their standard of living. That provides a steady and relatively predictable future market for anti-inflammatory drugs.

2. Drastically improve treatment
Biotech investors have likely read the term "unmet medical need" several gajillion times. But let's face it, developing a safe and effective treatment for diseases that leave patients with few or no options can be a successful endeavor. By default, meeting an unmet medical need or drastically improving upon current treatments yields first-to-market status. Figuring out how to treat once "untreatable" immune diseases has paid off immensely for the four companies:



2012 Sales



$9.27 billion

Johnson & Johnson


$6.14 billion



$4.24 billion



$3.73 billion

Source: SEC filings.

The three injectable drugs above provided the health care industry with convenient solutions to big problems, but that could also hasten their decline. Oral treatments are never far behind, and new injectable drugs add even more convenience to patient's lives while also reducing dosing regimens. 

3. Treat multiple indications
Treating multiple diseases (or sub-groups) with one compound can significantly increase annual sales. Drugs that can be used to combat several unmet medical needs are perfect candidates for megablockbuster status. Take a look at the approved uses for Humira, which this year will become the second drug ever to eclipse $10 billion in annual sales.



Rheumatoid arthritis

North America, Europe

Psoriatic arthritis

North America, Europe

Ankylosing spondylitis

North America, Europe

Crohn's disease

North America, Europe

Plaque psoriasis

North America, Europe

Juvenile idiopathic arthritis

North America, Europe

Ulcerative colitis

United States, Europe

Axial spondyloarthritis


Pediatric Crohn's disease


Source: AbbVie 10-K.

Some of these markets may not be very large on their own, but together they represent millions of potential patients. Keep in mind that there is no free pass: Companies have to conduct clinical trials for each new indication. Nevertheless, maintaining a relatively clean safety profile (Humira, Enbrel, and Remicade) can go a long way in cementing a drug's reputation with doctors -- ultimately leading to more prescriptions.

Boon for business or ticking time bomb?
There is no denying that the investors in the four companies above have all benefited from the development of the megablockbuster anti-inflammatory drugs. But with patent expirations looming it may be time to begin questioning the sustainability of relying on one drug for such a large portion of sales. All one needs to do is look at the havoc caused by the patent cliff to see how far sales can fall.

These record setters are nearing the end. Humira's composition-of-matter patent expires at the end of 2016 in the United States and in early 2018 in Europe. Remicade loses European exclusivity in 2015, while Enbrel recently gained another 17 years of protection through the end of 2028. Each company is working feverishly to replace the lost sales set to kick in -- and each has great pipeline candidates that could help fill the voids.     

Foolish bottom line
When combing the market for the next big drug remember to be on the lookout for the three areas outlined above. While several new anti-inflammatory treatments will undoubtedly reach blockbuster status, the market is getting pretty crowded. Therefore, I find it unlikely that any drugs currently in development will ever reach the $5 billion mark. Investors haven't seen the last megablockbuster, but the next batch will probably target a new market opportunity. What treatment or disease will that be? Stem cells? Obesity? Leave your thoughts in the comments section below.

AbbVie is a perfect example of a blockbuster-turned-liability scenario, as investors in the new company are left wondering what the future holds once the company's golden goose, Humira, is cooked. The Fool's brand new premium report on the company answers the high-profile questions that AbbVie investors are asking. Simply click here now to claim your copy today.

Read/Post Comments (0) | Recommend This Article (8)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

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: 2414677, ~/Articles/ArticleHandler.aspx, 9/25/2016 1:38:37 PM

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...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
AMGN $174.80 Down -0.82 -0.47%
Amgen CAPS Rating: ****
JNJ $118.81 Down -0.65 -0.54%
Johnson and Johnso… CAPS Rating: *****
PFE $34.26 Up +0.11 +0.32%
Pfizer CAPS Rating: ****