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The Next Wave Of Blockbuster Diabetes Drugs

 September 10, 2010 02:36 PM

(By Damien Conover, CFA)

Outlook for the Diabetes Market

Diabetes is emerging as one of the most serious global health burdens of the 21st century. The number of people affected by diabetes worldwide is expected to grow from 246 million today to 380 million by 2025 according to the International Diabetes Federation. The disease stems primarily from the growing prevalence of Type II diabetes due to an increasingly obese and sedentary global population. As a result, we project the diabetes market, excluding insulin, will grow to over $55 billion by 2019 based on a 5%-plus compound annual growth rate despite the genericization of the thiazolidinediones class. This lucrative market has attracted new interest from drug firms, giving rise to an influx of new diabetes therapies. The emerging new diabetes drugs offer drug companies an opportunity to replace key blockbuster drugs losing patent protection over the next few years. As these new diabetes drugs potentially develop into blockbusters, we expect the valuations of drug companies will improve.

U.S. Market Forecast for Non-Insulin Diabetes Treatments

Metformin, sulfonylureas, and TZDs largely control the prescription market share of non-insulin diabetes treatments. We expect both sulfonylureas and TZDs will lose market share to newer drugs and project annual prescription declines of 2% and 10%, respectively, over the next 10 years. We expect the Avandia cardiovascular concerns will weigh on the entire TZD class, driving our projected rapid declines in prescription volume. By 2013, all branded TZDs will have lost patent protection, which will also reduce the promotional voice behind the class. We expect metformin to largely maintain its market share and its status as a first-line therapy. In the figures below we depict the current U.S. prescription share breakdown of non-insulin diabetes treatments and our projections for 2019 prescription shares. In the figures, metformin combination therapies are classified separately from stand-alone metformin (e.g., Janumet is classified as a DPP-4 inhibitor).

From a share of dollars perspective, higher prices for branded drugs skew market share values. As a result, we expect the newer classes of drugs to control the lion's share of total U.S. non-insulin diabetes sales by 2019. We believe the DPP-4 inhibitors will benefit from a first-mover advantage against potential oral competitors in the SGLT-2 inhibitor class as well as more convenient dosing versus the injectable GLP-1 analogs. We think this will push the DPP-4 class to the top spot, with a market share of 35% by 2019.

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