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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: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Positive Rules and Negative Ones | Main | How Much Is Wrong? »

January 6, 2014

The 2013 Drug Approvals: Not So Great?

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Posted by Derek

So we finished the year with 27 new drugs approved. Compared to the 39 approvals the year before, is that a reversion to the mean, a sudden downturn, a meaningless fluctuation, or what?

John Carroll seems to be in the "something to worry about" camp at FierceBiotech:

The wave of new drug approvals that had been building at the FDA has broken. According to the official tally of new drug and biologics approvals at the agency, the biopharma industry registered only 27 OKs for new entities in 2013--a sharp plunge from 2012's high of 39 that once again raises big questions about the productivity and sustainability of the world's multibillion-dollar R&D business.

After 2012 some experts boasted that the industry had turned a corner, with the agency boasting that it was outstripping the Europeans in the speed and number of new drug approvals. But for 2013 the numbers look a lot closer to the bleak average of 24 new approvals per year seen in the first decade of the millennium than the 35 per year projected by McKinsey through 2016.

And here's Bernard Munos at Forbes on the same topic. He thinks that looking at the industry as a monolith might be obscuring something:

Overall, 2013 was good or great for half of big pharma, and forgettable for the rest. Is this the beginning of a split in the group that has long dominated the industry? Some companies may counter that approval statistics is a lagging indicator that reflects past performance and not the promise of their pipelines. If one looks at FDA’s Breakthrough Designations, however, which is a leading indicator of pipeline quality, they tend to show the same picture, and cluster around the companies that have been most successful. . .Success seems to beget success, which suggests that today’s winners may also be tomorrow’s winners.

One thing remains worrisome: 11 new drugs per year — the average big pharma output for the last 5 years — is not enough to support these companies’ $370 billion of current sales, especially since only 3 or 4 will become blockbusters. The giddy promises to deliver 2 drugs per year consistently have not materialized, and there is no indication that they will. . .

(You can tell he's never gotten over Lilly's promise some years ago to deliver approvals on that schedule, and who could blame him)? As for me, I wish that I had some sort of crystal-ball insight to deliver, but I don't. Drug discovery (and thus NDA filings and approvals) seems to be such a statistically noisy process that it's hard to draw conclusions from a year or two of data. Let's watch what happens this year and see both what the numbers are and how the FDA and the companies involve try to interpret them. One thing to note already is how some people were ready to use the 2012 approvals as clear evidence that the industry was getting more productive - are the 2013 numbers such clear evidence in the other direction, or not?

Comments (26) + TrackBacks (0) | Category: Business and Markets | Regulatory Affairs


COMMENTS

1. Wolframblau on January 6, 2014 1:03 PM writes...

I wonder how many drugs the big companies wanted to be approved this year, but failed due to any reason.

Permalink to Comment

2. Pharmivator on January 6, 2014 2:11 PM writes...

Nice quote: "GSK and J&J led the pack with 5 and 3 registrations respectively!"

Perhaps some ex-GSK staff who like to might like to comment! Probably not, it seems that only the bad news stories can motivate them to weigh in.

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3. biologist on January 6, 2014 2:27 PM writes...

Munos has a table of companies, approvals, and market caps. It's interesting to divide the market cap by the number of approvals (column 2009-2013) and think about the consequences:
1. GSK: $14 Gig / 2009-2013 approval
2. Bristol-Myers: $22 G
3. J&J: $27 G
4. Sanofi: $$28 G
4. Bayer: $28 G
6. Novartis; $36 G
7. AstraZeneca: $37 G
8. Pfizer: $39 G
9. Roche: $40 G
10.Lilly: $57 G
11.Merck: $71 G
12.Amgen: $86 G

One might think what that means for the R&D departments ...

Permalink to Comment

4. Hap on January 6, 2014 2:53 PM writes...

2: Gee, because fired employees always like to explain about how firing them was the right thing to do. I'm sure they'll be getting back to you real soon now. You might have a better chance getting one of their three remaining nonoutsourced employees to comment, though, assuming they can do so from one of the stairwells rather than their open-area desks.

It seems interesting, though, how much lower their market cap per approval is than almost everyone else - either the estimated value of their approvals is lower than those of others or their stock is undervalued relative to that of other pharma companies. I'm not sure why GSK would accrue more badwill from their behavior than other companies, if that were to play a role in the market cap/approval difference. I wonder if you would want to count market cap/(sum of approvals over last twelve years - exclusivity period) instead of just approvals over the last five - it would give you less of a snapshot of how current management is doing, but might give a better picture of how much money their pipelines are worth, and whether they're worth enough.

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5. exchem on January 6, 2014 2:59 PM writes...

@2, I'm not ex-GSK, but I'll weigh in on their behalf if you insist: you are an offensive buffoon. Most of those new registrations would've been discovered by some of those ex-staff you're so dismissive about.

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6. Anonymous on January 6, 2014 5:41 PM writes...

@5
Couldn't agree more. Drug discovery takes time. It will be good get an idea of what is happening with the DPU model and how the 3 year cycles are bringing drugs to patients.

Permalink to Comment

7. Anonymous on January 6, 2014 8:01 PM writes...

@3: Why are the most innovative companies (J&J, BMS, GSK) so undervalued vs those who struggle with innovation (Merck, Lilly, AZ, etc.)? What are shareholders thinking?

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8. Activist investor on January 6, 2014 8:51 PM writes...

@7

Who gives a crap about innovation? What we want is revenues, big revenues. Understand that and you might actually keep your job for a couple more years.

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9. Anonymous on January 6, 2014 8:59 PM writes...

@8: Speaking of revenues, why has everyone just been *counting* approvals instead of looking at their overall sales potential, which actually shows an improvement over 2012:

http://www.tcpinnovations.com/drugbaron/never-mind-how-many-feel-the-sales-potential-the-class-of-2013-fda-approvals/

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10. Activist investor on January 6, 2014 9:02 PM writes...

@3

It is much more interesting to divide the revenues by the number of employees. You can get that data at marketwatch.com

You'll see that Gilead is by far the best. All major pharmaceuticals companies need to undergo several rounds of layoffs before reaching Gilead's numbers. THIS is how a company should be evaluated.

Permalink to Comment

11. Anonymous on January 6, 2014 9:11 PM writes...

@10: Except that without investing in people to invest in innovation, you can't grow...

Permalink to Comment

12. Hopeless on January 6, 2014 10:45 PM writes...

Although most of highly paid pharma scientists don't work in their labs, they do invent slides every day.

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13. gippgig on January 6, 2014 10:58 PM writes...

Off topic, but some TV programs may be of interest:
PBS is showing The Poisoner's Handbook this week on American Experience about the development of forensic chemistry (Tuesday at 8 PM in Washington, D.C.).
A different public TV station here (Channel 32) is airing Women in Chemistry: Life Lessons from the Laboratory on Wednesday. I have absolutely no idea if or when this is being shown anywhere else. As the saying goes, check your local listings.

Permalink to Comment

14. Pharmivator on January 7, 2014 4:40 AM writes...

My comment was not meant to be offensive and should have been qualified by the pronoun "some" as in "some ex-employees", i.e. embittered ex-employees who resent GSK's recent success. As for the current state of the DPUs, here is an interesting perspective from none other than Bernard Munos himself:

http://www.fool.com/investing/general/2013/12/18/glaxosmithkline-the-worlds-biggest-biotech-startup.aspx#.UsvK3_ZhAeN

I think this might go some way to answering those critics. Things are definitely going in the right direction and the whole of GSK R&D can take a lot of credit for this.

Permalink to Comment

15. alig on January 7, 2014 8:31 AM writes...

@2, Over the past 5 years, basically the lifetime of the DPUs, the S&P500 is up 100%, Merck, Pfizer and Novatis stocks are up 60-70%. GSK is up only 38%. Obviously, the DPUs are underperforming the competition. It is past time for a change of leadership at GSK.

Permalink to Comment

16. weirdo on January 7, 2014 9:15 AM writes...

alig, that comment epitomizes all this is lamented here by most commenters as being wrong with how Big Pharma thinks and responds to (stock) market forces.

Nothing the DPUs could have started is anywhere near Ph3, let alone approval or revenues. And Mr. Market likes (near-term) revenue.

Without inside info on how the Ph. 1/2 portfolio is actually doing, your comment is worthless.

Permalink to Comment

17. exGlaxoid on January 7, 2014 9:24 AM writes...

I remember when GW/GSK's management declared that they would get 3 new drugs per year out...

And as for #2, most of the newly approved drugs WERE in fact discovered by people who have since been laid off, including the group that discovered 3 or 4 new cancer treatments, all of whom were given the boot in 2008-2010. Based on that, I would expect the drug submissions in 2015-2020 to plummet as that one group of 20-30 people did more useful work for GSK than some entire sites/purchased companies.

When GSK makes a fortune off of resveratrol, then I will be convinced that their management is good. Also, another reason their stock is so poor is that they have paid nearly $7 billion in fines recently for the lack of integrity in the companies management. You still can't convince me that management was not fully aware of what was happening in Puerto Rico, doctors gifts, and China. There is no way someone spent $500 million on "travel" without someone's approval at the top.

Permalink to Comment

18. Anon too on January 7, 2014 9:41 AM writes...

#17: Was thinking exactly and all the same points you made. And, don't forget buying of HGS, which will be a tough road to recover the investment if darapladib is not successful.

Permalink to Comment

19. Drug Developer on January 7, 2014 9:53 AM writes...

On topic for this blog: the start of a series of articles in Scientific American on the challenges of drug discovery and development, hitting some very familiar notes.

http://blogs.scientificamerican.com/the-curious-wavefunction/2014/01/06/why-drugs-are-expensive-its-the-science-stupid/

Permalink to Comment

20. Petros on January 7, 2014 10:13 AM writes...

The 27 approvals are a pretty mixed bag. There appear to be some significant improvements in some of the cancer and HCV treatments approved, with some interesting new inhaled combos to try and preserve GSK's hugh respiratory franchise. But the 27 approvals also include 3 imaging agents and 2 new agents for the treatment of the rare disease PAH.

Permalink to Comment

21. Chrispy on January 7, 2014 2:11 PM writes...

The problem, of course, is that approval rates reflect research that was done a decade or more ago. The gutting of R&D, particularly early R&D, over the last few years does not bode well for the number of approvals 10 years hence.

Permalink to Comment

22. alig on January 7, 2014 3:19 PM writes...

@16

You need to recheck your math. Two of the approvals GSK had last year were compounds that were candidate selected in 2007-2008 (MEK & BRAF inhibitors). Five years is long enough to know if the DPUs are producing (hell they were supposed to be judged on 3 year plans). The market has spoken and GSK management has been found wanting.

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23. Carlos at Lacerta Bio on January 7, 2014 4:29 PM writes...

Reversion to the mean as far as we're concerned.

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24. FormerPharma on January 8, 2014 11:35 AM writes...

Sean Ekins has written a very good piece on why he has left the Pistoia Alliance:

http://www.collabchem.com/2014/01/07/a-new-year-and-a-new-start-leaving-the-pistoia-alliance/

If you're in a hurry, just read the third paragraph. I left a large British Pharma some years ago and reading that paragraph reminds me of why I left.

Permalink to Comment

25. emjeff on January 9, 2014 11:26 AM writes...

This has regression to the mean written all over it, and the MBA's who write crap like this should be beaten with a statistics book. It is not realistic for approvals to continue to go up and up - we will need years of data to determine if the industry has mended its ways.

Regarding GSK, I work here, but am no cheerleader. However, the DPU model is solid. When you talk to the bench scientists (as I have) they like it - desicions actually get made and progress does happen. Not as quickly as anyone would like in an ideal world, but it is much better than the Tachi years, where every decision had to be run by him. The approvals last year speak for themselves.

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26. Josh on January 13, 2014 3:03 PM writes...

In my opinion, the most important number was not even mentioned. This year: 27 approvals, 8 in oncology, zero antibiotics. Last year, 37 approvals, 12 in oncology, zero antibiotics.

We are looking at a world of hurt.

Permalink to Comment

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