Fri, Jan 18, 2013 - Page 9 News List

Drug industry bets on new wave of blockbusters this year

By Ben Hirschler and Bill Berkrot  /  Reuters, LONDON and NEW YORK

Drugmakers are betting that a new wave of medicines for cancer, diabetes, heart disease, multiple sclerosis and hepatitis will shape up as tomorrow’s blockbusters in the coming 12 months.

With the industry regaining some of its swagger after winning 39 new drug approvals last year — a record only beaten in 1996 — there are signs the improving trend could continue through this year.

Roche, GlaxoSmithKline, Eli Lilly, Biogen Idec, Gilead Sciences and Novo Nordisk are among those with important new products reaching a critical point in development this year.

The industry needs a winning streak after delivering poor returns for years due to a wave of patent expiries. Now companies are emerging from that patent “cliff” and the balance of losses to new opportunities is improving.

European drugmakers, for example, have the potential to deliver new drugs from this year to 2015 with peak annual sales of US$64 billion (or US$27 billion after adjusting for the risk of failure), while fresh patent losses in the period will be only US$12 billion, according to Deutsche Bank estimates.

Simon Friend, global pharmaceutical leader at PricewaterhouseCoopers, agrees the picture is improving.

However, he warns it is still too early to say that drug companies are out of the woods, especially with governments and insurers taking an increasingly tough line on paying for new medicines.

“Productivity is starting to turn the corner — but the other big issue is whether the industry can get the prices it needs for new products,” he said.

Still, analysts say interest in the sector from growth funds is now picking up and investors are taking a closer look at drug pipelines — a trend to watch as Johnson & Johnson and Novartis kick off the reporting season next week.

BIOGEN’s AIM

A number of key research and development (R&D) bets on potential multibillion-dollar-a-year products will play out this year.

One of the most highly anticipated approvals of the year, likely to come in the first quarter, is for Biogen’s multiple sclerosis (MS) drug BG-12.

It will be the third oral MS drug to market after Gilenya from Novartis and Sanofi’s Aubagio, but many investors already see it as best in class. That has helped Biogen shares nearly treble over the past three years.

“It’s going to be priced very high, it will have a rapid market uptake and it’s going to have a timely approval because the FDA {Food and Drug Administration] can’t afford to keep a drug like this off the market,” said Raghuram Selvaraju, head of healthcare equity research with Aegis Capital.

Doctors treating diabetes are also likely to have new drugs before the year is out, with a new class of medicines that work via the kidneys seen entering the fray.

The SGLT2 inhibitors for type 2 diabetes had a setback when Dapagliflozin from AstraZeneca and Bristol-Meyers Squibb was rejected by the FDA over safety concerns.

However, Johnson & Johnson is likely to get an FDA green light for its Canagliflozin after an expert advisory panel last week recommended its approval. Morningstar analyst Damien Conover sees a SGLT2 market of about US$7 billion by 2020.

Novo Nordisk, meanwhile, is banking on a new ultra long-lasting insulin, Tresiba, to keep it out in front as leader in diabetes care. It also has a major chance in the obesity market, if it can prove its existing medicine Liraglutide is safe and effective in weight loss.

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