The top 15 spenders in the global drug R&D business: 2017
The top 15 spenders in the global drug R&D business: 2017
You usually don’t see much annual fluctuation in the overall R&D budgets of the top 15 companies. The trend over the last few years has been to keep the lid on spending, particularly among the giants in Big Pharma. Companies didn’t cut much overall, but there was plenty of realignment going on as the industry refocused pipelines and continued a migration to the big hubs.
This past year, though, it was clear that a few companies wanted to turn up the heat in drug development, and this kind of fuel costs real money for companies that traditionally focus heavily on late-stage blockbuster drug research.
The top five in the business saw their collective spending jump by more than $5 billion, from 2015 to 2016, based on the annual numbers filed largely — though not entirely — with the SEC and gathered by Endpoints News. Two of those companies, Roche and the new number 2, a hard charging Merck, accounted for the lion’s share of the increase. (To be sure, some onetime non-R&D spending, such as Merck’s patent settlement with Bristol-Myers on Keytruda, figured in. But so did bread and butter spending.)
Gilead also saw a significant increase in research costs, with Eli Lilly — now off course following two bad setbacks for solanezumab and baricitinib — and the ever aggressive Celgene joining the action as they pressed the accelerator on new drug programs.
Curiously, the added spending coincided with a bad drop in new drug approvals in 2016. But they don’t correlate, and we’ve already seen that turnaround under way as regulators get busy with a brand new year — and soon a brand new FDA commissioner.
Paradoxically, one of the reasons why some of these R&D budgets have been rising is that development has been picking up speed. That’s abundantly clear now in the cancer field, where success with immuno-oncology has triggered a land rush mentality, with top players staking out as much territory as fast as possible. Anything left on the table won’t stay there for long, and first mover advantage can be critical. So invest now, reap your rewards later.
In the process, treating new oncology cases is gradually being revolutionized. And that’s not PR talk.
R&D reorganization, once aimed at massive cost cutting several years ago at places like Merck, GlaxoSmithKline, Pfizer and AstraZeneca, is still with us. But the form and substance has changed. Now these companies, along with a pressured Novartis and a bottom-line focused Amgen, have been looking to winkle out cost savings wherever they can be found. But many are also investing heavily in new R&D centers in San Francisco and Boston/Cambridge.
Meanwhile, some of the top players, like Sanofi, increasingly appear to be stuck. Their in-house organizations have been largely unproductive. Their partnerships are responsible for turning out the key new approvals.
We’ve seen some M&A deals, of course, but not an abundance of acquisitions from the big 10. Roche doesn’t feel it needs to. Merck hasn’t been buying much. AstraZeneca — which is increasingly cash restricted — has been selling off its disappointments, ginning some cash flow in the process.
Meanwhile Sanofi practically has to do a deal to prove it knows how after letting Medivation and Actelion slip through its fingers, and not just to higher bids. And Gilead is being ordered to get into gear by analysts who have been kept waiting too long.
We’re still waiting for the big one.
And that remains the key here. Perhaps after tax reform, if that happens, we’ll see some of those overseas billions put to use in buyouts. But it’s a long time coming.
2016: $11.41 billion (11.53 billion CHF total: 10.15 billion CHF for pharma, the rest diagnostics)
2015: $9.2 billion (9.3 billion CHF total: 8.1 billion CHF for pharma, the rest for diagnostics)
Revenue: 50.5 billion CHF
R&D as a percentage of revenue: 22%
R&D chief: Michael D. Varney, gRED; John Reed, pRED
A blockbuster budget delivers in Phase III
Give Roche credit where it’s due. The buttoned-down Swiss giant acquired Genentech and didn’t manage to kill the creative chemistry, a rare event in this business. And as a result, Roche has maintained a reputation for in-house innovation that has allowed its executive crew to remain largely exempt from pressure to join the expensive M&A game — at least for now.
Roche is a consistent player at the top of the list of R&D big spenders, shelling out considerable cash for two groups — Basel-based pRED and Genentech’s gRED in California — and still buys the occasional therapy for its pipeline. Just look at the recent deal it completed with Bristol-Myers Squibb, bagging the anti-myostatin Adnectin in development for Duchenne muscular dystrophy with $170 million upfront plus $205 million in milestones.
The big emphasis in the late-stage pipeline has been on blockbusters. And that has paid off with a recent approval for Ocrevus, a new multiple sclerosis drug looking to disrupt that market, following the big score last year on Tecentriq, the first of the PD-L1 cancer checkpoints.
Success for new cancer drugs opens the door to a multitude of combination studies, which Roche has engaged in eagerly when it comes to its big checkpoint contender. In addition, the giant scored another recent win for its cancer franchise, reporting that a key Phase III trial adding Perjeta to Herceptin and chemotherapy outperformed the two older standards alone in reducing the risk of death or relapse for early-stage breast cancer patients after surgery.
Analysts crowed that the clinical victory signals a major advance for Roche, likely adding billions to its megablockbuster oncology franchise.
Its new drugs are also beating a path forward in the clinic, as we saw when Alecensa beat out Xalkori in ALK-positive non-small cell lung cancer.
Roche has high hopes for emicizumab (ACE910) for hemophilia, but investigators continue to raise fresh questions about its safety following the death of one patient and a slate of serious adverse events in the pivotal Phase III. And it’s brought gantenerumab back from the dead for its Alzheimer’s Phase III pipeline, which also includes the newly added follow up late-stage study for crenezumab.
2015: $6.7 billion
Revenue: $39.8 billion
R&D as a percentage of revenue: 25%
R&D chief: Roger Perlmutter
Offering a lesson in not screwing up the big one
Merck gets the prize for moving up the most on the R&D budget list in 2016, though it won’t care for being lauded in the high roller category, inflated somewhat by some steep costs related to its Keytruda patent settlement. A pharma giant which triggered a massive restructuring in 2013 — a time when the company seemed practically snake bit in drug development — R&D is clearly back in vogue as Merck completes one of the biggest turnarounds of the past decade under Roger Perlmutter.
Perlmutter triggered another, much smaller, reorganization in 2016, shuttering some facilities as he continued a push into the two big US hubs in Cambridge/Boston and the Bay Area. And if there was an industry award for not screwing up a big opportunity, Perlmutter would have won it handily.
Keytruda was on track to the big leagues when he arrived at Merck, but it paled in the shadows of Bristol-Myers Squibb’s Opdivo. Now those days are over.
Perlmutter focused immediately on making Keytruda a star. And after winning a pioneering approval, Merck is following up with dozens of studies on Keytruda combos. The stunner last year, though, was Merck’s move to the front on lung cancer, cutting ahead of a floundering Bristol-Myers Squibb.
The company turned heads once again, for example, with plans to combine Keytruda with Incyte’s IDO1 inhibitor epacadostat in lung cancer and several other oncology indications. And the pharma giant has 10 Phase III trials underway now.
Merck and Pfizer moved their SGLT2 diabetes drug hopeful ertugliflozin into the hands of regulators on both sides of the Atlantic, though they’re coming into a crowded field. Armed with positive pivotal data, Merck and Pfizer are up for three PDUFA dates in December 2017: Monotherapy, a combo with bestselling diabetes drug Januvia and another combination with longtime diabetes standard metformin. The same trio of applications is also now under review in Europe.
Eli Lilly’s Jardiance is well out in front with positive cardio data to back it up, but Merck and Pfizer do things by the full measure when they take on a late-stage drug. Their rival cardio outcomes results for ertugliflozin are slated to arrive in 2019.
Merck has had some big setbacks in the last year, most notably the failure of its BACE drug verubecestat in its first late-stage assault on mild to moderate Alzheimer’s. That drug remains in Phase III for prodromal patients.
The company has also stuck with its huge Phase III for anacetrapib, the last of the CETPs, which most analysts offer virtually no chance of success. And then there’s the Phase III for vericiguat, another heart drug that just was put into Phase III last fall, even though it had failed Phase II. V920 is in the pipeline for Ebola, a leftover from the last big pandemic to spur global fears of a breakout.
Merck doesn’t do a lot of deals, but Perlmutter clearly enjoys gambling on a few select companies and technologies each year. Case in point: The $95 million upfront for Israel’s cCAM, which might have had an interesting twist on immunotherapy. The lead drug, though, failed in Phase I, and Merck is moving on.
That’s a low-cost experiment in Merck’s world. If you’re trying to change medicine, you have to take some gambles every now and then. Some may eventually pay off.
2015: $9.08 billion
Sales: $48.5 billion
R&D as a % of revenue: 18%
R&D execs: Chief Medical Officer Vas Narasimhan and NIBR chief Jay Bradner
Despite the exodus, a new team pushes ahead on a big late-stage pipeline
Novartis started 2017 with some major accomplishments to report. Its CDK 4/6 drug LEE011 (ribociclib) just hit the market with an approval for breast cancer, armed with impressive data and a shot at $2.5 billion in annual revenue. Cosentyx, an early arrival for the new wave of psoriasis drugs, also is proving to be a disease modifier for a significant minority of patients. And Zykadia (ceritinib) recently nabbed a priority review for ALK-positive non-small cell lung cancer as well as breakthrough status for lung cancer patients with brain metastases.
To underscore its commitment to a pioneering CAR-T role, Novartis also added CTL019 to its list of prospective blockbusters, just ahead of filing for its first approval. CTL019 will be filed for pediatric ALL sometime in the very near future, with pivotal trial data waiting in Q2. Another filing for DLBCL is coming up in the second half of the year – with a major readout from the closely watched JULIET study — and Novartis is stepping up its game by bullishly asserting its $1 billion-plus annual sales potential.
These are major accomplishments for any pharma giant. The fact that they all occurred in an 8-week stretch underscores that its top-3 R&D budget has paid off with some big wins. Novartis has generally been number 2 on this list over the years, but slipped behind Merck for the first time in 2016.
Novartis has continued to be plagued by its shortcoming in the cardio-metabolic field. Entresto has been a persistent laggard on the sales side, underscoring its failure to live up to the company’s own hype. Payers in this field are hard to persuade, and Novartis is having the same kind of trouble that Amgen, Regeneron and Sanofi have all experienced with PCSK9 rivals.
To add to the bleak results here, Novartis was also recently forced to concede that serelaxin, which it had stubbornly kept on its list of prospective blockbusters even after the FDA and EMA turned it down, failed to deliver cardio benefits for patients. That drug is on life support — for now.
Novartis, though, isn’t planning to walk away from the core disease focus. The pharma giant underscored that again just months ago, when it inked a $1.65 billion pact with Ionis for a worldwide option and collaboration pact on AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx — handled by Ionis’ subsidiary Akcea.
The January deal includes $75 million upfront, $100 million in equity at $61.30 a share and $50 million more for stock in 18 months. And another $300 million is up for grabs if Novartis agrees to take the license options.
Over the past year Novartis has also been executing a makeover at the top of the R&D group. Mark Fishman stepped down as head of NIBR in late 2015 — yes, that really was a retirement — making way for Harvard Medical School’s Jay Bradner. And then in early 2016 Vas Narasimhan took over as global head of development and chief medical officer.
Later in 2016, they executed a broad ranging revamp of Novartis’ global R&D operations, another example of Novartis’ persistence in hunting down efficiencies — and cutting staff — wherever they can be found. Top line revenue has dipped at Novartis, and that trend has triggered tectonic financial forces that can crush careers in a heart beat. In a more controversial example of the company’s use of the ax, Novartis decided to eliminate its cell and gene therapy unit, cutting 120 jobs last summer, just as it was finishing up its lead CAR-T effort.
That move pushed the unit’s chief, Usman “Oz” Azam, out of the company and on to startup Tmunity. And his departure was just one in an exodus of execs who were either shoved out or left voluntarily from an organization that clearly shuns the status quo.
2015: $7.7 billion
Sales: $52.8 billion
As a percentage of revenue: 15%
R&D chief: Mikael Dolsten
The pharma giant wheels and deals its way to a late-stage pipeline
Back in 2010, when Ian Read took over as CEO of this pharma giant, he had a company with little in-house innovation to bank on. But he did have a big budget. And by sheer persistence in wielding the checkbook he’s built a pipeline through a long string of deals — and he’s quick to flag that there are no plans to stop anytime soon.
Read spent a record $850 million upfront to buy into Merck KGaA’s checkpoint program for avelumab, which delivered its first approval this year for an important cancer portfolio. There’s new work underway advancing Cellectis’ UCART19, an off-the-shelf CAR-T therapy with big plans for overtaking the pioneers now looking at their first approvals. The pharma giant acquired a leading role for itself developing SPK-9001, an important gene therapy for hemophilia B in-licensed from Spark Therapeutics. Pfizer bought out Medivation for $14 billion, and wound up with a late-stage PARP inhibitor, talazoparib.
Less than a year ago the pharma giant bought Anacor for $5.2 billion, and then picked up the approval for crisaborole for eczema, hoping to build a new blockbuster. And Pfizer and its partners at Eli Lilly are moving closer to the end for the big late-stage program for their anti-NGF pain med tanezumab, though there are still plenty of questions about where that drug may be headed.
Ertugliflozin is in Phase III for diabetes, partnered with Merck. And rivipansel was in-licensed from GlycoMimetics in 2011, which is currently enrolling patients in a big Phase III for sickle cell disease.
Add to that a slate of biosimilars picked up in the Hospira acquisition, and you can see how the BD team at Pfizer has been responsible for maneuvering this company to where it is today in late-stage research.
Like a lot of Big Pharma operations, Pfizer isn’t particularly good at understanding how to foster new drugs from scratch. But it’s more than capable at executing ambitious and complex late-stage development programs. In this business, that’s what it takes for pharma to be successful — so long as you know which deals to strike.
For Pfizer, that hasn’t always been easy. The company struck a big deal — $295 million upfront — to partner with Opko on a long acting growth hormone. But the Phase III ended in failure last December, even though Opko seized on some “outliers” in the study to try and spin it as something else.
Pfizer went through one of the biggest R&D reorganizations in the book, but its R&D budget has been steadily climbing north over the last few years. Given the company’s position on pushing for new buyouts big and small, though, a new revamp may not be far away.
Pfizer is known for the ruthless use of the axe when it comes to finding cost synergies after a deal. The company never entirely puts it away.
2015: $9.05 billion ($6.8 billion for pharmaceuticals)
R&D as a % of Revenue: $71.9 billion
R&D chief: Paul Stoffels
Thinking globally but staying focused on Phase III
J&J is unique on this list. It’s a Big Pharma giant and a conglomerate, with roots deep in medical devices and consumer items. This time around, I’m ranking them by their R&D spending specifically for pharma. And they are still huge.
J&J has been making a game effort to prove that a pharma giant can be innovative and forward thinking. It’s global dealmaking arm has been partnering up with dozens of small players around the globe each half, looking to be in on the next wave of groundbreaking drugs while lending a hand to the startups it likes.
That’s an important role to play, but it’s generally all years away from pivotal work. It’s J&J’s late-stage pipeline which underscores that it’s the big pacts for the big drugs that are being tapped as near-term blockbusters that claim the majority of the attention at the top of the R&D group.
At the end of March, J&J came up with another round of supportive Phase III data for guselkumab, which looks like a late, though promising, arrival in the most recent wave of new drugs for psoriasis. Darzalex partner Genmab has been talking up that drug’s megamarket potential. J&J itself is cautious about throwing peak sales forecasts around, but has said that both guselkumab and sirukumab are both likely blockbusters.
Sirukumab, though, posted mixed data against Humira in treating rheumatoid arthritis, and the field is intensely competitive.
We’re still eagerly waiting for pivotal data on esketamine, a new formulation of the horse tranquilizer ketamine, for depression. And apalutamide, the old ARN-509, will soon demonstrate if J&J’s appetite for billion-dollar deals can still deliver cancer blockbusters.
If anything, J&J’s late-stage pipeline at Janssen is light. But the pharma giant can afford to buy what it can’t develop for itself. So when J&J decided to buy Actelion, giving Sanofi room to screw up their end of the negotiations, the company was waiting with a $30 billion package for their PAH franchise. That deal included letting the Actelion team spin out into a new biotech with a promising pipeline of its own and a longterm partnering commitment.
2015: $6.0 billion
Revenue: $19.6 billion
R&D as a % of revenue: 30%
Chief Medical Officer: Sean Bohen
One step forward, two steps back
You can’t deny that AstraZeneca has had a few big successes over the past year. Lynparza just delivered some convincing Phase III PARP data that keeps it a big contender in the class. Tagrisso, sped through the clinic in a masterful two-year program, came up with promising lung cancer data for patients with an EGFR T790M mutation late last year. And it arrived as a rival from Clovis was self destructing.
It’s also had some important, though less spectacular, successes. That would include the long-delayed FDA approval of Qtern, a pairing of the company’s saxagliptin and dapagliflozin, to help out a flagging diabetes group.
But this year all eyes are on a combination of durvalumab and tremelimumab to determine what kind of near-term impact that the company can make on the checkpoint class in oncology. With Pfizer/Merck KGaA’s fourth checkpoint now through the regulatory gate, durvalumab would appear to be in line for the fifth spot in that race, well behind leaders like Merck, Bristol-Myers Squibb and Roche, which have been slicing and dicing this growing market.
Success is not a given. Analysts have been increasingly skeptical that a CTLA-4 like tremelimumab can retain control of a combo franchise due to its toxicity. Other, better, combos could blow that up. And it remains a fragile catalyst.
AstraZeneca also has the BTK inhibitor acalabrutinib – acquired through the $4 billion Acerta buy-in — in the late-stage pipeline, which figures as one of the top 10 orphans in the industry pipeline. And benralizumab remains a top prospect in asthma.
But even the drugs that AstraZeneca CEO Pascal Soriot likes to highlight in Phase III can wind up in inauspicious arrangements. Duaklir, for example, was recently outlicensed to a struggling Circassia.
Its failures, meanwhile, have been stacking up with ominous regularity. Last year we learned about conclusive data that means Brilinta will never be the big drug that Soriot counted on. Selumetinib flopped, again, in Phase III with fast shrinking prospects. AstraZeneca bailed out of brodalumab, after Amgen split in a heartbeat after learning about the drug’s ties to suicidal thinking. Valeant picked it up in a bargain basement sale, where AstraZeneca’s disappointments have a habit of landing.
ZS-9 proved to be enormously frustrating as well. Purchased for $2.7 billion, the drug was a slap shot away from an approval. But manufacturing foul ups have now ended in its second CRL, creating a lengthy delay while a rival gathers force and market share.
Against this backdrop, AstraZeneca announced plans to winkle out $1 billion in R&D costs, leading to a series of small retreats. It’s tiny remaining effort in neurosciences, for example, was shuttered.
AstraZeneca’s revenue meanwhile is being chewed up by generics, leaving it slipping further behind the ambitious numbers the company has floated to investors. With AstraZeneca, every big advance seems followed by two reversals.
It’s really not a pretty picture.
2015: $5.33 billion (5.08 billion euros)
Sales: $35.4 billion (33.8 billion euros)
R&D as a percentage of revenue: 15.3%
R&D chief: Elias Zerhouni
Thanks to its partners, Sanofi survives an in-house drought
Sanofi’s in-house R&D group has been a reliable nonperformer for years now. Saddled with a largely unproductive French research group, the company relies on Regeneron and its other biotech collaborators for much of the innovation it needs for new therapies. Elias Zerhouni has explained to me before that the company’s best prospects lie outside of its internal research house, and its performance would validate the strategy.
So it’s no great surprise that when CEO Olivier Brandicourt highlighted the company’s top prospects, he focused on collaborations. At the top of the list: Dupilumab, advanced by Regeneron with considerable late-stage support from Sanofi, was approved as Dupixent and promises to be a game changer in treating eczema. Another Phase III is underway for nasal polypsis, as the partners prep for expanding the label.
Another partnered drug of theirs, sarilumab, has been held up by an FDA rejection based on a manufacturing snafu. But while Sanofi and Regeneron were waiting, their big rival in the clinic – baricitinib from Eli Lilly and Incyte – blew up at the finish line. The FDA is now demanding more data on baricitinib, which could well leave it far behind the competition by the time Lilly turns this one around.
A late-stage effort is underway at Sanofi for sotagliflozin, an SGLT-1 and SGLT-2 inhibitor for diabetes, which was the focus of a billion dollar deal with Lexicon Therapeutics.
Then there’s the anti-CD38 drug isatuximab, in a pivotal study for multiple myeloma. In late 2015 J&J’s Darzalex (daratumumab) – licensed from Genmab — became the first anti-CD38 approved for multiple myeloma. Sanofi is looking to enter the fray, alongside MOR202 from Morphosys, while J&J has been studying subcutaneous administration of their star myeloma drug in preparation for the coming showdown.
Sanofi’s Brandicourt has been trying to help the late-stage pipeline with a big buyout, but it made unsuccessful efforts to acquire Actelion – a serious embarrassment after its target spurned Sanofi for J&J – and Medivation. And a rumored acquisition deal for Flexion – a much smaller target – has yet to pan out.
Don’t underestimate what Sanofi brings to the table. Zerhouni’s crew know how to do Phase III, and the M&A bumbling can be tagged on execs outside of R&D. But CEO Brandicourt has to deal with a flagging diabetes franchise, with a whole lot to prove about positioning the pharma giant for the future.
8. Eli Lilly
2015: $4.8 billion
Revenue: $21.2 billion
R&D as a % of revenue: 25%
R&D chief: Jan Lundberg
Two bad R&D pratfalls remind us of a troubled past
What are you going to do with a pharma giant like Eli Lilly?
Until last fall, you could say that Eli Lilly was finally making its long promised comeback. New blockbuster drugs like Taltz were approved. The company – ever ready to see progress in every new thing – declared it was on the mend, able to consistently push revenue up now after years of seeing generics chop up its franchise therapies. What it didn’t say was that annual increase has more to do with the way it bumps its existing drugs’ prices — not new drug revenue.
Lilly, which endured a years-long clinical drought ahead of the turnaround, is in danger of regaining its rep as a reliably consistent disappointment. Notably, solanezumab failed its third straight clinical test, an unimpressive drug that seems like it will not make a major difference for patients. And then new CEO Dave Ricks had a bitter setback in recent days when the FDA rejected baricitinib, its big 2017 drug hopeful.
That revenue had been all but baked in at Lilly, which will now have to go back and get more safety data in the clinic. Lilly, not known for transparency, has left a lot of details on that score in the dark.
Lilly started this year with longtime helmsman John Lechleiter transitioning to chairman for a restricted stint on the way out to retirement. And Ricks started out looking to trim costs, axing 200 staffers spread broadly across the organization. He followed up with an $850 million refurbishing plan for the Indianapolis-based operations.
Such relatively minor cost-cutting moves are nothing new in Big Pharma, and Lilly has resisted any pressure to follow most of the big players in completely reorganizing R&D. Compared to its peers and revenue, Lilly spends much, much more on research. And it’s had to continue that in order to revamp what had been one of the industry’s worst pipelines.
A couple of years ago Lechleiter promised investors that he would deliver several new drug approvals each year for an indefinite span. Now, though, that’s been replaced by a pledge to get 20 drugs approved in the 10-year stretch leading through 2023. Lilly, though, can’t afford another Phase III pratfall like the one it has just experienced with baricitinib.
That’s not a good spot to be in.
9. Gilead Sciences
2015: $3 billion
R&D as a percentage of revenue: 17%
R&D chief: Norbert Bischofberger
Can anyone stop the pain?
Gilead managed to push its way into the top 10 this year, but investors are unlikely to be happy about what their $5.1 billion bought.
Gilead did manage to whip up some excitement recently on impressive mid-stage data for its new HIV drug bictegravir that reminded some analysts of the company’s glory days. A few years ago, Gilead drew rave reviews for its rapid march on a hep C cocktail that revolutionized the field. And the bictegravir program – hustled straight into Phase III ahead of the Phase II readout — could be put in the same camp of rapid successes.
In another display of what its R&D group is capable of, Gilead turned around an impressive snapshot on Phase I NASH data for a new drug obtained from Nimbus for $600 million in quick cash.
Now, though, Gilead’s success in hep C is melting away as patient numbers and prices shrink and competition grows. And while it continues to play a dominant role in HIV, the key carry away from 2016 was a record of defeats and setbacks that continues to haunt the one-time star.
In November momelotinib, acquired in its $510 million buyout of YM BioSciences, performed poorly in its Phase III program for myelofibrosis. Its NASH drug GS-4997 sparked considerable skepticism from analysts. Gilead recently wrote off simtuzumab, along with the late-stage drug GS-5745 for ulcerative colitis and Crohn’s. And it’s top cardio prospect — eleclazine (GS-6615) — failed a late-stage study as well.
All of this happened in a year in which Gilead significantly increased the amount it’s spending on R&D.
To top it all off, late last year Gilead lost a big court fight to Merck after a jury leveled a knockout, $2.54 billion punch against Gilead for violating its hep C drug patents.
CEO John Milligan has waffled on the deal front, but seems determined now to deliver an acquisition, or acquisitions, with its hoard of cash that can begin to assure analysts the company is seriously trying to mount a comeback.
Something big needs to happen soon.
10. Bristol-Myers Squibb
2015: $5.92 billion
Revenue: $19.4 billion
R&D as percentage of revenue: 25%
R&D chief: Francis Cuss, replaced by Thomas Lynch
“Squandering what was otherwise an extraordinary and enviable market position”
How do you take a top-ranked biotech giant that’s seemingly on the verge of totally dominating the biggest new drug field of the decade and then seriously damage that rep in a matter of a few short months?
You’d have to have a serious heart-to-heart with the execs at Bristol-Myers to find that out. Their checkpoint Opdivo was all set to romp and stomp in lung cancer when a trial setback threw up a roadblock. Then the company had to announce that there would be no early filing for a combination of Opdivo and Yervoy, throwing the competition – again – to Merck, which had just filed for frontline use with a combination of Keytruda and chemo.
The market tempest that followed even briefly took AstraZeneca down a notch, raising some fresh concerns about its combo prospects with durvalumab and tremelimumab.
A brutally direct Jami Rubin put it all in perspective:
“So listen, if I take a step back and look at what has happened to Bristol-Myers in the past year, you’ve gone from having the best oncology I-O franchise in the industry with a significant lead over your competitors to now handing that lead over to Merck and, in my view, squandering what was otherwise an extraordinary and enviable market position with now question marks over your position in lung.”
Not what you want to hear in your annual wrap up call with analysts.
CEO Caforio countered with the company’s plans to stay focused on I/O, plus: “liri [lirilumab], LAG-3, GITR, CFS1R, IDO in oncology; and outside of oncology a number of promising programs like CD28, TYK2, possibly BTK, two programs in fibrosis that we believe have potential to be really important for us.”
It’s not enough, which is why Bristol-Myers has become Carl Icahn’s latest activist project. Heads had to role, and Francis Cuss was standing at the front of the line. Cuss is now out, and Thomas Lynch is in.
Given time, Bristol-Myers could well get its mojo back. The company has earned respect for one of the most consistently innovative, fast-paced R&D organizations on the planet. That can’t just go up in flames overnight.
But mojo is not a commodity Bristol has much of right now.
2015: $4.4 billion (3.56 billion sterling)
Revenue: $27.9 billion
R&D as a percent of revenue: 16%
R&D chief: Patrick Vallance
Still can’t get any respect for new drugs
To be sure, GlaxoSmithKline has had success in R&D to boast about. But it’s kept a very low profile in the area of new drug development for years now.
Shingrix was filed last fall, giving GSK a clean shot at a new vaccine OK that could pave the way to $1 billion in sales. A closed tripled for COPD — ICS fluticasone furoate, LAMA umeclidinium and LABA vilanterol — has been handed over to regulators. And GSK’s majority-owned ViiV scored another big success recently with its two-drug combo of Tivicay (dolutegravir) tied to J&J’s rilpivirine compared with the results from the three- and four-drug cocktails it hopes to replace.
If you didn’t hear much about it, that is because the analysts ran off to ooh and aah about Gilead’s rival Phase II data. Sometimes GSK just can’t catch a break.
Instead of specific blockbuster contenders, though, GSK prefers to talk about the “20 to 30” significant trial readouts due over the next two years. Anything exciting there? A breakthrough prospect? Maybe. But it focuses more on a series of incremental gains sought in HIV, respiratory, and anemia — fitting for a careful pharma crew.
This is the year, though, that generic Advair should really start eating into revenue. To get some respect, new GSK CEO Emma Walmsley will have to see if she can garner some excitement for a drug with megablockbuster potential. We’ve been waiting.
We’re still waiting.
2015: $3.7 billion
Revenue: $11.2 billion
R&D as a percentage of revenue: 40%
R&D chief: Rupert Vessey
The BD team sets the industry pace for a long-running deal spree
Celgene’s R&D costs spiked $772 million last year, leaving it just a step away from top 10 status and hitting a top-15 high of 40% of revenue. But you won’t hear a lot of investors complaining about the numbers.
This latest surge was due largely to their $892.9 million of R&D asset acquisition expense associated with the buyouts of EngMab, Acetylon, and Triphase as well as a spike in spending on their early- to mid-stage product pipeline.
While growing the Revlimid flagship franchise, Celgene pushed Pomalyst and Otezla into blockbuster status last year. The big biotech started the year with 11 pivotal studies underway, with 10 more slated for launch. One of those will be for BB2121, a BCMA collaboration with bluebird bio. And 8 studies are being plotted in combinations with durvalumab. It’s tied to Juno’s late-stage effort on JCAR017, the new lead now that the disastrous — and lethal — JCAR015 has been officially laid to rest.
The NDA is in on enasidenib, or AG-221, with the FDA providing a priority review. Two Phase IIIs are underway on luspatercept, partnered with Acceleron. Two Phase IIIs are proceeding for CC-486 Phase III studies, known as the QUAZAR studies, in higher-risk MDS and first-line AML maintenance. But mid-stage data for demcizumab, partnered with OncoMed, proved to be a flop.
And then there’s the inflammation pipeline.
Ozanimod, acquired in the $7.2 billion Receptos buyout, is poised for an NDA filing now that it cleared top-line Phase III hurdles in February.
Celgene showed that it still has plenty of interest in early-stage work, buying Delinia and its fledgling preclinical efforts on autoimmune disease for $300 million upfront. It paid $55 million for the option to buy Anokion, another autoimmune upstart.
Neurodegeneration is a subject of longstanding interest to Executive Chairman Bob Hugin, and Celgene took a small but significant step in that direction last year, partnering with Evotec.
Late last year the Big Biotech completed a deal to buy Boston-based Acetylon for an unspecified sum (Celgene paid $100 million to acquire the option) with an eye on worldwide rights to Acetylon’s selective HDAC6 inhibitor programs and intellectual property in oncology, neurodegeneration, and autoimmune disease, including its lead drug candidates citarinostat (ACY-241) and ricolinostat (ACY-1215).
And it’s been tracking positive data for its Crohn’s drug mongersen (GED-0301).
Celgene isn’t done doing these deals. Right now, licensing and M&A is written into its DNA. And it’s on the verge of demonstrating just how successful that kind of track record can be.
2015: $4.28 billion
Revenue: $25.6 billion
R&D as a percentage of revenue: 17%
R&D chief: Michael Severino
Looking beyond Humira, in search of new blockbusters to fund the future
AbbVie $ABBV is in one of the most perilous positions a biopharma company can be in. And the only way off the ledge can be found through the pipeline.
The company was spun out with Humira already well established and paying the bills. Last year that flagship therapy provided $16 billion — 62% percent of its revenue — as the money tree continues to provide. But we already have a lineup of biosimilars — including an FDA-approved rival from Amgen — waiting to shred that market, which AbbVie insists it can hold back for years to come.
One slip, though, and the wolves will be right on top of it. So to keep the howling mob back, AbbVie has become one of the most generous dealmakers in the top 15, hunting down new blockbusters — though it has a heart of steel when it comes to picking what stays, and what goes.
AbbVie is following up on its hep C combos with new and better therapies. Stellar new Phase III data on its combo with Enanta proved that progress. But it seems as if everyone is making progress in the field, which has seen revenue decline as competition built for a shrinking group of patients still seeking a cure.
The company has big hopes for its JAK1 rheumatoid arthritis drug ABT-494, now the star in its late-stage immunology pipeline. The company was so convinced by what it’s seen execs backed away from a major pact with Galapagos on filgotinib – swiftly picked up by Gilead, which has its own pipeline woes to consider.
And there’s more. There are label expansion trials in the works for Imbruvica and Venclexta. The IL-23 contender risankizumab (ABBV-066; formerly BI 655066) — partnered in a major deal with Boehringer Ingelheim — is in a big Phase III psoriasis program, with followups coming in psoriatic arthritis and Crohn’s disease. Its PARP drug veliparib, counted as a top 10 orphan drug by EvaluatePharma but now blighted by a Phase II flop, is in Phase III. And new drug applications are approaching for elagolix, partnered with Neurocrine, on endometriosis and uterine fibroids.
That’s quite a late-stage list, for any of these companies.
Right now, AbbVie holds the prize for paying top dollar for a questionable asset in 2016.
Their $5.8 billion cash payout for Stemcentrx – with another $4 billion in milestones – looked far too rich to many analysts looking over the deal. With money like that on the table, expectations were running high when investigators made their big reveal at ASCO. The preliminary data for small cell lung cancer showed a one-month survival advantage over historical trends, causing more than a few analysts to do a double take on the drug and the deal.
AbbVie, though, also has no problem walking away from partnerships, and not just when it comes to Galapagos. The hit list includes Ablynx’s Phase III-ready drug vobarilizumab, after AbbVie shrugged off its $175 million upfront buy-in.
Back in the fall of 2014, a restless AbbVie stepped in with a $275 million upfront payment to partner with Infinity Pharmaceuticals on duvelisib, its oral PI3k-delta/gamma inhibitor for blood cancers. But after duvelisib failed to impress the pharma company – or anyone else – in a mid-stage study, AbbVie departed from their partnership and Infinity had to ax 100 staffers to conserve cash before handing the drug over to Verastem in a giveaway.
Halozyme, meanwhile, felt the heat after the company announced that AbbVie opted to drop one of their partnered programs using their platform tech with a tumor necrosis factor alpha target.
For all the money that has gone up in smoke, AbbVie is still a player to be reckoned with. It had to do a considerable amount of wheeling and dealing to get to this spot, but as long as the Humira goldmine continues to produce the yellow stuff, you can expect the deals to keep coming.
2016: $3.84 billion
2015: $4 billion
Revenue: $23 billion
R&D as a % of revenue: 17%
R&D chief: Sean Harper
Every ambitious new move comes with a ‘but’ clause
For a company dragging toward the bottom of the top 15, Amgen often finds itself in the thick of the action. And with every new move, there always seems to be a new sentence right around the last graph that starts with ‘but.”
Amgen and its ex-US partner Novartis are key players in the race to get a first approval for a CGRP drug with the late-stage erenumab. But there are plenty of competitors, including Eli Lilly, Alder and Teva.
Amgen has helped shore up expectations for its osteoporosis drug romosozumab, releasing updated Phase III data that underscore its straight shot at a marketing approval. But the big biotech, which is partnered on this program with UCB, may have to concede a big piece of this competitive market after spelling out its failure on a key secondary endpoint. And Radius Health has a rival in development as well.
Biosimilars play a big role in the pipeline, and Amgen won the first FDA approval for a Humira knockoff, while defending its own home turf. But there are plenty of others scrambling in as well, and AbbVie will not let go of its IP without the longest legal war it can manage to fight.
Parsabiv (etelcalcetide), regularly feted as a top effort, was approved for secondary hyperparathyroidism a couple of months ago. But it likely won’t hit blockbuster status.
We’ve been waiting for more than a year for a major and much anticipated acquisition from Amgen — but so far that has not materialized. The Big Biotech’s last M&A deal hit in late 2015, when it picked up Dezima, a CETP acquisition with a $300 million upfront that landed just ahead of another late-stage CETP fiasco at Eli Lilly.
But that’s not a major buyout.
That last big one was for Onyx, a $10 billion acquisition. Amgen got Kyprolis out of the Onyx deal. But it was recently handed a setback when its Phase III for frontline multiple myeloma flopped.
In their quarterly meeting with analysts in February, Amgen CEO Bob Bradway said his $40 billion cache of cash gives him the flexibility to take a hard look at a variety of acquisitions this year, big and small.
Tick, tock. Tick, tock.
What the company hasn’t stinted on over the last year are new licensing pacts.
Amgen has tied the knot with Germany’s Immatics, paying $30 million upfront and offering hundreds of millions more in possible milestones for the development of bispecific T cell-engaging therapeutics for a range of cancers. The gene therapy experts at Italy’s San Raffaele Hospital and Scientific Institute (Ospedale San Raffaele, OSR) and its spinout Genenta Sciences are collaborating with Amgen on new tumor programs.
In two separate pacts with Arrowhead, Amgen gained the worldwide rights to ARC-LPA as well as an option on a second, undisclosed cardio program.
Amgen has joined the immunotherapy partnering frenzy. The Big Pharma is signing up with the little biotech Advaxis, collaborating on its technology using bioengineered bacteria to recruit a T cell attack on cancer. Amgen $AMGN paid $65 million upfront to get the deal kickstarted, with $25 million reserved for an equity stake in the company.
The PCSK9 wars with Regeneron and Sanofi, which led those two companies to fire a preemptive warning shot over their megablockbuster contender Dupixent, led to a stunning legal win for Amgen. But a decision to force their rival off the market has been stayed and the decision is on appeal. These things take time to play out.
Amgen, though, has never managed to eke out much revenue from their would-be blockbuster. Even after coming up with positive cardio data, analysts were left unimpressed with the results and payers evidently will wait for more than a simple guarantee — such as no heart attacks or your money back — before covering this drug.
One reason why the company tends to register among the bottom tier of companies on this list is that CEO Robert Bradway never leaves a stone unturned in search of additional economizing. So recently Amgen dispatched 100 jobs to its operations in the two big hubs of Boston/Cambridge and San Francisco. And that followed a thorough revamp that saw the pharma operation shutter its R&D facility in Seattle followed up with the decision to shutter and sell off the Onyx campus acquired in that buyout.
2015: $3.5 billion
Revenue: $16.1 billion
R&D as a % of revenue: 19%
R&D chief: Andy Plump
Turning an ancient Japanese company into a modern biopharma starts with an “R&D transformation”
(Takeda finishes their fiscal year at the end of March. These figures are from last spring, the most recently available gathering of the annual numbers.)
As a Japanese pharma company with more than two centuries of history behind it, Takeda is often overlooked in the greater biopharma land of big players. But that would be a mistake. This company is being given electric shock therapy by CEO Christophe Webber and R&D chief Andy Plump. Win or lose, they are determined to turn their R&D organization upside down and see what they can shake out of it.
Over the past year we’ve seen this company engineer a top-to-bottom revamp, restructuring and concentrating R&D in the US and Japan. It’s been outsourcing development to the big CRO PRA, a process which was recently extended to their Japanese operations. Takeda struck a deal to buy Ariad for $5.2 billion in January. And it’s concentrated on 3 key areas: oncology, gastroenterology (GI) and central nervous system (CNS), plus vaccines.
“R&D transformation” has become a mantra in Takeda’s quarterly sit-downs with the analysts. Last February Weber told analysts that the company had struck 50 new partnerships in the previous 18 months.
“And over the last two months only,” added Plump, “we put together eight very significant collaborations or partnerships, including one with Exelixis (in a $145 million deal), for development of cabozantinib in Japan. So I would say that, in terms of driving our R&D strategy, in terms of rebuilding our pipeline, which you recognize is a long-term effort that we’re very committed to, we’ve made very substantial progress.”
Right now, Takeda execs seem game to try new things. That made for good timing for Jeremy Levin, the CEO for Ovid, who struck a partnership deal to develop a new therapy under a joint steering committee, with Takeda taking an equity stake as they design upcoming studies, starting with Phase Ia/IIb trials to cover three rare neurological conditions.
There were back-to-back microbiome pacts with upstart biotechs – Finch and NuBiyota – inside a week. In January they invested $125 million in Maverick Therapeutics, picking up an option to buy the biotech and its T cell engagement platform. And the company disclosed a research pact with Korea’s LegoChem Biosciences to study next-gen antibody drug conjugates.
In short, Takeda is on a global tear, and tear-up, and this kind of transformation move comes with lots of fresh opportunities, and risks, as Ariad staffers could tell you after their new owners laid off more than half the staff.