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Is the Golden Age of Blockbusters Over?

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Only 19 drugs have ever netted at least $5 billion in annual sales -- and most were at their peak --according to a list compiled by Simon King of Forbes earlier this year. Lipitor from Pfizer peaked at $13.7 billion in 2006 and remains the only drug to achieve annual sales of $10 billion or more. Humira from AbbVie (NYSE: ABBV  ) will eclipse the watermark this year, which is quite an amazing feat when you consider the history of the pharmaceutical industry.

Big Pharma has learned the hard way that having ridiculously successful products is great when the checks are rolling in, but they can be transformed into huge liabilities when the music stops. Combine that with an industry stuffed full of competition and it is easy to see why many, including King, say that the Golden Age of the Blockbuster is gone. Companies will have a much more difficult time fielding single drugs that enjoy this kind of success. Is that sentiment right? Or are analysts just fatigued from the industry's patent cliff? Let's review.

A Golden Age dawns
Big Pharma exploded onto the scene during the three-year span from 1996 to 1998 when a record 135 drugs received regulatory approval in the U.S. It should be no surprise that many of the megablockbuster small molecules were approved during this time.


Drug, treatment

Approval date

Peak sales (world)


Lipitor, high cholesterol

Dec. 17, 1996

$13.7 billion

Bristol Myers Squibb / Sanofi

Plavix, blood clots

Nov. 17, 1997

$9.32 billion


Seroquel, antipsychotic

Sept. 26, 1997

$6.18 billion

Merck (NYSE: MRK  )

Singulair, asthma

Feb. 20, 1998

$5.48 billion

Eli Lilly

Zyprexa, antipsychotic

Sept. 30, 1996

$5.03 billion

Johnson & Johnson

Levaquin, infections

Dec. 20, 1996

$1.36 billion

Sources: FDA Orange Book, FirstWord Pharma.     

The euphoria for the new treatments was bound to end at some point, which is exactly how the industry found itself in the midst of the patent cliff in the first place. As you can imagine, the competition eventually caught on to the enormous potential of cholesterol, antipsychotic, and asthma drugs. Absent a major research lab breakthrough, investors likely won't see any spectacular gems in these markets.

If everyone has a drug, then no one has THE drug
Companies have instead decided to throw their weight behind the next big markets: diabetes, cancer, and immunology. Even these indications are becoming crowded, though. Take diabetes, for example. Despite bringing in $5.75 billion in 2012, Merck's Januvia/Janumet franchise stumbled out of the gates this year thanks to increased competition. Total sales slipped 1.5% from the year-ago period. Newer therapies, such as Invokana from Johnson & Johnson, have nudged the bar upward by offering patients more convenience and improved safety characteristics.  

Does all of this market saturation foreshadow a bleak future for an industry currently ripe with blockbusters? There may be a period of calm ahead, but investors cannot rule out that future game changers won't emerge.

The next frontier?
The one thing that each of history's most successful drugs has in common is that each drastically improved upon the standard of care at the time of launch. Whether it was treating a disease that was never before treatable (severe rheumatoid arthritis) or pioneering a new class of drugs altogether (TNF-alpha inhibitors), each of the most successful drugs in history did not get there by targeting incremental improvements.

So, what fields could offer investors the next batch of game-changing drugs?

Investors are already imagining what could be possible in the newly opened obesity market. The Food and Drug Administration approved Qsymia from VIVUS (NASDAQ: VVUS  ) and Belviq from Arena Pharmaceuticals (NASDAQ: ARNA  ) in 2012. These treatments may or may not take off on their own -- each offers weight loss of 6% to 8% over one year -- but they could certainly be a good starting point for future, more effective compounds.

Additionally, stem cell therapies have remained elusive as the industry's ultimate Holy Grail. Osiris (NASDAQ: OSIR  ) received Canadian approval for the world's first stem cell drug, Prochymal, for children battling acute graft-versus-host disease, or GvHD, last year. The approval meant more symbolically than to the bottom line, but it definitely put the potential of stem cells front and center for investors.

It is easy to see the magnitude that the world's first major stem cell approval (not Prochymal) would merit, although perhaps difficult to comprehend. Imagine a therapy that could safely and effectively treat heart attack or stroke patients just days after arriving in a hospital. Or how much safer organ transplants could become if a broad GvHD treatment was developed. Stem cells could not only treat diseases that damage important muscles such as the brain and hear, but could actually reverse the damage altogether. Unfortunately, most companies dabbling in stem cell research are very small and the best approach has yet to be determined (perhaps it has yet to be created). The potential is there, but the results are lacking.

Foolish bottom line
Is the Golden Age of Blockbusters over? This one may be history, but investors cannot rule out the possibility of future game changers. Drug development is such a lengthy and costly process that no company can target blockbusters from the beginning. Consider that research into adalimumab (Humira) first began in 1993 -- 20 years ago! Simply put, we don't know what we don't know. However, investors can be pretty certain that more Golden Ages await the pharmaceutical industry.

Is the Golden Age of Obesity Treatments upon us?
Obesity has all the markings of the next big market, but who will win? Can VIVUS pick up its lagging sales and fend off the competition, or will Arena Pharmaceuticals reign supreme in the obesity space? If you're in the dark, grab copies of The Motley Fool's premium research reports on VIVUS and Arena Pharmaceuticals to stay up to date. Senior biotech analyst Brian Orelli gives investors the must-know information, including an in-depth look at the obesity market and reasons to buy and sell both stocks. Click now for an exclusive look at Arena and VIVUS -- complete with a full year of free updates -- today.

Read/Post Comments (3) | Recommend This Article (0)

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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 May 10, 2013, at 2:53 AM, ReasonableRisk wrote:

    Good article. You may be right re anti-obesity drugs. Arena will soon be meeting with the FDA to design trials for a combination what may be called "Bel-Phen" a formulation of Belviq and phentermine. This should be a safer version of Fhen-Phen, which was a blockbuster in the 90's before it was pulled. It would also effectively be a combination of Belviq and Vivus' Qsymia, which is itself a formulation of two generics, including phentermine.

  • Report this Comment On May 15, 2013, at 8:47 AM, MRJOSEPHD wrote:

    Eisai guides to $200M in their FY2013 for Belviq

    I don't believe anyone has posted this yet but I just had a chance to listen to Eisai's earnings call and there is a golden nugget in the QA session. Sorry if someone already posted but I don't believe they have.

    Question 4. When asked by Credit Suisse about slide 11 in the presentation and how they will achieve these growth numbers, Eisai's CEO says Belviq is not called out in that slide because it was not available yet but he would like to see at least $200M from Belviq in FY2013 (end of March 2014.)

    Lonnel Coats goes on to discuss the importance of the new AACE guidelines and also confirms Medco coverage.

    By June 11, Belviq will be available in 20K pharmacies. Within the first 30 days on the market, the sales force will have touched 20K physicians. "We will penetrate this market very quickly."

    If you have Belviq do $200M over the next 8mo and Qsymia does $20M, maybe the street will then start to get it. And if they say $200M, they should be confident that is a conservative number for them.

  • Report this Comment On May 16, 2013, at 8:33 AM, MRJOSEPHD wrote:

    Subject: Why I Believe Belviq is a Likely Candidate to Become a Blockbuster Drug

    From my point of view, there are five features of Belviq that suggest likely blockbuster status: (1) safety in a very large pool of users, (2) efficacy among responders, (3) good and improving insurance coverage, (4) versatility and (5) off-label use.

    (1) Safety appears to be decided. Valvulopathy appears to be a non-concern (;, with the rate of echocardiographic valvulopathy similar with lorcaserin and placebo and less valvulopathy after two years in the lorcaserin group than in the placebo group.

    Given the unknowable outcomes of use in a very large pool of users, I believe Arena and Eisai will be extremely careful to protect their valuable asset from bad publicity and will try to ensure that the drug is used safely at all stages of the rollout. Expect early marketing emphasis to be on educating specialists on the benefits and the proper use of the drug and long term marketing to emphasize responsible use.

    (2) Efficacy among responders is substantial and impressive. It is very similar to the efficacy of the much more dangerous Qsymia. Moreover, the efficacy (and safety) of the Lorc/Phen combo supposed to be much better than Qsymia.

    (3) Insurance coverage is estimated at 30% at launch and seems likely only to increase over time.

    (4) Versatility is perhaps the most overlooked feature of this new and very promising compound. As an agonist specific for the 5-HT2c receptor, which has a complex and nuanced functionality, the agent appears to be effective on:

    I. Diabetes and pre-diabetes;

    II. Dyslipidemia;

    III. Hypertension;

    IV. Fatty Liver and NASH;

    V. Addictive and unwanted stereotyped behaviors such as smoking (nicotine), alcohol consumption, and nail-biting:;

    VI. Fibromyalgia, a psychosomatic and central-sensitive condition:;

    VII. Schizophrenia, a profound disturbance of the central nervous system:

    (5) Off-label use. One can be sure that many non-obese people will find ways to try Belviq, and many of these may find it compatible with lifestyle design.

    It should also be noted that Arena Pharmaceuticals has a pipeline of analogous compounds targeting the G-protein coupled receptor that the company believes will be effective in treating an array of medical conditions, including hypertension, thrombosis and autoimmune diseases.

    A compound (and a company) like this appears to be the sort of thing that comes along once a decade.

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