The end of the blockbuster?

Pharmaceutical companies will be unable to rely on blockbuster products to drive growth in the latter half of the decade according to new research from market analyst Datamonitor, which says that more investment in drug discovery technologies is needed to improve R&D pipelines.

Datamonitor's analysis indicates that while revenues from products with billion dollar-plus annual sales are set to experience year-on-year growth of 5.2 per cent, rising from $116 billion (€104bn) in 2002 to $158 billion in 2008, a significant slowdown in growth is forecast between 2005 and 2008.

In this period, total blockbuster sales are forecast to demonstrate a compound annual growth rate (CAGR) of 1.6 per cent, compared to 9 per cent in the 2002-05 period and representing more than a five-fold slowdown in growth.

In the short-term, currently marketed products are expected to fuel growth, but after 2005 sales from current blockbusters will decline as products lose patent protection, leaving revenues exposed to erosion from generic competition, according to Datamonitor.

More than 30 of the current crop of 57 blockbusters are set to lose patent protection between 2003 and 2008 with total 2002 sales for these products exceeding $60 billion, according to the report.

"The impending fall in revenue from current products is particularly concerning in light of weak blockbuster pipelines across the industry,"​ said Datamonitor. Though many companies' pipelines contain drugs with high-earning potential, the company has identified only five pipeline products that it believes have potential to generate annual revenues of $1 billion or more by 2008. Combined sales for these products are expected to reach just under $9 billion in 2008, representing a 'paltry' 5.7 per cent slice of that year's total blockbuster revenue.

The ramifications of a blockbuster deficit to the pharmaceutical industry are compounded by the dependence many companies place on blockbuster revenue. For companies with blockbuster products, the contribution from blockbusters has on average increased from 40 to 45.6 per cent between 2000 and 2002.

In particular, Datamonitor observes that Aventis, GlaxoSmithKline, Johnson & Johnson, Pfizer, Novartis and Wyeth have each increased their reliance on blockbuster revenue by at least 10 per cent over this time frame.

Of all the top-tier companies, Datamonitor believes that Pfizer has the most promising outlook in terms of potential new blockbuster products. Four drugs currently marketed by Pfizer are forecast to achieve blockbuster status by 2008. They are the rheumatoid arthritis drug Bextra (valdecoxib), glaucoma product Xalatan (latanoprost), Detrol (tolterodine) for incontinence and the respiratory product Spiriva (tiotropium).

In addition, Pfizer has the strongest late-stage pipeline, with three of the five late-stage pipeline products forecast by Datamonitor to achieve blockbuster status across the industry. These are its central nervous system (CNS) product pregabalin and the two cardiovascular drugs Inspra (eplerenone) and Caduet (atorvastatin/amlodipine). Combined sales of the products are forecast to reach $4.7 billion in 2008.

Eight blockbusters generated $22.3 billion for Pfizer in 2002 and Datamonitor forecasts that blockbuster revenue will increase to $29.7 billion by 2008 equating to a CAGR of 5 per cent.

"Therefore, despite having the strongest blockbuster pipeline and with the largest promotional capacity of 37,000 sales reps worldwide, Pfizer is still only forecast to achieve blockbuster sales growth in line with the overall blockbuster market and is thus short of the double digit growth that has historically attracted investors to the pharmaceutical sector,"​ notes Datamonitor.

Along with Pfizer, Datamonitor expects other pharmaceutical majors to perform poorly. GSK, Merck, J&J and Wyeth are all forecast to underperform total blockbuster market growth between 2002 and 2008.

While a number of companies including AstraZeneca, Aventis, Eli Lilly, Novartis and Roche are expected to outperform the blockbuster market, their performance over the next five years is heavily tied to currently marketed products. In the absence of improvements in blockbuster pipelines, the majority of top-tier companies are likely to face poor blockbuster sales growth toward the end of the decade.

Datamonitor says that if pharmaceutical companies wish to continue to pursue the blockbuster model, they must identify licensing, acquisition and alliance strategies in order to source new products to bolster portfolios.

Alongside such activities, companies must re-address current R&D strategies and continue to invest in new drug discovery technologies to improve blockbuster pipelines organically. However, in the absence of a turnaround, Datamonitor asserts that pharmaceutical companies must shift their business models to reduce dependence on blockbuster products.

Companies must switch to more sustainable revenue streams to fill the blockbuster revenue gap and achieve more balanced portfolios. However, given the long lead times required to implement major shifts in global strategy, it seems unlikely that even if top-tier companies were to take steps now to reduce their reliance on blockbusters, that a sufficient reduction could be achieved in time to counter the slowdown in growth forecast after 2005, it noted.

The cardiovascular and CNS therapy areas are expected to continue to dominate the blockbuster market over the next five years. In 2002, the combined sales of cardiovascular and CNS blockbusters totalled $50.9 billion or 44 per cent of total blockbuster revenues. Over the next five years, these two therapy areas are forecast to maintain their hold on the market to reach $67.8 billion or 43 per cent.

The oncology, arthritis and respiratory disease markets are those primed to see double-digit growth up to 2008. Therefore while the blockbuster outlook is bleak as a whole, the market does present attractive growth opportunities. Indications within these markets are associated with a high degree of unmet need, offering opportunities for innovative products to drive growth over the next five years.

Within the oncology disease market for example, future blockbusters such as Novartis' Glivec (imatinib), illustrate the success achieved through innovation. Likewise, in the respiratory disease market, Boehringer Ingelheim's Spiriva (tiotropium) will achieve blockbuster success owing to its position as the first once-a-day inhaled bronchodilator treatment for chronic obstructive pulmonary disorder (COPD) - a significant advance over other treatment options.

"Therefore, to maximise blockbuster success, companies must seek out and exploit such opportunities, developing innovative products targeted to indications with a high therapeutic need,"​ concluded Datamonitor.

Benchmarking Blockbusters: identifying winning products and therapy areas to 2008​ is available from Datamonitor​.