2015 Annual Report: Top 50 Companies Overview – Making Progress
It was relatively good news for the pharmaceutical industry in 2014, and positive trends continue in 2015. Although generic erosion continues for their longtime blockbusters, many companies are putting their R&D efforts into biotech and specialty drugs that promise to yield treatment advances as well as profits. Additionally, top companies are becoming more involved in collaborations with each other on their portfolios, as well as selling each other assets as they do some restructuring. Some of these collaborations extend outside of the pharmaceutical industry as companies try more innovative ways of R&D. All together, the top companies face a more hopeful future than they did just a few years ago.
With the push into biotech, many of the top companies are spending more on R&D, not less. For example, AstraZeneca upped its R&D spending in 2014 to $5.58 billion, 15.7 percent more than in the previous year. Pfizer spent $8.39 billion on R&D, 25.7 percent more than during 2013.
Novartis invested an industry-leading $9.94 billion on 2014 research and development. As of June 2015, Novartis’ Pharmaceuticals business had an industry-leading pipeline with 143 active programs, including 74 new molecular entities, more than 500 ongoing trials and 300-plus trials planned to start through year-end 2016.
Novo Nordisk spent DKK 9.32 billion ($2.45 billion) on 2014 R&D, 19.7 percent more than in 2013. Novo Nordisk President Lars Rebien Sorensen says, “we have no intention of cutting back in the coming years” on R&D funding.
For Company of the Year Gilead Sciences (see profile on page 36), R&D is vital to the company’s advancement and in the development of the blockbuster hepatitis C drugs Sovaldi and Harvoni. In 2014, Gilead spent $2.85 billion on R&D expenditure, 34.6 percent more than in the previous year. Gilead’s R&D push is not abating as the company develops new drugs for HIV and for steatohepatitis. For the first half of 2015, Gilead’s R&D expenditure was $1.51 billion, 28.6 percent more than in the first half of 2014.
For many companies, R&D investment has been paying off, including for Johnson & Johnson. According to its management team, J&J’s strong business pipelines are anticipated to yield 20 key consumer product launches worldwide in 2015; 30 new major medical device product submissions between 2014 and 2016; and 10 major new pharma filings and 25 line extensions between 2013 and 2017.
In a May 2015 meeting with industry analysts, senior leaders from the Janssen Pharmaceutical Companies of Johnson & Johnson revealed plans to file for regulatory approval more than 10 new products between 2015 and 2019. Each of the promising medicines have the potential to top $1 billion in annual revenue. During that time frame, Janssen also intends to file for regulatory clearance more than 40 line extensions of existing and new drugs.
GlaxoSmithKline managers say the company’s R&D organization has produced an exceptional period of productivity since 2009, with more FDA approvals of new molecular entities received than any other company. Following marketing approvals granted during 2013 for the respiratory products Breo Ellipta and Anoro Ellipta, the oncology drugs Tafinlar and Mekinist and the HIV medicine Tivicay, GSK gained four additional approvals during 2014: Incruse Ellipta and Arnuity Ellipta in respiratory, Triumeq in HIV and Tanzeum for type 2 diabetes.
Biologics and innovation
The lines between big pharma and biotech continue to blur, as biologics become more central in pipelines and product portfolios.
According to AstraZeneca CEO Pascal Soriot, biologics now account for nearly half the company’s pipeline. “This increases the probability of success of our projects and potentially enhances the longevity of our assets,” Soriot says. “A greater focus on innovative delivery devices can offer choice to patients while also ensuring the durability of our products. Overall, we believe the growing proportion of specialty care products in our portfolio will boost profitability.”
“Innovation is at the heart of Pfizer,” says Ian Read, CEO of Pfizer. “We are now four years into transforming our approach to biopharmaceutical R&D. The mark of our progress is an R&D pipeline that is matched to a set of important medical needs and poised with the potential to provide a steady flow of new therapies starting in a few years. We’ve built a range of assets across six therapeutic areas and also biosimilars that have strong scientific and commercial potential.”
Janssen announced during February 2015 the launch of three new research platforms concentrated on disease prevention, disease interception, and the microbiome to underpin ongoing research and propel scientific knowledge in these fields of significant potential to change the way diseases are managed. The Janssen Prevention Center concentrates on prevention of chronic, non-communicable diseases; the Disease Interception Accelerator is focused on tackling the origins of disease and intercepting progression to disease for people at-risk – before they get sick; and the Janssen Human Microbiome Institute concentrates on the diverse population of bacteria living in and on the human body to develop therapeutic targets and diagnostic capabilities that have the potential to transform human health.
Acquisitions and restructuring
Several of the top pharmaceutical companies are focusing on revamping operations to produce future profitability. For example, during 2014 GlaxoSmithKline entered into a three-part transaction with Novartis, which was completed on March 2, 2015. The innovative transaction is expected to accelerate GSK’s strategy of becoming a simpler, stronger and more balanced platform for long-term growth.
In turn, the deals with GSK as well as agreements with Eli Lilly and CSL helped Novartis change its business portfolio with the goal of being a worldwide leader in three core areas: innovative pharmaceuticals, eye care, and generic medicines. The company divested or spun off operations that lack the potential to be worldwide leaders, including businesses in vaccines and over-the-counter products.
Novartis acquired GSK’s oncology products for an aggregate cash consideration of $16 billion, which bolstered the company’s high-priority oncology business and solidified its position as the world’s No. 2 company in cancer treatments. Novartis sold its Vaccines Division – excluding the influenza business – to GlaxoSmithKline for up to $7.1 billion plus royalties, creating the No. 1 vaccines business globally. GSK paid Novartis an initial cash consideration of $5.25 billion for the global Vaccines business (excluding influenza vaccines). In turn, Novartis sold its influenza vaccines business to CSL in a separate transaction. Also, Novartis and GlaxoSmithKline merged their over-the-counter businesses into a joint venture that is one of the world’s largest consumer healthcare companies. Novartis owns 36.5 percent of the joint venture.
Novartis completed the sale of its Animal Health business on Jan. 1, 2015, to Lilly for $5.4 billion, creating the world’s No. 2 company in that sector. The series of transactions has reduced the amount of Novartis divisions from six to three: pharmaceuticals, eye care, and generics.
Lilly’s acquisition of Novartis’ animal health business increases the product portfolio and expands the global commercial presence of Elanco, which is a division of Lilly. The acquisition also augments Elanco’s manufacturing and R&D capabilities with a total of 17 manufacturing sites and 14 R&D locations in the newly combined organization.
Merck & Co. made two big-ticket strategic moves at the end of 2014 – the $14.2 billion sale of its consumer care business to Bayer and the $9.5 billion acquisition of Cubist Pharmaceuticals. Merck also divested multiple sites within its manufacturing network around the world and completed the closure of its facilities in Whitehouse Station and Summit, N.J.
Merck completed the sale of the Merck Consumer Care business to Bayer in October 2014. Bayer acquired Merck’s existing over-the-counter business, including the global trademark and prescription rights for Claritin and Afrin, for $14.2 billion, or about $9 billion in after-tax proceeds, less customary closing adjustments as well as certain contingent amounts held back that will be payable upon the manufacturing site transfer in Canada and regulatory approvals in Mexico and Korea.
In December, Merck signed a definitive agreement to acquire Cubist Pharmaceuticals for $102 per share in cash. Cubist’s antibiotic Cubicin, the only approved once-a-day therapy for both S. aureus bacteremia and complicated skin and skin structure infections (cSSSI), has been used to treat more than 2 million patients and continues to be an important therapy in the acute care environment. Cubist’s in-line and late-stage pipeline of anti-infective medicines, including Zerbaxa (approved by FDA in December), is expected to enhance Merck’s hospital acute care business in a variety of therapeutic areas, including Gram-positive and Gram-negative multi-drug resistant infections.
Additionally in December, Merck announced the acquisition of OncoEthix, a Swiss-based privately held biotechnology company that specializes in oncology drug development.
In July, Teva Pharmaceutical Industries signed a definitive deal to acquire Allergan’s generics business in a transaction valued at $40.5 billion.
For Amgen, the company is undergoing a significant transformation designed to position the company to deliver long-term, industry-leading innovation and financial returns. To that end, during second-half 2014 Amgen initiated a restructuring plan to invest in continuing innovation and the launch of the company’s new pipeline molecules while improving its cost structure. As part of the plan, Amgen would reduce its staff by 3,500 to 4,000 by year-end 2015, close facilities in Washington state and Colorado, and reduce the amount of buildings at headquarters in Thousand Oaks, Calif.
Sanofi in July 2015 announced a new structure that will be initiated in January 2016 and will “simplify and focus Sanofi to optimize future growth.” The change creates five global business units: General Medicine and Emerging Markets, Specialty Care, Diabetes and Cardiovascular, Sanofi Pasteur, and Merial.
Collaborations
Johnson & Johnson executed more than 100 strategic partnerships, licenses, and acquisitions across its Pharmaceutical, Medical Devices and Consumer segments during 2014. The deals executed across J&J’s three business segments in 2014 included two significant acquisitions added to the company’s innovation portfolio. One was Alios BioPharma, a privately held clinical-stage biopharma company concentrated on developing therapies for viral diseases. The other was Covagen AG, a privately held biopharmaceutical company specialized in developing multi-specific protein therapeutics through the FynomAb technology platform.
In August 2014, Merck and Pfizer entered into an agreement to explore the therapeutic potential of the combination of Pfizer’s Xalkori with Merck’s anti-PD-1 therapy Keytruda in a Phase Ib clinical study evaluating the safety and tolerability of the combination in patients with ALK-positive advanced or metastatic non-small cell lung cancer. This multi-center, open-label clinical study is expected to begin in 2015. Pfizer will conduct the study.
In May 2015, Merck and Amgen announced an expanded collaboration to evaluate the efficacy and safety of talimogene laherparepvec, Amgen’s investigational oncolytic immunotherapy, in combination with Keytruda in a Phase I, open-label trial of patients with recurrent or metastatic squamous cell carcinoma of the head and neck. In addition, the companies announced that a global, randomized Phase III trial evaluating the combination in patients with regionally or distantly metastatic melanoma is being initiated.
In the beginning of third-quarter 2015, Amgen and Novartis entered into a partnership to jointly develop and commercialize a BACE inhibitor program in Alzheimer’s disease, with Novartis’ oral therapy CNP520 being the lead molecule. The companies additionally plan to jointly develop and commercialize Amgen’s migraine portfolio, including the fully human monoclonal antibody AMG 334 with first Phase III data anticipated during 2017.
In September 2014, Lilly and AstraZeneca announced an agreement to jointly develop and commercialize AZD3293, an oral beta secretase cleaving enzyme (BACE) inhibitor currently in development as a potential treatment for Alzheimer’s disease. And in January, Lilly and Bristol-Myers Squibb announced a clinical trial collaboration to evaluate the safety, tolerability, and preliminary efficacy of BMS’ immunotherapy Opdivo in combination with Lilly’s galunisertib. The Phase I/II trial is evaluating the investigational combination of Opdivo and galunisertib as a potential treatment option for patients with advanced (metastatic and/or unresectable) glioblastoma, hepatocellular carcinoma, and non-small cell lung cancer.
During that same month, Lilly and Merck announced an oncology clinical trial collaboration to evaluate the safety, tolerability and efficacy of Keytruda in combination with Lilly drug compounds in multiple studies.
In May 2015, Lilly and AstraZeneca entered into a clinical trial collaboration to evaluate the safety and preliminary efficacy of AstraZeneca’s investigational anti-PDL1 immune checkpoint inhibitor MEDI4736 in combination with Cyramza, Lilly’s VEGF Receptor 2 antiangiogenic cancer medicine. The planned study will assess the combination as a treatment for patients with advanced solid tumors.
In conjunction with the divestiture of its Consumer Care business to Bayer, Merck also entered into a worldwide collaboration with Bayer to develop and commercialize soluble guanylate cyclase (sGC) modulators. This collaboration includes Bayer’s Adempas, the first in a novel class of compounds and the only treatment approved for both pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension, as well as the investigational compound vericiguat, currently in Phase II development. The collaboration also includes opt-in rights for other early-stage sGC compounds in development by both companies. Merck made an up-front payment of $1 billion in connection with the sGC collaboration.
Not all scientific collaborations are focused with other pharma or biotech companies, or even biomedical research facilities. In April, AstraZeneca and PatientsLikeMe signed a five-year agreement to provide access to PatientsLikeMe’s global network in support of AstraZeneca’s patient-driven research initiatives.
AstraZeneca will use patient-reported data from PatientsLikeMe to shape future medicine development and help improve outcomes across its main therapeutic areas, with an initial focus on respiratory disease, lupus, diabetes and oncology.
J&J and IBM’s newly formed Watson Health unit plan to use advanced data analysis and insights to help develop personalized patient engagement and coaching solutions that span consumer wellness and chronic condition management. J&J will additionally leverage IBM’s relationship with Apple to deliver new iPhone and iPad applications, providing a seamless user experience and intuitive design. Also, J&J’s medical device company Ethicon during March 2015 entered into a strategic collaboration with Google’s Life Sciences team to advance surgical robotics to benefit surgeons, patients and health-care systems. The companies are combining their capabilities, intellectual property and expertise to create an innovative robotic-assisted surgical platform capable of integrating advanced technologies with the goal of improving health-care delivery in the operating room.
New leaders
Two of the top pharmaceutical companies engaged in leadership changes during early 2015. Following a board announcement of the change in January, Dr. Giovanni Caforio took over as CEO of Bristol-Myers Squibb in May. At the same time, outgoing CEO Lamberto Andreotti transitioned to executive chairman of the company’s board of directors, replacing the retiring James Cornelius.
Dr. Caforio brings a broad range of experience to his role as CEO, company leaders say. Through a variety of expanding roles, he has made significant contributions to improving the company’s strategic focus and operational performance.
During February, Sanofi announced the appointment of a new CEO, Olivier Brandicourt, who officially took over in April. As CEO of Bayer Healthcare AG since 2013, Brandicourt was responsible for leading the company’s global portfolio across the pharmaceuticals, consumer care, animal health, and medical care businesses.
