Gauging new product need in the drug industry

In sharp contrast to prevailing wisdom, a new report has suggested that an average-sized, top 20 pharmaceutical company with 3 per cent market share only needs to produce two new products every three years to be successful.

However, the picture is different for the largest companies, such as Pfizer. These could need up to five average-sized new products each year order to sustain them, according to a new report from Decision Resources​.

The new Spectrum report on the current and future trends of new-product productivity in the pharmaceutical industry, published by Decision Resources, has been written by John Ansell of John Ansell Consultancy.

Currently accepted wisdom in the pharmaceutical industry is that major companies need to produce three new products per year for continued growth. During most of the 1990s, the top 20 companies were, on average, managing only one-and-a-half first launches, and this average has now dropped to barely one. However, industry growth rates have remained very respectable, at around 8.5 per cent on average.

"The number of products required to sustain different companies varies much more now than it did in the past. Therefore, what is required in terms of productivity should no longer be expressed as a 'one size fits all' target for all major companies,"​ said Ansell. "The target number of products must be tailored to each company."​

"It is unlikely that enough new products will be generated over the next three to four years to ensure the survival of all major pharmaceutical companies as independent entities," he noted.​

One launch every two years will enable growth rates at the average top 20 company to be sustained, but this will be hard to achieve over the next three to four years, owing to declines in R&D productivity that have seen new launches drop 5 per cent year-on-year since the 1990s.

"Beyond 2007, however, industry pipeline projections suggest a return to high levels of productivity that will enable the majority of surviving companies to prosper,"​ continued Ansell.

However, he cautioned that while this projection sounds encouraging, at the company level it is much more difficult to consistently meet productivity targets for new products. Even with the option of in-licensing to augment the internal R&D pipeline, it is very difficult to achieve a steady flow of new products and ensure that enough of them have the commercial potential to add significantly to corporate sales.

"This challenge is likely to result in a number of top 20 companies failing to survive as individual entities long enough to take advantage of the likely upturn in industry productivity,"​ he concluded.

Decision Resources has organised a teleconference on September 30 for those interested in hearing more about Ansell's findings on the new-product need in the pharmaceutical industry. For more information about the teleconference or to sign up to participate, contact Frank Sama​