In the period from 2003 and 2009, large pharmaceutical companies witnessed strong sales growth. For the period, major pharma firms recorded compound average growth rates of over 7 percent. Independent market research firm Datamonitor expects this robust growth to slow down to just 1.3 percent till 2015, and the research company expects the slowdown in branded sales from the expiration of patents to be the main cause of rapid growth declines.
Pharma companies have relied on ‘blockbuster' drugs, especially the valuable patents that the developing company holds on its production. However, as these patents expire, it allows generic manufacturers to reproduce the same drug, ending the exclusivity enjoyed by the developing brand and applying pricing pressure.
However, developing blockbuster drugs may not be as easy as it seems. Often these discoveries are serendipitous in nature, with scientists looking for one thing and finding another. As companies struggle to find replacements to their money making drugs, they will have to look towards diversification in other areas in order to remain competitive. As evidence of this, U.K.'s largest drug maker, GlaxoSmithKline, has now refocused its efforts towards branded consumer products, and many drug companies are following suit and rethinking their core businesses.
Datamonitor expects companies that are not affected by generic completion will at least be able to recoup revenue growth through "high biologics focus" and "the targeting of niche indications and areas of high unmet need will therefore emerge as the best performers."
Of the big pharma firms, Abbott Laboratories' (ABT), recently announced that it was withdrawing the drug Briakinumab, its' most anticipated new drug from its pipeline. The drug has a net present value of $950 million, on estimated sales of $358 million. Its' arthritis drug Humira, however, is set to release this year with a patent till 2016 and is estimated to generate $100 million till then. Pfizer (PFE) recently hit a snag getting its drug tofacitinib out in to the market, with a death during clinical trials expected to increase regulatory scrutiny. The drug is expected to generate sales of up to $400 million till 2015. French drug-maker Sanofi-Aventis, recently announced that its' Q12011 results were affected by the availability of cheaper generics, but its recent $20.1 billion acquisition of Genzyme Corporation adds 10 drugs in clinical trials to its pipeline of 64 products. Emerging markets will play a big role if big pharmaceutical hope to continue the growth they have witnessed. Healthcare reforms, austerity measures and shrinking R&D budgets in Western countries, will mean that drug companies will have to shift their focus to economies like China, India and Russia, where drug spending is expected to see growth in double digits.