Replenishing The Pipeline: And The Winner Is…
17 CommentsBy Ed Silverman // August 18th, 2008 // 2:40 pm
| Company | 2007 | 2012 | Percent Change |
|---|---|---|---|
| Schering-Plough | 0.38 | 1.58 | 315.8% |
| Amgen | 4.50 | 1.46 | -67.6% |
| Bristol-Myers Squibb | 1.08 | 0.84 | -21.7% |
| Wyeth | 0.60 | 0.49 | -18.2% |
| Abbott Labs | 1.73 | 0.42 | -75.7% |
| Johnson & Johnson | 0.39 | 0.38 | -2.4% |
| GlaxoSmithKline | 0.27 | 0.32 | 17.3% |
| Eli Lilly | 6.64 | 0.29 | -95.6% |
| Novartis | 2.27 | 0.27 | -88.2% |
| Merck | 0.51 | 0.26 | -49.0% |
| Pfizer | 0.39 | 0.06 | -85.7% |
| AstraZeneca | 0.58 | 0.04 | -92.6% |
| Roche | 4.03 | 0.00 | -100.0% |
| Sanofi-Aventis | 0.11 | 0.00 | -100.0% |
Which drugmaker is projected to replace its thinning pipeline fastest? A new analysis suggests that Schering-Plough, which has suffered this year over clinical trial results for its best-selling Vytorin and Zetia cholesterol drugs.
The above table, courtesy of AVOS Life Sciences, shows the replacement ratio, which the research firm defines as a measurement of how quickly a drugmaker replaces lost sales with sales from new products. This is a direct measure of R&D productivity. In 2012, the top 14 global drugmakers will generate an average of 26 cents from new products (launched during the prior five years) for every dollar lost from declining products. This represents a 65 percent drop from the 2007 level of 77 cents.
Only two drugmakers are projected to maintain a replacement ratio above 1 in 2012 - Schering-Plough (1.58, due to a strong pipeline and minimal patent risk) and Amgen (1.46, due to a portfolio of primarily biologics), according to AVOS.
On the other hand, two drugmakers that rank high in global sales, Roche and Sanofi-Aventis, will fall to the bottom of the rankings in 2012 when it comes to replacing former blockbusters with new, big-selling meds. In fact, AVOS says neither is projected to launch a new product between 2008 and 2012.
Loss of exclusivity is the main driver of the overall low replacement ratio in 2012, with the following major products going off patent: Lipitor (Pfizer), Effexor (Wyeth), Risperdal, (Johnson & Johnson), Zyprexa (Eli Lilly), Topamax (Johnson & Johnson) and Cozaar/Hyzaar (Merck), according to AVOS.
Jack2
I don’t really understand what this study shows.
Mike
Replacement ratio simply measures revenue from new products against declining revenue from older products. If you’re bringing in as much money as you’re losing, then you’re breaking even and your replacement ratio is 1.0 Hope that helps
Jim
This would seem to me to indicate that there will be a lot more acquisitions of smaller drug companies that devote most of their resources to developing new treatments.
Condor
This measure simply compares two sets of any given company’s projections — so it is only as reliable as the company’s own projections, right?
In this regard — the leader on the AVOS chart, Schering — has a particularly awful track record for accuracy — and reliability, in forecasting its own future fortunes.
. . . .More on these thoughts — in another thread, here at Pharmalot:
http://www.pharmalot.com/2008/08/the-vytorin-limbo-going-just-a-little-lower/#comment-369553
Mike
Condor, the data is based on consensus investment research — not on each company’s own projections. In addition, our analysts go over the data to make sure it’s cleaned and aligned.
Best,
Mike Goodman
VP, AVOS Life Sciences, LLC
Bob Freeman
Does anyone know if the revenue stream is discounted back to present value?
Thanks
Condor
Mike — I hear ya’. . . .
I am not dissin’ your metric — I am simply pointing out that even Wall Street relies chiefly on a single source to build its models. . . .
That source is the company, itself.
And — just so we’re all on the same page — Wall Street sold over $3.8 billion of Schering paper just about one year ago, today — priced at $27.50 per share (Schering is trading at about $20.30 today) — to all of its deep-pocketed clients. . . . can you say “AWKWARD”?
Yep.
So, the Wall Street banks have an incentive to see Schering’s share price rise (to avoid lawsuits/paying recission to the clients) — and thus are more prone to “drink the SGP Kool-Aid” — than at many other big-pharma-industry players.
I appear here — just to offer another perspective, not to attack your firm, or your metrics.
Cheers!
Condor
Good question, Bob F. — for the metric to be remotely credible, it ought to use discounted cash-flows, not absolute dollars.
Mike?
What happened???
what about Plavix in the BMS Sanofi equation….not mentioned!!
Mike
Bob F,
These numbers don’t represent a discounted cash flow (or any other cash flow) analysis. It is intended to address only the top-line dimension of Pharma company performance. We make no claims that it is a comprehensive assessment of financial health, but rather suggest that since the industry has historically been judged on a revenue growth basis, it is appropriate to measure whether the large cap companies in question have the in-line (or portfolio) products to deliver that growth.
What Happened,
The genericization of Plavix is embedded in the 2012 Replacement Ratios for both BMS and Sanofi-Aventis – as are all other major product losses of exclusivity.
Thanks for the questions,
Mike
Bob Freeman
And, thanks for the reply. Appreciated
jim
So if Roche wins approval for Actemra in September and launches it this year, does that count as an approval and launch between 08 and 12?
Mike
Jim,
Actemra was launched by Chugai in Japan in 2005, albeit for a minor autoimmune disorder, and Roche has been reporting revenue for it. See slide 87 http://www.roche.com/irp080130.pdf
We try to be strict but evenhanded in how we account for revenue in our replacement ratio model.
Best,
Mike
petros
Jim
Actmera was approved last year by the FDA but no yet launched becuase of the patent dispute with Amgen
Exroche Reppe
AMGN numbers look fudged by their CEO/CFO team.
Steve
Petros, Micera (not Actemra) was approved last year in the US and disputed by Amgen. Actemra is due (hopefully) to be launched in the US end of 2008.
Effexor Side Effects
My name is Dennis Norman and i would like to show you my personal experience with Effexor.
I am 42 years old. Have been on Effexor for at least 4 years now. Many medline sources, (NE J Med, etc.), cite doses of at least 225mg or over are required In summary, the citations clearly indicate that at 225mg, the medication finally BEGINS to elevate dopamine levels (as well as elevations in SE and NE). However, it is only when dopamine if finally stimulated that the ultimate therapeutic effect begins Thus, patients require dosing of 225mg or above for ultimate therapeutic effect. At 450mg, I have no side effects; nor do I experience side effects if I miss a couple days; no side effects if I only take only 1 or 2 pills a day rather than 3 for a period of a week or so..
I have experienced some of these side effects-
sweating, gained weight, headache
I hope this information will be useful to others,
Dennis Norman
Effexor Side Effects