Patent Expiration Impact Infectious Disease Market
Rash of expirations force leading players to adapt.
The two largest sectors for drugs targeting infectious disease - antibiotics and antifungals - have seen significant decline over 2005-06, due to a glut of patent expiries of major products. The leading pharmaceutical players now face some tough decisions about what sort of presence they should maintain in the market, or even if they should remain involved at all.
According to Datamonitor research, even growth sectors such as small molecule antivirals have slowed down and the HIV market is witnessing its first patent expiries.
"At best, the pharmaceutical companies involved in the market will be seriously re-thinking their core-competencies to find means of re-invigorating sales," says Datamonitor infectious disease senior analyst Jonathan Angell, "and we can expect to see a few decide that their resources are best spent elsewhere."
Antibiotics and Antifungal Patent Expiries Drag Sector Down
The $38 billion market for anti-infectives can be readily subdivided into the antibiotic, antifungal, antiviral and HIV sectors. Loosely speaking, although antibiotic sales dwarf those of antifungals, the sectors can be divided into two high volume markets (antibiotics and antifungals) and two lower volume markets (HIV and antivirals). The high volume sectors have witnessed the highest levels of revenue decline over the 2005-06 period, with antibiotic sales falling by 8%, and antifungals' sales falling by 7%, upsetting the relative stability that existed between 2002 and 2006.
Given that the $19.8 billion antibiotics market accounts for such a large proportion (52%) of total market sales, its influence over total market values is naturally high. Indeed, although the antivirals market has seen a substantial decline from an 8% compound annual growth rate (CAGR) between 2002 and 2006 to flat sales for 2005-06, it has been the smaller volume sectors that have pushed market values over recent years. That said, in the light of its first patent expiries, even the HIV market has seen growth rates fall over the 2005-06 period.
The clinical diversity seen across the sectors is matched by substantial differences in the nature and structure of the commercial markets that serve them. For example, the antibiotics market is heavily saturated by generics, which accounted for just under one third of sector sales values, but two thirds of sales volumes in 2006. Meanwhile, the antivirals sector (which tackles diseases as diverse as coughs and colds through to herpes and hepatitis), is characterized by the highest domination by leading products - the top 10 selling molecules account for 84% of value sales, and 54% of volume sales. In the newest sector, HIV, however, corporate dominance is the most striking characteristic: the top 10 companies account for 99% of volume sales, and 98% of value sales.
Volume Versus Value
These sector-specific characteristics, combined with the underlying financial dynamics of the infectious disease market, have been caused by and will continue to shape some very divergent company strategies to portfolio management.
For example, Johnson & Johnson has serially introduced next generation products from established classes to corner markets before they become mainstream targets. This allows it to capitalize on prescriber familiarity with established predecessors, while also offering a step-wise shift to an innovative alternative that addresses pertinent and well understood unmet need. The company has in-licensed EU rights for the most advanced developmental protease inhibitor (PI) for hepatitis C (HCV), and in HIV the company has the best of the next generation PIs and two next generation non-nucleoside reverse transcriptase inhibitors (NNRTIs), one of which will be the first of its kind to get to market.
Honing the model used with Tarivid and Levaquin, Doribax and ceftobiprole are anticipated to yield Johnson & Johnson the early advantage of an either/or sales proposition in the gram-negative sector, while other companies struggle to realize their products' potential due to overcrowding in the gram positives arena. By contrast, Novartis has moved with the antibiotics market. Its branded pharmaceutical business has produced two key low volume, high value niched products (Cubicin and Tobi), while Sandoz' capabilities are perfectly suited to making the most of the tidal wave of antibiotic patent expiries.
The majority of the 11 companies that comprise the top five players in each sector display a very high degree of specialization in one context or another: Schering Plough, BMS, Astellas, Gilead and Roche are all renowned for expertise in a specific arena.
Following a de-escalation of its other infectious disease operations, Roche is now purely focusing on its antivirals portfolio, allowing other interests to slip away. Gilead (which as a company focuses almost solely on anti-infectives) has focused on the highest value and growth sectors, HIV and antivirals, and staunchly reserved its sales and marketing efforts to the geographies in which it knows it can play to a home advantage.
Astellas, meanwhile, has built a very focused offering for critical care, spanning transplant products, antifungals and antibiotics. BMS has focused interests in HIV, and Schering Plough in HCV. This is a stark comparison to the big-hitters GSK and Pfizer. GSK, in particular, appears to be offering a portfolio of anti-infectives that may not be as cutting edge as it used to be, but in a wide enough range of products and applications that has enabled the company to maintain an even keel in revenues in recent years. While the company may not have exhibited the growth recorded by some of the smaller companies in the market, neither has it suffered the losses seen across the seven major markets in infectious diseases as a whole.
Lastly, Pfizer has provided text book case studies that run from the micro level of product lifecycle management tactics through to macro-scaled portfolio lifecycle management strategies. Good examples come from the company's antibiotic and antifungal franchises, which have frequently featured exceptionally well timed launches of successor products with subtle elements of indication overlap and disparity.
This has facilitated prescription switching but minimized cannibalization risk from generic copies of the older drug, and Pfizer has reduced generic incursion further through Greenstone, its own generic subsidiary.
Related research:
Commercial Insight: Infectious Diseases Overview priced $15,200
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Commercial and Pipeline Insight: Systemic antifungals priced $15,200
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Stakeholder Opinions: Hepatitis C - Small-molecule antivirals pave the way for triple therapy priced $3,800
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