Stocks move up and down every day for a multitude of reasons, but for pharmaceutical companies, clinical data is the driving force that investors most want to pay attention to.
Keep your eyes on the clinical prize
Developing new drugs takes a lot of time and money for Big Pharma, thus having a deep pipeline, as well as opportunities to expand the label indications of existing drugs, tends to be important. However, the drug development process has a multitude of steps, ranging from discovery, to in-lab work, to preclinical testing, and finally human clinical trials (phase 1, phase 2, and phase 3). Placing too much emphasis on early stage work can lead to investor disappointment if things don't go as planned -- and based on historical data, things don't go as planned far more often than they do.
For prospective investors, the bread-and-butter clinical data of interest are phase 3 studies. Phase 3 trials, like phase 2 and phase 1 before it, are still focused on safety and tolerability. The difference is late-stage studies often involve hundreds or thousands of patients, thus drug efficacy comes into play in a big way. Presumably, drug developers with larger late-stage pipelines should have more immediate catalysts; and if the clinical data is good, the rewards for investors can be great.
With this in mind, I took a gander at the clinical pipelines of 10 publicly traded Big Pharma companies with market valuations north of $75 billion to figure out which one had the largest late-stage pipeline. These drug developers are:
- Johnson & Johnson (NYSE:JNJ)
- Pfizer (NYSE:PFE)
- Novartis (NYSE:NVS)
- Bristol-Myers Squibb (NYSE:BMY)
- Eli Lilly
- AstraZeneca (NYSE:AZN)
Can you guess which Big Pharma has the largest late-stage pipeline?
Out of these 10 Big Pharma names, can you pick out which one has the largest late-stage pipeline? Note, this is based on total phase 3 studies that are ongoing and excludes registration studies.
Have your answer?
Now prepare to be amazed, because here's how many actual phase 3 programs are in the works for each company based on their latest pipeline update.
- AstraZeneca: 35.
- Johnson & Johnson: 31.
- Pfizer: 30.
- Novartis: 29.
- Merck: 23.
- Eli Lilly: 18.
- AbbVie: 17.
- GlaxoSmithKline: 14.
- Sanofi: 11.
- Bristol-Myers Squibb: 1.
A bit of a shock with AstraZeneca at the top, right? It's worth noting that some of these drug giants have more than a half-dozen drugs under review by regulatory agencies, and if those were included in the discussion, then Pfizer would edge out AstraZeneca in late-stage products. Additionally, the way pipeline data is reported can vary from one Big Pharma to the next. Johnson & Johnson's data, for example, represents just its U.S. development stage products. For AstraZeneca, we're talking about phase 3 products around the globe. And lastly, some of this data hasn't been updated for a few months, so there certainly could have been a few changes since the last pipeline updates for these companies. While this data isn't perfectly apples-to-apples, it does give a pretty general look at which Big Pharma has the most robust late-stage pipeline.
Breaking things down
Now I know what you might be thinking, "What the heck is wrong with Bristol-Myers Squibb?" I, at first, had the same thought. However, remember that Bristol-Myers Squibb is also heavily reliant on its market-leading immuno-oncology pipeline, led by Opdivo. Opdivo is being tested in dozens upon dozens of combination studies, and it's possible, given the drugs' incredible response rate in cancer patients, that Opdivo studies can bypass phase 3 and move straight into registration for a supplemental new drug application. Opdivo has only been on pharmacy shelves for roughly a year and a half, but following its Q1 sales of $704 million, could push north of $3 billion in total sales in 2016.
Novartis, Pfizer, and Johnson & Johnson all give investors exactly what they'd expect from the three biggest drug developers by market valuation: a deep pipeline.
Novartis has nine oncology products, five ophthalmologic drugs, and three biosimilars all in late-stage studies at the moment. With oncology and personalized medicine all the rage within the scientific community, it's Novartis' Zykadia, designed to treat non-small cell lung cancer patients with the ALK+ mutation, which could be the most intriguing. In the phase 2 ASCEND-2 and ASCEND-3 studies released last year, Zykadia produced overall response rates of 38.6% and 63.7%, with median durations of response north of nine months in both studies.
Pfizer's late-stage pipeline is also heavily reliant on oncology, with label expansion opportunities for Ibrance, and possible approvals for experimental immunotherapy avelumab waiting in the wings. We should learn a lot more about avelumab at the annual American Society of Clinical Oncology meeting in early June. Meanwhile, Ibrance continues to do its thing, with $429 million in Q1 sales, almost all of which came from within the United States.
Johnson & Johnson (along with AbbVie) has a lot riding on label expansion opportunities for blood cancer blockbuster Imbruvica, as well as recently approved multiple myeloma drug Darzalex. About a third of J&J's late-stage portfolio is devoted to these therapies, which makes sense given Imbruvica's peak annual sales target of $7 billion and Darzalex's peak annual sales estimate of $4 billion.
Finally, AstraZeneca's surprisingly deep pipeline is rooted on success in, you guessed it, oncology! Specifically, AstraZeneca has a bounty of late-stage combination trials testing durvalumab, its PD-L1 inhibitor, and tremelimumab, its CTLA-4 monoclonal antibody. Eight studies are examining this combination for indications including first-line squamous cell cancer of the head and neck, first-line bladder, first-line NSCLC, and third-line NSCLC, to name a few. You'll also find quite a few COPD and asthma compounds working their way into late-stage studies in AstraZeneca's pipeline.
Ultimately, pipeline depth isn't everything, but this exercise does give investors a jumping off point to perhaps narrow their research a bit. If you're looking for a Big Pharma stock that could potentially surprise in the coming quarters, then AstraZeneca might be a name you'll want to consider.