Drug Discovery
Home  »  Community News  »  Drug Discovery
Jun
20
Sandeep Singh Dhillon
Pharma’s Not So Stingy With R&D After All – Forbes
Drug Discovery, Pharma Notables
0
,

By Frank David

Many pharma critics argue that drug companies skimp on research while earning outsize revenues–but a new analysis my colleague and I just published tells a more nuanced story.

First, some background. Journalists and academics often point to the fraction of revenues that drug companies spend on research versus “sales, general and administrative” (SG&A) expenses as evidence that pharma underfunds research. But as Derek Lowe (here, here) and others have noted, these analyses provide zero insight into whether spending in each category is too high, too low or just right. Just as households need to spend money on food and utilities, pharma companies need to pay for both SG&A (which includes not just commercial expenses, but also corporate infrastructure) and R&D, and it’s impossible to say a priori which should be a larger fraction of top-line revenues.

Instead, it’s more pertinent to ask about how the growth rates of R&D, SG&A and revenue are related. I think many critics and lay readers would reflexively assume that even when adjusted for inflation, pharma’s revenues have increased year over year, while R&D spending may have stayed constant or even declined.

But that’s not the case, as my Pharmagellan colleague Richa Dixit and I found in our new paper in Nature Reviews Drug Discovery (contact me for a PDF). We examined financial data from 2005 to 2015 for the 10 largest R&D spenders among public big pharma. Looking at the group as a whole, we found the inflation-adjusted compound annual growth rate (CAGR) for R&D (+1.76%) over that period exceeded that of both revenue (-0.01%) and SG&A (-1.12%). And this pattern of the change in R&D spending growth outpacing those of both revenues and SG&A also held true for most of the individual companies. (See note at the end for some additional analysis.)

R&D spending, revenue and selling, general and administrative (SG&A) expenses for each company were converted into US$ as needed, inflation-adjusted (using US inflation rates) and normalized to 2005 values. The compound annual growth rate from 2005 to 2015 for each metric is shown in the colored boxes.Another common belief among critics is that when times get tough in pharma, R&D is the first thing to get slashed–but in fact, that appears to be an oversimplification as well. We looked specifically at instances when a company’s revenue declined by more than 5% (inflation-adjusted) and asked how the drugmaker responded in the following year. Even in the face of steep revenue drops, R&D mostly either increased (9/20) or decreased by a lesser percentage than SG&A (5/20), suggesting that companies often strive to protect R&D even in the face of acute financial pressure.

R&D and SG&A spending by companies in response to large revenue declines. Each data point is from a year in which revenues decreased by >5% compared with the previous year, and reflects the change in R&D and SG&A spending from that year to the subsequent year. All revenue, R&D and SG&A percentages reflect inflation adjustments. See original article for details.Importantly, that last point counters not just a dominant narrative from pharma critics, but also one of the industry’s key arguments against price controls. Price hikes are a major driver of pharma revenue growth, and it’s hard to predict what might happen to the biopharma ecosystem if that growth were constrained. However, these data suggest that large drugmakers are generally committed to sustaining R&D, and many manage to grow research spending even in the face of both acute and longer-term revenue declines. In other words, pharma’s R&D spending may be more strategic than algorithmic, and the simple assumption that lower revenue growth would lead companies to invest less in drug research may not be entirely accurate.

Note: Instead of calculating CAGRs (which only depend on the starting and ending values in the series), one can look at the slopes of the best-fit lines for each 10-year data series, which yields slightly different numbers but essentially the same story; see table below. Using this approach, we found that the annual growth rate of R&D spending (+1.3%) still exceeds that of both revenue (+0.24%) and SG&A cost (-0.80%) for the total set of companies. The rate of growth in R&D exceeds that of SG&A in eight of the 10 individual firms, and it exceeds that of revenue in seven of 10. (For reference, in the published paper, R&D CAGR exceeded SG&A CAGR and revenue CAGR in 9/10 and 8/10 firms, respectively.)

Slopes of best-fit lines for inflation-adjusted R&D spending, SG&A costs, and revenues, 2005-2015. See text for details.Thanks to Chris Franco (Takeda) and Scott Innis (Biogen) for input on drafts of the research cited here. Feel free to email me with questions or for a copy of the article.

Frank S. David, MD, PhD leads the biotech consultancy Pharmagellan, and is the co-author of “The Pharmagellan Guide to Biotech Forecasting and Valuation.”

Jun
1
Sandeep Singh Dhillon
WHO commends Malaysia’s medical research work – MIMS Malaysia
Drug Discovery, Pharma News, Pharma Notables
0
, ,

Newly-elected WHO director-general, Dr Tedros Adhanom Ghebreyesus has expressed interest in harnessing Malaysia’s medical expertise. The Health Ministry said the World Health Organisation (WHO) is truly impressed with the country’s medical research work and the accessible and affordable healthcare available here.

“WHO is looking into harnessing our expertise based on this unique model of the research ecosystem in Malaysia to bring down the cost of medicine. We highlighted crucial issues close to the heart of many in developing countries such as cost and access to diagnostics and medicine, where we are convinced that this new partnership model can close the gap of equitable access to medicine,” said Datuk Dr Noor Hisham Abdullah, the Health director-general.

He also took to social media to relay Ghebreyesus’s fascination with this country’s work on Hepatitis C treatment. This programme is in partnership with the global non-profit organisation, Drugs for Neglected Diseases Initiative.

Medical research a valuable field

Despite progression in research, the country still faces some barriers to producing high quality data. A healthcare professional weighed in on this issue recently and described that a basic skill set to conduct good research is required and should be identified in potential researchers.

The medical expert also explained that a large chunk of studies published comes from high-income countries with a Caucasian population. Thus, data from these places might not suit our population entirely and local research would prove beneficial. Another barrier faced here would be low number of cases per hospital and thus, effective research sample sizes are reduced and the study’s significance might be questionable.

Health minister advocates for zero hunger and good health

Health Minister Datuk Seri Dr S. Subramaniam said courageous steps are required as advocators to address the co-benefit of innovative public policy for health. Speaking at the 70th World Health Assembly (WHA) last week, he stated that a better, sustainable health system can be built when our view of the system goes beyond healthcare.

Subramaniam also said at the WHA in Geneva, Switzerland that pollution and climate change are not merely environmental issues once it changes the pattern of communicable disease. This is because Arbovirus infections such as dengue can spread beyond its usual temporal and geographical boundaries.

“A hungry world, a polluted world or a world where women do not stand equally cannot be defined or considered as a healthy world. Achieving zero hunger and good health goes hand in hand. In our passionate search for new vaccine and medical technology, we must remember that no vaccine can prevent the detrimental effect of famine and no medicine can replace the damaging effects of stunted growth,” he added. MIMS

May
19
Sandeep Singh Dhillon
The world’s largest drugmaker thinks it has 11 billion-dollar drugs in the pipeline : here’s what they treat – Business Insider
Drug Discovery, Pharma News, Pharmaceutical & Drug Delivery Journals
0
,

Johnson & Johnson just listed out the drugs it plans to file for approval over the next few years that could be “blockbusters.”

These are drugs that haven’t been approved yet, but by 2021, they could be making more than $1 billion in annual sales each.

Right now, the world’s largest drugmaker is known for its immunology drugs like Remicade, which made $4.8 billion in sales in 2016 and Stelara, as well as the bloodthinner Xarelto, which made $2.2 billion in sales in 2016.

Here’s the list of drugs J&J plans to file for approval over the next four years that could hit that blockbuster threshold, including cancer and depression treatments:

guselkumab – psoriasis (Filed for approval in 2016)
sirukumab – rheumatoid arthritis (Filed for approval in 2016)
apalutamide – pre-metastatic prostate cancer
esketamine – treatment-resistant depression
talacotuzumab – acute myeloid leukemia, a type of blood cancer
erdafitinib – solid tumors
niraparib – prostate cancer
imetelstat – myelofibrosis, a bone marrow disorder
pimodivir – influenza A
lumicitabine – respiratory syncytial virus (RSV) infection
JNJ-7922 – adjunctive treatment for major depressive disorder

Apr
4
ragupathyrenganathan
US FDA grants Kitova a waiver for new drug application filing fee
Drug Discovery, Pharma News, Pharmaceutical & Drug Delivery Journals
0

Dec
20
ragupathyrenganathan
‘Extraordinary growth’ on the cards for cancer immunotherapies !
Drug Discovery, Formulation Discussion, Pharma News
0

Dec
19
ragupathyrenganathan
Finnish re­search­ers cor­rect Par­kin­son’s mo­tor symp­toms in mice !
Drug Discovery, Pharma News
0

Dec
19
ragupathyrenganathan
Domainex invests in NanoTemper MST technology to advance fragment-based drug discovery services
Drug Discovery, Formulation Discussion, Pharma News
0

Dec
19
ragupathyrenganathan
EMA issues positive opinion on Hansa’s application for orphan drug designation of recombinant IdeS
Drug Discovery, Pharma News
0

Dec
16
ragupathyrenganathan
Drug Mechanism Questioned !
Drug Discovery
0

Dec
5
ragupathyrenganathan
Pfizer announces positive results from phase 3 study of Lyrica to treat paediatric epilepsy
Drug Discovery, Pharma News
0