Indication Diversification: Big Pharma’s New R&D Driver

14 Mar

By Max Klietmann, VP of Research, LSN
I’ve written previously about how big pharma is changing in terms of targeting emerging biotech companies for acquisition, rather than investing in in-house R&D, but there are also profound changes taking place in terms of what indications are most attractive, and how to strategically approach the replacement of blockbusters that are about to fall off the patent cliff.
Big pharmaceutical and biotech companies were historically synonymous with blockbuster drugs: therapeutics targeting an indication afflicting a large patient population, such as cardiovascular disease or diabetes, drawing billions of dollars into the company while enjoying the price premiums afforded by robust patent protection. However, the impending patent cliff, which is the rapidly approaching inflection point at which many blockbusters will lose patent protection, means that these revenue streams will soon vanish and be replaced by cheaper generics. This translates to billions in sales lost to generic competitors. Worse yet, pharmaceutical companies are scrambling to find replacements for these revenue streams, and despite great effort and expenditure, there are few candidates with the potential to fill the gaps. Moreover, competition is highly aggressive for blockbuster indications, making it very easy to lose significant sums in R&D. However, strategically oriented pharmas understand this conundrum, and when it comes to blockbuster indications, the big pharma business model is evolving too.

Rather than sinking astronomical sums into major indications, the focus is beginning to shift towards a diversified portfolio of niche therapeutics targeting less common indications. This doesn’t necessarily mean orphan drugs (which have always had a clear advantage on the regulatory front), but simply those disease areas that were previously less attractive, e.g. pancreatic cancer or kidney cancer. This way, there is diminished completion for market position upon commercialization.

One large pharmaceutical plans to take this strategy one step further by focusing on therapeutics that target biological disease pathways, rather than specific indications, so that a drug can be re-purposed for a variety of indications further down the road. Multi-purpose drugs are by no means new to the space; plenty of scientists have argued that their pre-clinical compound is a panacea (many of these folks never get much further than this stage, as this “scattered” approach is often unattractive to investors who value a targeted and focused drive to market.) But multi-purpose drugs historically were repurposed due to favorable side-effects discovered by accident. What is happening today is very different; for the first time, pharmaceutical companies are strategically targeting drug candidates with the potential to treat several indications simultaneously. Specifically targeting these drugs creates the opportunity to develop a novel type of blockbuster via a multi-indication revenue stream approach whereby a single drug can become a multi-billion dollar product across a variety of smaller disease markets. However, it is important to remember the regulatory issues associated with multiple FDA trials for various indications.
These trends will be important for both early stage investors and life science CEOs moving forward on a track to partner with large pharmaceutical companies down the road. The most attractive indications of the future are not necessarily the largest single markets, and keeping a watchful eye on secondary disease areas will help to create a strategic approach to drug commercialization.

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