Novartis expects its pharmaceutical division to have at least 14 ‘blockbuster’ products within the next five years.

The Group claims to lead the industry with the number of new approvals it has had globally since 2007 and expects the release of new products to be equally successful.

Joseph Jimenez, CEO of Novartis, said its “leading pipeline... positions us well for continued future growth.”

So far this year the company has received nine approvals or positive recommendations. It aims to build on this within the next 13 to 24 months with a further 11 pivotal trials, 11 filings and 10 regulatory decisions with various health authorities.

In addition, Novartis claims its pipeline boasts 139 projects in clinical development, including more than 73 New Molecular Entities across a multitude of disease areas.

It has highlighted compounds AIN457 from its oncology pipeline and LCZ696 and RLX030 for heart failure to create “significant newsflow” in the future. Also, Novartis claims compound QVA149 has the potential to become the “new standard of care for COPD”.

But within its oncology business is where the greatest growth is expected within the next five years. Novartis points towards its robust late-stage pipeline, which includes 13 new chemical entities and 19 new indications, to combat the upcoming patent expiry on Glivec.

These late-stage products are expected to contribute more than $1bn in sales by 2017, with Afinitor predicted to earn revenues of around $2bn in sales in advanced breast cancer alone in the same period.

As the era of blockbuster drugs draws to an end, the pharmaceutical industry is looking to fresh markets and new models of drug development while facing legislative changes as well as economic threats. Sarah Hanson looks at what lies ahead for the industry in 2012.

2012 looks set to be the year when pharmaceutical companies face their scariest outlook: peering over the brink of a patent cliff. Major pharmaceutical companies are realising that they can no longer rely on a broken business model that is dependent on blockbuster drugs, and are looking for alternative ways to maintain profits and cover the loss of revenues due to patent expiry. This throws up a host of commercial, legal and regulatory challenges.

Entering new markets
Major structural shifts are taking place in R&D and how intellectual property is financed, meaning that the life sciences sector is providing a rare bright spot in the pervading economic gloom. Over the last decade, there has been almost US$700bn worth of deals in the pharmaceutical sector, which remains one of the prime industries in terms of M&A activity. Now we are likely to be at the start of a fresh cycle of M&A activity in the industry, with a particular focus on emerging markets (BRIC, South-East Europe and Turkey) where the portfolios of many pharma companies remain weak.

Japan has enjoyed a particularly busy year in terms of pharmaceutical M&A: across all sectors, cross-border acquisitions by Japanese companies nearly tripled relative to 2010. Liquidity among Japanese pharma companies remains strong, as does demand for prescription medicines from an ageing population, enabling Japanese companies to enter into deals at a time of intense competition for intellectual property in the industry. In 2011 Takeda, the largest Japanese pharmaceutical company, completed its €9.6bn (debt-free, cash-free) acquisition of Swiss drug company Nycomed. On the back of this transformative deal, we expect the industry to undertake more M&A activity in Japan in 2012. Factors such as the economic climate, demography and the state of R&D pipelines should see more Asian acquisitions of European patented drugs.

Emerging markets also continue to receive significant life science private equity (PE) investment, with China and India gaining the most. Historically, the risk involved in R&D has led PE firms to avoid large pharma companies and the biopharma industry in general. However, recently some small deals have linked PE and venture capital with biotechnology, and we are seeing investment in a number of diverse projects in different life science areas. This growing trend is already playing out in Europe – according to the European Private Equity and Venture Capital Association, the total investment in life sciences in Europe increased from €3.4bn in 2009 to €5.7bn in 2010, while the total venture investment in life sciences accounted for 30% of the total investment in Europe in 2010. Such funding is likely to increase as the cash-rich life sciences sector is seen to be ’recession proof’.

A helping hand for R&D
Pharmaceutical companies looking to weather the storm of patent expiry on key products are also looking to diversify their pipelines and develop replacement products. With most companies struggling to make a return on high R&D costs pumped into prospective pipelines, additional support is vital.

In the UK, the Government hopes its new Patent Box legislation will give a welcome boost to research and development. When it comes into force in April 2013, the Patent Box will reduce UK corporation tax on patent profits to 10%, encouraging R&D activity and providing incentives for companies to retain intellectual property in the UK. This will make the UK competitive with other European countries such as Ireland, Switzerland and Hungary, which have had similar systems in place for years. While the existing system of R&D tax credits has given some relief for R&D expenditure, there has until now been no similar incentive for businesses to retain their IP in the UK once it has been created.

Legislation such as Supplementary Protection Certificates (SPCs) will also play a significant role in assisting companies facing the expiry of major patent portfolios and provide more protection for companies investing heavily in R&D. EU patent offices have long been able to grant SPCs where there has been a large gap for a company between filing a patent application and getting authorisation to market a drug. However, legal issues surround how SPCs apply to medicines that contain more than one active ingredient. In a landmark case in November 2011, the Court of Justice of the EU said that there is no reason why an SPC may not be granted for a single active ingredient that is specified in a patent where the marketing authorisation also contains other active ingredients. This (and other recent cases regarding SPCs) is likely to have further ramifications in battles between generic and pharmaceutical companies into 2012.

New legislation: help or hindrance?
New legislation coming into force will also have an impact on the pharma industry in the year ahead. Whether the expected IP and regulatory legislation will help or hinder pharmaceutical companies in this challenging climate remains to be seen.

A number of significant regulatory issues are being debated in Europe. A Directive is being developed to improve the EU pharmacovigilance system, simplify regulatory decision-making, provide a legal basis for more proactive pharmacovigilance by both regulatory authorities and the industry, and involve patients more closely in reporting adverse drug reactions. Though it was adopted in 2010, compliance is not compulsory until 2012. The legislation will bring about the most profound change to the legal framework since 1995, when the EMA was set up. The European Commission, EMA and Member States have been carrying out work to implement the legislation, but companies still lack clarity on many of the new obligations. It is likely that the new requirements will be introduced in phases beyond the original July 2012 implementation deadline.

At a time when social networking continues to grow and become part of the daily routine of many working lives, pharmacovigilance is particularly important. The pharma industry must recognise that social networking and reporting are taking on a rapidly-increasing significance in the marketing, discussion and exchange of information concerning drugs. There are pharmacovigilance obligations at all stages of the life cycle of a medicine and the process of drug monitoring; the pharmacovigilance system will need to take account of this, not least because the increasing use of social media also poses interesting questions around geographical legal jurisdiction.

Discussions continue about the introduction of a Directive that would require substantial changes to the regulation of clinical trials. In March 2010, the Chancellor of the Exchequer announced that the Government would review the UK’s implementation of the Clinical Trials Directive in order to reduce perceived gold-plating and to increase the proportionality of the system. The MHRA has stated that it intends to wait for the outcome of the European negotiations before reviewing and amending the UK legislation.
2012 may also herald significant changes in the way drugs are marketed. EFPIA in particular will be under the spotlight this year as the implications of amendments to the advertising of medicines become apparent. Currently, the advertisement for a medicine must be in line with the product’s Summary of Product Characteristics (SmPC). Hence off-label promotion is not allowed. EFPIA has approved an amended Code of Practice on the promotion of prescription-only medicines to, and interactions with, healthcare professionals.

The changes to the Code make allowance, for example, for the provision of a limited number of samples to healthcare professionals for a limited time (Art. 16).  Previously, following EU Directive 2001/83/CE, the provision of samples was not allowed (due to concern over inducement); but in accordance with national and/or EU laws and regulations, a limited number of medical samples may now be supplied on an exceptional basis and for a limited period. A reasonable interpretation of this provision is that each health professional should receive, per year, not more than four medical samples of a particular medicine that he/she is qualified to prescribe for two years after he/she first requests samples of that particular medicine.

A landmark year
Last year saw significant developments for the pharma industry – and for lawyers – which look set to continue through 2012. With deals such as Takeda’s acquisition of Nycomed in 2011, we expect the trend of commercial and economic power shifting eastward to continue. Increased diversification, coupled with regulatory hurdles, will set a challenge for the pharma industry. Whether companies will survive and thrive on this challenge remains to be seen as the year unfolds, but the structural upheaval felt as a result of life beyond the patent cliff is already being witnessed.

Sarah Hanson is a partner at CMS Cameron McKenna: the UK branch of CMS, a leading European provider of legal and tax advice.

The FDA has delayed making a decision on whether to approve the use of Eliquis (apixaban) for the prevention of stroke and systemic embolism in patients with atrial fibrillation.

Further data supplied by Pfizer and Bristol-Myers Squibb on patient trials after the original application will take an additional three months to review, the Agency has said.

Pfizer and BMS said in a joint statement they will continue to work closely with FDA during the review period.

Eliquis is not yet approved in any country for the prevention of stroke and systemic embolism in patients with atrial fibrillation.

It faces competition from Boehringer’s Pradaxa (dabigatran) and J&J’s Xarelto (rivaroxaban) for the indication.

Industry analysts predict all three have the potential to become ‘blockbuster’ brands as doctors and patients search for an alternative to warfarin.

Eliquis was approved in May 2011 by the European Union as a treatment option for the prevention of blood clots in patients who have undergone hip or knee replacement surgery.

BernsteinResearch analyst Dr Timothy Anderson forecasts total sales of Eliquis to reach $395 million this year, rising to $2.5 billion in 2015 and $3.7 billion by 2020.

Novartis’ Galvus (vildagliptin) has been approved for use by the European Commission for patients with type 2 diabetes who cannot take metformin, the current standard treatment.

The approval is based on data from clinical trials which assessed the drug as a monotherapy and found the treatment delivered improvements in glycaemic control, was generally well-tolerated and associated with a low risk of hypoglycaemia.

David Epstein, Head of Novartis, expects the brand to develop into a “blockbuster, we believe, quite soon”.

Galvus is already approved in the EU as an add-on treatment to metformin, sulphonylureas and thiazolidinediones. Towards the end of 2011, it received approval for patients with type 2 diabetes and moderate or severe renal impairment.

Last year it recorded sales of $677 million, an impressive increase of 66%, despite not being available in the USA. But it is the latest approval which has caused excitement at Novartis. The company estimates that more than 47 million Europeans have type 2 diabetes. It estimates this total will rise to 57 million people by 2030, with a quarter of these people unable to take metformin due to intolerance or contraindications.

The global generic market is likely to capitalise on the patent expiration of a host of blockbuster drugs in the next five years, a new report predicts.

Frost & Sullivan’s Generic Pharmaceuticals Market – A Global Analysis estimates that revenues will increase at an annual rate of nearly 10% and reach $231bn in 2017 as governments and healthcare service providers search for cheaper medication.

Several major brands worth $150bn between 2010 and 2017 will lose exclusivity which Aiswariya Chidambaram, a Frost & Sullivan research analyst, says will “fuel the growth” of the market.

The report found that leading generic manufacturers have been creating strategic alliances with pharma companies for marketing rights and the exclusivity in producing generic versions of blockbuster products such as Lipitor, Cozaar and Crestor.

Market leaders such as Teva, Sandoz and Mylan are also focusing their efforts on biosimilars to provide a competitive edge that also presents huge profit gains.

However, the report adds, one potential obstacle which may prevent growth is austerity measures imposed by governments around the world.

Instead, generic manufacturers should focus on the product segments they wish to compete in and the appropriate time of entry into the market if they are to be successful, the report advises.

“Large multinational generic firms need to adopt a differentiated approach by opting for products with technologically challenging formulations, products which require significant regulatory support and products with limited availability of active pharmaceutical ingredients (APIs),” said Aiswariya Chidambaram. “Small and medium-sized firms should focus on products with relatively higher profit margins.”

Merck (MSD outside the US) topped the job-cutting charts in 2011 as the industry witnessed another year of workforce reductions after a series of cost-cutting measures from a number of pharma giants.

Merck revealed plans in July to reduce its workforce by 12,000 to 13,000 following its merger in 2009 and to realign expenses with the expected reduction in revenue when Singulair loses its exclusivity in August, in an attempt to save $1.5billion.

Pfizer followed Merck after it after cut thousands of jobs after planning to close R&D plants in Sandwich, Kent, at a cost of around 2,400 jobs and in Connecticut accounting for a further 1,100 positions. An additional 500 employees in Germany and 220 in Spain have also reportedly been axed.

The world’s largest research-based pharma company aims to cut its R&D budget by $1.5 billion after realigning its investigational priorities and following the loss of exclusivity on its blockbuster drug Lipitor.

Novartis came third when wielding the axe after it revealed plans to reduce its workforce by 2,000 in an attempt to save $200 million a year. Workers were relieved of their duties at sites across Europe and reportedly in New Jersey. However, the company did invest somewhere in the region of $600 on a new R&D facility in Cambridge, Massachusetts.

Abbott Laboratories followed in fourth position after it revealed at the start of last year that it would tackle the challenging regulatory environment by cutting 1,900 employees, or 6% of its staff. Further upheaval is also expected in 2012 when the company completes its breakup of the company into one focused pharmaceutical business and one solely for medical products.

AstraZeneca completed the top-five after it shed more than 1,500 positions in the US and Europe last year as it braced itself for the expiration of patents on brands on Seroquel by reducing its American sales team by nearly a quarter. The London-based company did however increase its presence in the emerging Chinese market.

Teva Pharmaceuticals, Sanofi, Johnson & Johnson, Eisai and Bayer Healthcare completed the top-ten companies for job losses as the industry struggled to compensate for major brand patent expiries, a challenging healthcare environment and a need to align expenses with growth targets.

Generic versions of some of the world’s most popular medicines are set to enter the market and heavily reduce the cost of drugs when several ‘blockbuster’ brands come off patent, a new report says.

EvaluatePharma’s World Preview 2016 “Beyond the Patent Cliff” notes that seven of the world’s 20 best-selling drugs will lose patent protection within the next 14 months, including the top-two: Lipitor and Plavix.

Anthony Raeside, Head of Research, EvaluatePharma, says $54bn of sales will be lost to cheaper generics, with 2011 and 2012 “forecast to be the worst years” for pharma companies.

Between now and 2016, manufacturers of blockbuster brands will lose around $225bn in global sales, the report reveals.

Generic alternatives will result in sales dropping for more expensive branded drugs and slash the cost of medicines to patients and payers.

Copycat products typically cost anywhere between 20% and 80% less than brand names. Although only one generic version is permitted to be sold for the first six months after a drug has lost its patent protection, several other generic options often enter the market after this period.

As a result, blockbuster drugs will lose 90% of their revenue within two years, although Ben Weintraub, a Research Director at Wolters Kluwer Pharma Solutions, says it’s not uncommon for this to happen within as little as 12 months.

But pharma is aiming to combat the lost billions in revenue by increasing prices towards the end of a drug’s patent. Companies have also organised contracts with generic manufacturers for ‘authorised generics’ which entitle them to a share of future sales. Other tactics include reducing the number of jobs, merging with other companies and stabilising future sales by adding more sales representatives in emerging markets.

According to the Generic Pharmaceutical Association, generics saved the US healthcare system more than $824 billion between 2000 and 2009, and now save about $1 billion every three days.