Thanks to Pharmalot for drawing attention to an AVOS Life Sciences analysis of the future of big-cap pharma company revenue. The “replacement ratio” chart shows the extent to which each company is expected to replace dollars lost from declining products (mainly patent expirations) with revenue from products launched within the past five years. It’s analogous to the analyses of the birth rate relative to the replacement rate, which show countries like Italy and Japan heading for oblivion through population loss while the US manages to keep its head above water.
Italy and Portugal look like big-time breeders compared with pharmaceutical giants like Sanofi-Aventis, Roche and Pfizer –in fact compared with almost every company on the list. Neither Sanofi-Aventis nor Roche is expected to launch any drugs at all over the next five years, while Pfizer is expected to replace every dollar lost with only six cents of new revenues. Most other players are under the 50 cent mark, with only Schering-Plough and Amgen above the replacement level. The average figure is 26 cents.
Pharmalot calls the ratio “a direct measure of R&D productivity.” I don’t think that’s entirely accurate. After all the number can go up or down based on the total dollars in lost sales –if Lipitor goes off patent earlier or later than expected it would affect the replacement ratio but it wouldn’t seem to have anything to do with R&D productivity. Similarly you can’t use the ratios to compare R&D productivity across companies, but you can use it as a rough comparison of desperation levels.
Things may even be worse than the numbers imply. New product revenue is uncertain –because you never know what will be approved, when, and how well it will do– but presumably the analysis incorporates those factors. However, it probably ignores the threat of existing products being pulled off the market or losing sales due to safety concerns. With the increased emphasis on post-marketing surveillance that’s probably not a good bet.
Italy and Japan are unlikely to convince their citizens to have substantially more babies, even if they pour money into it. But there’s always immigration for rich countries that want to keep their population levels up. In-licensing is the analog to immigration for big pharma companies, but there aren’t a lot of drugs out there waiting to be let in to the big pharma tent.
The main hope for pharma is increasing productivity in discovery and development through the use of new technologies and approaches. That’s not going to close the gap in the near term.August 19, 2008