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2011 Scrip 100: Why the smart money is on injectables

This article was originally published in Scrip

Executive Summary

Low exposure to generic competition and robust monoclonal antibody-driven growth point to healthy prospects for companies focused on the development of injectable drugs. This contrasts starkly with the near-term forecast for sales of traditional orally-administered products. The world's largest pharmaceutical company has already responded to this trend, Joshua Owide reports.

Overall prescription drug sales among the leading pharmaceutical players saw an impressive expansion over 2003-09, rising at a 9.6% compound annual growth rate (CAGR). Although this was partly due to M&A-driven consolidation, notably in the orals segment where sales increased at a 7.6% CAGR over the same period, there was an even more pronounced ramping up in total sales attributable to injectables therapies, an area where, until recently, M&A has been less rife.

In all, injectable sales have grown 166% in the past six years, increasing from $54.1 billion in 2003 to $144 billion in 2009: an impressive CAGR of 17.7%. While the sales contribution from other delivery types remained significantly lower, the increasing availability and popularity of novel therapeutics has seen ophthalmic, vaginal and topical drugs enjoy rising sales over this timeframe. Inhalable sales also grew considerably despite the rapid maturation of the respiratory disease segment.

However, the outlook to 2015 will be markedly different. Although consolidation continues to sweep through the industry, the opportunity for organic growth is significantly diminishing. Nowhere is this more apparent than in the oral drug field, where a number of blockbuster patent expiries are set to erode a significant proportion of annual sales. The biggest losers will be Pfizer's Lipitor (atorvastatin), Bristol-Myers Squibb/Sanofi-Aventis's Plavix (clopidogrel), Lilly's Zyprexa (olanzapine), Pfizer's Effexor (venlafaxine) and AstraZeneca's Seroquel (quetiapine).

Overall, oral therapeutics are forecast to decline at a CAGR of 0.8% to 2015, a flat expectation which is heavily reliant on the success of new oral pipeline drugs transgressing increasingly difficult regulatory pathways to reach their disease markets. This flat outlook for orals will be mirrored by a strong performance from the injectables segment, which is forecast to continue growing to 2015 at a CAGR of 5.1%.

The relative performance of the two delivery mechanisms means that injectables will gain a significant 6.5 percentage points in market share by 2015, rising to more than a third of total prescription pharmaceutical sales. At the same time, oral sales will lose market share, falling 7.0 percentage points to less than half of the overall market. The significance of this trend permeates almost all strategic cross-sections of the prescription pharmaceutical segment, supporting the notion that a growth strategy built around injectable drugs is of benefit to a company's long-term prospects. This is primarily a reflection of the type of indication and level of innovation associated with the current crop of injectable therapeutics.

Other delivery types will remain relatively small in terms of their overall sales, but will enjoy faster growth out to 2015 than oral drugs. Like the oral segment, nasal and inhalable therapies are under threat from generic entries impacting a number of major pharmaceutical brands.

Looking at the pharma market in absolute terms, the injectables portion will see an absolute increase in annual sales of $54 billion between 2009-15, far overriding the dynamics of the other delivery segments over this timeframe. An oral sales decline of $14.1 billion will erode some of this anticipated expansion from injectables, while other delivery fields, despite showing positive growth rates in percentage terms, will exert a modest effect on the overall sales performance of the world's leading pharma players.

injectables riding a wave

By aligning product level growth expectations with therapy area and delivery mechanism, it is possible to assess the therapy areas where each major delivery type will exert its commercial influence.

The slowest-growing therapy areas – cardiovascular (CV), central nervous system (CNS), gastroenterology and respiratory – will suffer from steep sales declines as a result of falling oral sales, despite positive growth contributions from novel delivery types in the cases of CV and CNS. Sales from respiratory drugs will also be driven down by falling inhalable product sales.

These dynamics are completely mirrored by expectations in the fastest-growing therapy areas, namely oncology, infectious disease, endocrinology and inflammatory/immunology, where the growing contribution from injectable drugs will be vital in driving up sales.

While oral sales are expected to exert a positive effect on the oncology market, where significant unmet need remains, the growing prominence of injectable drugs within these fast-expanding therapy areas is clear. This largely reflects the role of the parenteral route of administration in opening up novel targets for today's cutting-edge treatments to exert their therapeutic effect, crucially in areas where outcomes have been historically poor with oral products.

Furthermore, if we split out growth forecasts specifically by drug life cycle stage and delivery mechanism, an important theme emerges which supports the notion that it is better to hold a position in injectables than in orals.

In terms of new launches, orals are forecast to make the biggest growth contribution, with $58.9 billion in new product sales by 2015, followed by an expected $30 billion in new injectable drug sales. In terms of core growth prospects (ie, patent-protected drugs that neither launch nor expire between 2009-15), oral products will make the most significant growth contribution at $27.6 billion, compared with $22 billion from injectables. Thus, based on the current expectations of launch and core products, one expects both orals and injectables to play an important role in driving new sales opportunities across the market.

The key point of differentiation lies in the patent expiry product set across the leading pharmaceutical players. Collectively, the leading pharma companies will see a total patent expiry-driven decline of $112 billion out to 2015, with oral products accounting for the majority of this fall, losing an anticipated $104 billion in annual sales. By contrast, injectables facing patent expiry are expected to see a slight sales increase of $996 million across this six-year forecast period. This contrasting outlook highlights the heightened protection from generics that injectables hold over their oral counterparts, a consequence of a range of factors such as biologic patent legislation and heightened production costs.

Ultimately, it is clear that while oral therapeutics can still offer significant commercial potential from a drug development perspective, their growing exposure to generics will unwind the growth enjoyed historically by the leading prescription pharmaceutical players in the oral segment.

MAb drivers

The oral vs injectables argument is further strengthened by looking at the growth dynamics underlying each molecule type. There are four major molecule type segmentations: small molecules, therapeutic proteins, monoclonal antibodies (MAb) and vaccines.

Of these, by far the greatest absolute growth will come from the MAb segment, where companies like Roche/Genentech and Johnson & Johnson are expected to enjoy significant growth from their heightened penetration of the oncology and inflammatory/immunology fields, respectively. Roche's oncology MAb Avastin (bevacizumab) is forecast to become the second highest-selling prescription therapy globally with sales exceeding $10 billion in 2015. All MAbs, with the exception of Genentech's (Roche's) ophthalmic MAb Lucentis (ranibizumab), are administered by injection, as oral delivery, based on current available technology, would be wholly ineffective.

Vaccines and therapeutic proteins are also expected to show growth to 2015 and, like MAbs, they too are inherently reliant on the parenteral route of administration. Interestingly, despite a potential threat from biosimilars, the three molecule types comprising the biologic space are all set to enjoy growth.

The intrinsic use of injectable delivery in biologics gives the injectables segment an inherent position of strength over other modes of delivery. While this does not necessarily equate to opportunity in the development of injectable technology itself, there is a growing level of innovation within the drug delivery segment as differentiation becomes an increasingly important factor in market penetration.

In total contrast to the fortunes of the biologic therapies, the dominant small-molecule component will on the whole see relatively flat sales out to 2015, with annual sales falling by $1.1 billion. Interestingly, while the injectable subsection of small molecules is forecast to expand, the sales decline facing the oral small-molecule drug field will be definitively responsible for mitigating any positive growth trend that small-molecule drugs might have otherwise experienced. This further highlights the maturity of the oral drug segment relative to other modes of delivery and the commercial benefit that attaching novel delivery technology can inject into a product.

Pfizer's wise buy

As expected, big pharma companies make up the majority of the leading oral players, with Pfizer leading the way, ahead of AstraZeneca, Novartis, Merck & Co and GlaxoSmithKline. Below this top tier are Japan's Takeda, Astellas, Eisai and Daiichi Sankyo (somewhat highlighting the dependency on oral drugs underpinning Japanese pharma) and leading generics player Teva.

Pfizer's position as undisputed leader in oral therapeutics carries significant implications in terms of its long-term performance. Whereas in 2009 the company generated oral sales of $34.9 billion, the impact of patent expiries will see this fall to $28.4 billion by 2015. This does not account for the impact of M&A; adding historical Wyeth sales into the equation increases this decline to $12.3 billion.

Crucially, with its big pharma rivals set to achieve relatively stable oral drug sales out to 2015, Pfizer's dominant position in the oral segment would have been compromised were it not for its recent M&A exploits. New entrants into the top oral player grouping will be HIV-specialist Gilead and emerging oncology player Celgene.

As in the orals segment, big pharma players make up the majority of the 20 companies generating the highest sales from injectable prescription drugs, although these are somewhat more interspersed with biotech firms. Roche, Sanofi-Aventis and Amgen were the three biggest injectables players in 2009, with injectable sales of $22 billion, $18.9 billion and $13.7 billion, respectively. Whereas only three companies can boast injectable sales exceeding $10 billion, nine different firms achieved oral sales over this level, highlighting the specialist nature of companies within injectables. This dynamic will change by 2015, with nine companies set to achieve the milestone of more than $10 billion in injectables sales.

Pre-Wyeth, Pfizer ranked only 20th in terms of injectable sales. On the other hand, Wyeth exhibited one of the highest injectable sales positions, with very nearly $10 billion in annual sales coming from injectables. Through M&A, Pfizer has effectively acquired an instant presence in the injectables segment, thereby lowering its exposure to mature oral technology.

Looking ahead to 2015, there will be some significant movement among the top companies in the injectable segment. Roche's expansion into the MAb-driven cancer market will continue apace as it creates distance between itself and the next biggest injectables player, Sanofi-Aventis. Roche is forecast to record a staggering $32.8 billion in injectable sales by 2015, making it the clear market leader.

Significantly, Pfizer will displace Amgen as the third-ranked player in injectables, a marked improvement on its previous position and a robust indication that its acquisition of Wyeth was based on a sound strategic rationale. Pfizer's injectable revenue stream will increase dramatically from $2.9 billion in 2009 to $16.1 billion by 2015, with a significant proportion of this growth stemming from the incidental impact of Wyeth's full-year consolidation in 2010.

As well as this leap from Pfizer, a number of other major players are set to enjoy strong growth from injectables. As mentioned, nine players will surpass the $10 billion injectable sales barrier by 2015. Heightened penetration of the injectables segment will be enjoyed by many companies, notable examples being Merck & Co (itself benefiting from the Schering-Plough merger), Novo Nordisk, Lilly, Novartis, Genzyme and GlaxoSmithKline, among others.

By and large, the biggest-selling injectable drugs will display similar characteristics in 2015 as they do now. That is to say they will be predominantly biologic in nature and address a range of serious, often life-threatening diseases.

While this is a reflection of the nature of injectable medicines themselves – whereby they prevail in relation to the mechanism of action needed to treat serious illnesses – the relative commercial stability among injectables reflects an enhanced longevity compared with their rapidly declining oral counterparts.

Joshua Owide is a senior healthcare analyst at Datamonitor.

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