Big Pharma Mutating from Small Molecules into Biotech Drugs

According to the Tufts Center for the Study of Drug Development, the pharmaceutical industry, particularly Big Pharma, has decidedly changed course, shifting its R&D focus away from small molecule drugs towards biotech products. Such biotech products are muscling out small molecules’ prior domination of the top 10 drug product sales. For example, in 2012, biotech products accounted for 71% of the revenues generated by the world’s top selling biopharmaceutical products. This remarkable growth mirrors the successful evolution of biotech research over the last three decades. Drilling down further, the Tufts Report notes that monoclonal antibody (mAb) biotech products saw the largest increase in growth over the last decade and now account for almost 60% of the biotech products being clinically developed by the largest pharmaceutical companies.

This dramatic expansion of biotech products is expected to continue. In a January 2013 article reported in Forbes, the blockbuster drugs that are best positioned to record an increase in peak annual sales over the next five years are all biologics: Humira (Abbott), Enbrel (Amgen), Rituxan (Roche), Herceptin (Roche) and Lantus (Sanofi-Aventis). Forbes notes the lack of small molecules expected to deliver significant growth moving forward, which “demonstrates both the effects of the patent cliff and the reduced ability by the industry to bring more products of this type/revenue scale to the market.”

While small molecules have experienced aggressive attacks on their patents and subsequent generic entry, the biotech products so far have been spared the biosimilars fights, despite the availability of an abbreviated approval pathway. As we previously reported, the Biosimilars Act, formally known as the Biologics Price Competition and Innovation Act, created an abbreviated approval path for products demonstrated to be interchangeable or “biosimilar” with large-molecule drugs that already have been approved by the FDA. While many companies have been working on developing generic biosimilar products, to date no one has received FDA approval under this process.

Also driving the R&D bio-evolution is the fact that biotech products are meeting unmet medical needs, improving disease outcomes, maintaining market exclusivity longer than small molecules, and not the least important, commanding high prices. Many being specialty care products, there appears to be more willingness for payers to justify reimbursing for biotech injectables rather than for “little white pills.”

Gibbons will continue to monitor developments in this important area.