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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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June 26, 2012

The Next Five Years in the Drug Industry

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Posted by Derek

Nature Reviews Drug Discovery has an article on the current state of drug development, looking at what's expected to be launched from 2012 to 2016. There's a lot of interesting information, but this is the sentence that brought me up short: "the global pipeline has stopped growing". The total number of known projects in the drug industry (preclinical to Phase III) now appears to have peaked in 2009, at just over 7700. It's now down to 7400, and the biggest declines are in the early stages, so the trend is going to continue for a while.

But before we all hit the panic button, it looks like this is a somewhat artificial decline, since it was based on an artificial peak. In 2006, the benchmark year for the 2007-2011 cohort of launched drugs, there were only about 6100 projects going. I'm not sure what led to the rise over the next three years after that, but we're still running higher. So while I can't say that it's healthy that the number of projects has been declining, we may be largely looking at some sort of artifact in the data. Worth keeping an eye on.

And the authors go on to say that this larger number of new projects, compared to the previous five-year period, should in fact lead to a slight rise in the number of new drugs approved, even if you assume that the success rates drop off a bit. They're guessing 30 to 35 launches per year, well above the post-2000 average. Peak sales for these new products, though, are probably not going to match the historical highs, so that needs to be taken into account.

More data: the coming cohort of new drugs is expected to be a bit more profitable, and a bit more heavily weighted towards small molecules rather than biologics. Two-thirds of the revenues from this coming group are expected to be from drugs that are already in some sort of partnership arrangement, and you'd have to think that this number will increase further for the later-blooming candidates. The go-it-alone blockbuster compound really does seem to be a relative rarity - the complexity and cost of large clinical trials, and the worldwide regulatory and marketing landscape have seen to that.

As for therapeutic area, oncology has the highest number of compounds in development (26% of them as of 2011). It's to the point that the authors wonder if there's an "oncology bubble" on the way, since there are between 2 and 3 compounds chasing each major oncology target. Personally, I think that these compounds are probably still varied enough to make places for themselves, considering the wildly heterogeneous nature of the market. But it's going to be a messy process, figuring out what compounds are useful for which cases.

So in the near term, overall, it looks like things are going to hold together. Past that five-year mark, though, predictions get fuzzier, and the ten-year situation is impossible to forecast at all. That, in fact, is going to be up to those of us doing early research. The shape we're in by that time will be determined, perhaps, by what we go out into the labs and do today. I have a tool compound to work up, to validate (I hope) an early assay, and another project to pay attention to this afternoon. 2022 is happening now.

Update: here are John LaMattina's thoughts on this analysis, asking about some things that may not have been taken into account.

Comments (16) + TrackBacks (0) | Category: Business and Markets | Drug Development


1. ppedroso on June 26, 2012 8:09 AM writes...

Nice last sentence... It puts things in a different perspective!

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2. petros on June 26, 2012 8:11 AM writes...

Interesting analysis but I feel over optimistic..

Given the fate of major pharma's CNS R&D it was surprising to see the number of CNS drugs in their assessment.

BTW the 4 authors are from 3 McKinsey offices

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3. schnyber on June 26, 2012 8:19 AM writes...

Its good to see optimistic side of the Derek Lowe once in a while......Keep it up Derek.....Long live Drug Discovery...

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4. Afraid to be honest on June 26, 2012 8:27 AM writes...

Ah, a rosy report from The Bubble Factory, written by Mr. Bubble, Bubblicious, The Boy in the Bubble, Bubbles Greenspan, Jr. and published in Bubble Wrap. Surely they know where the next big money lies!

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5. Calvin on June 26, 2012 8:34 AM writes...

This was picked up by John LaMattina and he was perhaps a little less positive on the analysis. I agree that the commercial analysis is largely frantic hand waving. I have never seen a commercial prediction be remotely accurate. From my reading, Dereck, they were predicting that the commercial return was going to be worse rather than better. "However, average peak-year sales of innovative products are forecasted to continue to decline, from around $900 million for products launched in 2012 to around $600 million for products launched in 2015.”

Given that we're talking about the McKinsey crowd here I imagine it will be seized upon as a "look we can cut and productivity is maintained or improved! Let's keep going!" .

Given the inherent uncertainty in what we do, I just find these types of analysis hilariously simplistic. One rather suspects that Bernard Munos might suggest that this is fundamentally flawed.

Oh, and I'm amused that all drugs have been renamed "innovative products". I'm alrerady jaded by the overuse of that word.

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6. Rick Wobbe on June 26, 2012 8:43 AM writes...

I got quite a different story from a summary of a Sanford Bernstein conference a few days ago. (see here: Given McKinsey's lusty advocacy for M&A, it's not surprising their outlook is so optimistic; neutrality or pessimism would create an existential crisis. For the rest of us, there are 2 options for reconciling these diverging views: take these guys with a salt mine or give them credit for having some insight and risking whiplash.

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7. John LaMattina on June 26, 2012 9:50 AM writes...

"2022 is happening now" - great line and a perspective that few outside of drug discovery have.

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8. anon the II on June 26, 2012 10:00 AM writes...

Oh, I get it.

In 2022, I should be a couple of years into retirement. Instead, I am now.

Yeah, that makes a lot of sense.

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9. Chemjobber on June 26, 2012 11:18 AM writes...

Roche closing Nutley, NJ site, consolidating to Germany, Switzerland. Press release linked in handle.

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10. WCA on June 26, 2012 11:41 AM writes...

Roche closing Nutley, NJ site, consolidating to Germany, Switzerland. Press release linked in handle.

Apparently, 2022 is today for those 1000 people losing their jobs.

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11. Anon on June 26, 2012 2:29 PM writes...

I REALLY feel these projections should consider talent in the future. My academic dept. (1 of about 10) has had a couple retires and a couple hires (but no net increase) in the 4 years I've been here. Yet the grad school has admitted 400 students over that period of time (100/year). Even if you ignore the international postdocs that are brought in, you have a huge amount of people in a careerless and moneyless holding pattern circling the few open positions left. I think the drop in talent and know-how 10 years from now will be more of an issue than making projections based on China's market growth or increasing regulatory issues.

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12. Hap on June 26, 2012 3:05 PM writes...

10) I'm hoping it won't take ten years for them to find jobs.

When the previous generation talked about retiring earlier, I had no idea that unemployment was what was meant by retirement. At least there's still railroads to ride.

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13. drug_hunter on June 26, 2012 8:21 PM writes...

30-35 new drugs a year is better than low-20s and I can wave pom-poms as enthusiastically as the next guy but I fear it is not nearly enough to rescue the big pharmas, given all the looming patent cliffs and ever-increasing costs. Anyone see it differently?

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14. Hap on June 26, 2012 10:34 PM writes...

Unless all that investment in China starts producing (and isn't taken by the Chinese government or duplicated by other businesses) and academia comes up with some useful and exploitable targets, all that research cutting is going to leave some barren, worthless fields to harvest in ten years or so. I can't see small pharma generating enough drugs worth what will be paid for them to pay themselves off, and without that, you're just staving off the inevitable (like Europe). If people can figure out some of the factors that have made drug trials uncertain (and the extra time higher approvals give pharma might help), then things could get much better, but we keep hoping for that and the roof keeps falling in on us anyway (hence, "Hope is not a planning tool.")

Of course, my money is not where my mouth is, unlike investors, or VC, or small or big pharma, so you can use your own salt lick while you read this.

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15. petros on June 27, 2012 6:58 AM writes...

If the NCE approval rate continues at 30-35 then it will help, but how few of those will achieve >$1 billion per year?

The need is to replace revenues from the sartans, nearly all off patent by year end, as well as the likes of Plavix

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16. Anonymous on June 27, 2012 10:11 AM writes...

Here's a question

It's predicted the approvals will be 30-35 a year for next five years (so these are the drugs where development started between 2000-2006 ish).

The massive increase in firing and shutting big sites started when? approx 2007/2008??

Anything wrong with that picture?!

Anyone wonder if things had started to be sorted out and now we're just destroying all the good work done after the 90's?

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