R&D costs associated with bringing a drug to market are stabilizing for large pharma; however, the industry is facing reduced returns on investments due to declining average peak-year sales from the launch of innovative drugs. Fewer drugs are reaching the pinnacle of blockbuster status year on year, and many internal and external factors are contributing to this trend. With companies faced with increasingly competitive treatment landscapes owing to years of innovation, and a call from all stakeholders to demonstrate value-based pricing using strict criteria, the challenge to derive substantial revenue from pipeline assets is greater than ever.
Pharma companies are increasingly turning their attention to oncology for revenue, with the therapy area (TA) coming out top for R&D spend in 2016 and almost a third of the drugs in development for cancer indications. The focus is paying off, with oncology drugs responsible for the most blockbusters in 2016 according to GlobalData, and forecast to generate 40 blockbusters in 2020, a third more than the next closest TA, metabolic disorders, and around $122 billion in combined sales. Two companies leading this trend are BMS and Merck & Co. with their immuno-oncology assets Opdivo and Keytruda respectively. Despite great fluctuations in analyst consensus forecasts due to the dynamic and widespread development of the two agents, they will undoubtedly be amongst the bestselling oncology drugs of all time.
The key to the success of both drugs is the R&D strategy taken by both companies, including the generation of robust clinical evidence demonstrating a clear benefit to patients, patient stratification, and first-mover advantage. Despite many improvements in cancer care, a considerable number of patients have poor outcomes, with many of the over 100 cancers still relying on toxic chemotherapy, which is both largely ineffective by today’s standards, and also significantly reduces the quality of life for patients. There is substantial room for novel efficacious treatments to bring improvement in care, and the unprecedented efficacy of Opdivo and Keytruda has justified premium prices, while demonstrating value to all stakeholders.
Both companies defined their focus during development, which allowed them to get first-mover advantage in many areas and maximize success. In addition, by searching for pockets of patients with high unmet needs and a low standard-of-care hurdle, both companies were able to show meaningful clinical and commercial differentiation upon launch.
A bright future
The future looks promising for oncology drugs. Unlike the big blockbusters of the past, such as Lipitor, which faced a disruptive patent cliff and deep generic erosion on patent expiry, Opdivo and Keytruda are biologics, like 40% of forecast blockbusters in 2020, and biosimilar erosion is expected to be less pronounced, protecting the long-term sales of both agents. However, with oncology costs expected to reach stratospheric levels, push-back from all stakeholders is on the horizon, particularly in free markets like the US, which may limit the future growth in this lucrative market.
Oncology is an area that receives a disproportionate level of attention compared to other therapy areas from Pharma, governments, and the public alike, and an appetite for better treatments is growing. Advances in cancer treatment are occurring rapidly, with more patients surviving cancer than ever before, and the good news is more innovative, life-extending treatments are on the way.