Pharma: A blueprint for health?

Bright IdeaWhile few would dispute that the pace of innovation has picked up, the outlook varies from one company to another — and many appear to be relying more on mergers and acquisitions than homegrown R&D to deliver new products. According to a report by Deloitte last month, return on investment from R&D rose in 2014 for the first time since 2010, to 5.5 per cent, up from 5.1 per cent the previous year.

The second is economic: growing wealth in the developing world is increasing the ability of countries such as China and Brazil to provide high-quality healthcare — and increasing the demand from their burgeoning middle classes for access to modern medicines. Chinese per capita spending on pharmaceuticals is forecast to grow by more than 75 per cent in the next five years, according to the IMS Institute for Health Informatics.

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Last year’s high-profile backlash by US insurers and politicians against the price of new breakthrough treatments for hepatitis C — particularly Gilead Sciences’ $1,000-a-day Sovaldi — suggests that America’s bloated health system is also becoming more cost- sensitive.

If such a stance were replicated by other big developing countries, it could weaken the foundations of the intellectual property framework on which the industry’s economic model is based.

According to Deloitte, almost 60 per cent of forecast revenues from the late-stage R&D pipelines of the 12 biggest drugmakers involve assets brought in through acquisitions or partnerships.

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As for the industry as a whole, Mr Remnant says: “We see some signs that a new era of growth could be on the horizon but it would be premature to declare victory.”

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Outlook: The fortunes of US big pharma are as diverse as the companies themselves — from old guard Pfizer, Merck and Eli Lilly battling to refresh their product pipelines to fast-growing young biotech companies. Standard-bearer for this latter group is Gilead Sciences, whose hepatitis C medicine, Sovaldi, broke industry records in 2014 by generating about $10bn of sales in its first year.

Pipeline: Merck and Bristol-Myers Squibb are racing for leadership of a new category of cancer drugs, called PD-1 checkpoint inhibitors, which boost the immune system’s ability to attack tumors.

Pipeline: Much of the optimism around AstraZeneca stems from an experimental cancer medicine, called Medi4736, which is in late-stage trials with the company targeting peak annual sales of up to $6.5bn.

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